If only it were that easy!

When I am representing a homeowner in the sale of their property, I am:

• creatively presenting their home in the best possible light
• aggressively marketing their home to potential buyers
• diligently following up with each Realtor who shows the property to potential purchasers

But many sellers want me to go one step further --- and convince the buyers to buy! 

The reality is that I often don't have that opportunity!  Most buyers these days are working with a Realtor and thus have someone representing their interests.  I can talk the ear off of their Realtor to try to convince them of the merits of the house that their client has viewed, but I don't have the ability to directly affect the buyers' decision making.

Alas, in a market where sales are much slower than previous years, most homeowners really wish that I (or their Realtor) could make that connection with the potential buyers --- and somehow, somehow, convince them to buy!

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These days, most real estate web sites allow you to view properties listed by any agent or company in the area.  My web site works this way --- when you are searching for properties, you won't just find properties being marketed by Coldwell Banker Funkhouser Realtors.

But what you see on a Realtor's or Brokerage's web site is a subset of the information that is in the MLS (multiple listing service).  Here's an example of what you would see for the property located at 409 Diana Court --- a spacious, like new duplex with 1900+ square feet on the south end of Harrisonburg.



But perhaps you would like more information about a property that you are looking at online.  If so --- just e-mail me (scott@cbfunkhouser.com) or call me (540-578-0102), and I'd be happy to provide you with the fuller report on the property available through the MLS.  Here's what that looks like...



The information you find on my web site, or any other public web site, is limited to the fields that our local Realtor association allows us to display on a public web site.  The other details can certainly be helpful, so please e-mail (scott@cbfunkhouser.com) or call (540-578-0102), if you'd like to see the full report.

OH --- and if you're looking for even MORE information, don't forget about the many online resources for researching properties in Harrisonburg and Rockingham County.

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Driving around town, you might see quite a few "Price Reduced" riders on real estate signs.  Have you ever wondered whether most sellers are holding fast, or reducing their asking price?  Let's take a look....

In Harrisonburg and Rockingham County, there are currently 953 residential properties on the market (single family, townhome, condos) without a contract on them.

In the past 30 days (June 2008), 134 of those properties had a price change (that's 14% of the active inventory).  I'm going to assume most of those were price reductions, although some could have (??) been price increases.  (It isn't possible via our MLS to see en masse whether the prices went up or down).

In the past three months (April, May, June 2008), 293 of these properties had a price change --- that's 31% of the active inventory.

And if we look at all of the listings to see how many have, versus have not EVER had a price change, here's what we find:
    384 listings have had a price change (40%)
    569 listings have NEVER had a price change (60%)

This is rather interesting (in my view), as I suspected that most owners may have reduced their price at some point while it has been on the market.  But in fact, most home sellers (60%) have NEVER reduced their asking price.

Here are some other interesting stats looking at how long properties have been on the market.

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Some would say that as a Realtor, I am a salesman.  In fact, when I am representing a Seller, I am working diligently to sell their house.  But when I am representing a buyer, I view my role a bit differently....

Salesman vs. Consultant
When I am working with buyer clients, looking at homes, I am never trying to convince them to buy a particular home.  I am not trying to sell them on the merits of a particular house.  What I am doing is trying to understand their housing needs and desires and to help them evaluate each home to determine whether it will meet their needs, and fulfill their desires.  I am a real estate consultant, helping them to examine each critical aspect of a home to make a wise buying decision.

And yet sometimes (in retrospect) it would have helped my buyer clients if I were a bit more coercive!
I have now had two clients in the past two weeks who knew what house they were going to buy, but held off (for valid reasons) on making an offer.  Then, in the time that they waited, interest rates went up, the associated monthly payment increased, and they were not comfortable buying anymore.  If they had made an offer sooner, they would have finalized their financing, locked in their rate, and they would have been able to buy the house they had hoped to live in.

Rates aren't likely to go up drastically in the next few days, weeks, or months, but they are increasing --- and an increased rate changes your monthly housing costs. 

Given this interest rate context --- I advise you to act speedily once you know which house you would like to purchase!

Read a bit more about pre-qualification here.

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It would seem that many buyers in the market today are hesitating before making an offer because they are unsure of the current and future value of the home they think they want to purchase. 

While it's impossible to predict the future 100% accurately, I can definitely help you to better evaluate your buying decision.  Here are a few ways we could quantitatively analyze a property:

Price-per-square-foot trends

If you are buying a home in a subdivision where other homes have recently sold, we can certainly look at average price-per-square-foot trends to estimate the value of the home, and to see how those values have changed over recent months and years.  This graph shows price-per-square-foot trends for all of Harrisonburg and Rockingham County.  We would be doing the same sort of analysis, but with a smaller data set.

Comparative Market Analysis (CMA)

In my opinion, a CMA isn't just for a seller before they list their home for sale.  Comparing a property for sale to other similar properties that have recently sold can shed significant light on the potential value of the property.  The "comparable" sold properties would be as similar as possible based on features such as: age, bedrooms, bathrooms, location, condition, square footage, amenities, etc.

There are other ways we can approach this issue as well, but the main thing to remember is that it is important (in any market, but especially now) to understand the value of the home that you might purchase.  The listing price alone won't provide a full picture of the value of the home.

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Many things in real estate aren't exactly self explanatory. 

Over the past month I have had conversations with three first-time home buyers who didn't realize that I could show them any house listed by a Realtor in the Harrisonburg and Rockingham County area.

As I stopped to think about it, I realized that many people who have never bought a home may not realize that fact.  So here's how it works...

• When a homeowner works with a Realtor to market and sell their home, the homeowner and Realtor negotiate and agree upon a "brokerage fee" -- the amount of money that the homeowner will pay the Realtor upon the successful sale of the property.  This is often a percentage of the sales price. 
  
  
• Almost always, the homeowner and Realtor agree that if a different Realtor finds and represents the buyer for the home, that the brokerage fee will be split between the Realtor representing the seller, and the Realtor representing the purchaser.
  
  
• As a result, systems exist (MLS, lockboxes) to allow Realtors representing home buyers to be aware of and have access to all homes on the market.
  
  
• So -- while many contextual clues (for sale sign, brochures, other advertising) might suggest that you MUST call the Realtor, representing the homeowner, in fact, that is not true at all.  You can call any Realtor.
  
  
• To bring it all together --- I can show you any house that you see that is for sale.
  
  
• And, of course, any other Realtor can show you those houses, including my listings.

Clear now?  Any questions?

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For those of you who regularly read articles on my blog, it is likely apparent that I thoroughly enjoy data, number crunching, analysis, etc. But sometimes my counseling background (Masters of Education in Counseling Psychology, CSPA) slips in, and I give the data some rest to look beyond the numbers.

These three perspectives on our current market were developed through conversations with several clients over the past few weeks, and I believe they offer valuable insight into our current market in addition to what the numbers would suggest.

Place and Space

Most people realize that in our current market, there are some great opportunities to get a good deal on a home purchase. The supply of homes for sale is higher than it has been for several years, and the amount of buyers in the market is lower than it has been for several years. Given this dynamic, some sellers, Realtors, market observers are curious as to why more buyers aren't finding a great deal and moving forward.

I had a conversation recently with someone who isn't even in the market to buy right now --- but who shared a valuable perspective with me. They suggested that for most people, buying a home isn't really about "getting a great deal" or "taking advantage of the current market dynamics" --- it's about buying a place that feels like a home and space that serves one's needs.

That is a keen observation --- because there are plenty of deals to be had, and buyers can definitely take advantage of current market dynamics. But perhaps buyers aren't snapping up homes because they are waiting to find the perfect place and space to call home.


The Psychology of Fear

Just listen to the news, or your neighbor, and you'll soon know that the economy is terrible right now. High gas prices --- a declining national housing market --- higher food costs --- soaring health insurance costs, and on and on. All of these economic conditions can make people (home buyers, especially) fearful for their financial future.

And thus, even though home values in Harrisonburg and Rockingham County haven't seen declines like some areas of the country, many buyers are hesitating to purchase --- and some of them are doing so out of fear for what the economy may look like over the next few months and years.


The Power of Hope

Beyond the effects of feeling fearful about the future, I would also suggest that home buyers need to feel positive and hopeful in order to be excited about buying a home. Sometimes this can be a self-contained hope --- hope for how a home will make life better for their family. But sometimes those outside influences (such as our current economic situation) can sneak in and steal the hope away.


To truly understand our current market, it is essential to not only consider the data but also current market psychology --- as either can have the upper hand in shaping our real estate market now and into the future.

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A lot of people feel this way right now --- that they have been trying to sell their home for many months (or longer) without success.  This situation is mainly a numbers game ---- closings are down 23% this year, and new listings are up 43%.  Clearly, there are many more sellers in the market than there are buyers, which creates the impatience for selling.

To put your situation in perspective, let's break down the listings that are currently for sale in Harrisonburg and Rockingham County:  This information is showing how many months these sets of properties have been on the market without having sold:


If your house as been on the market for a few months without having been sold, don't despair --- it is just taking a bit longer for these properties to sell.

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One of the fun tools that I use as I work with buyers is my laser measuring device.  This handy device uses a laser beam to measures the distance across a room --- with a click of a button we can measure from wall-to-wall up to 50'.

I always keep it in my car, and bring it into most houses that I am showing buyers.  Some of my clients aren't too concerned with the specific dimensions of the rooms in the house --- but for those who are, we can quickly capture the dimensions of each room as we tour the house.

It even gets a bit more fun, as many of my clients have become quite accurate with their guesses of the room dimensions --- as we look at houses, they refine their visual measuring skills by trying to be as accurate as my laser measurer! 

Are you up for the challenge?

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As I work with buyers to prepare contracts to purchase, we spend some time reviewing the 30 paragraphs of the standard Virginia purchase contract. If you will be buying a home in the next year, it is o.k. to wait to review the majority of the contract until the time at which we are ready to submit an offer --- except, perhaps, paragraph 23.

Paragraph 23 of Virginia's standard purchase contract states:

If you wait to review that paragraph until we are getting ready to sign an offer to purchase, you don't leave yourself much time to conduct any due diligence, because this paragraph does not say:

If it is important to you to buy a home in an area where there are not a high number of sexual offenders (currently) living, you ought to do your research before we start looking at homes for sale.

The good news is that the Virginia State Police web site is a fantastic resource for learning about sexual offenders in our community. You can search by zip code, county, city, name, or map. And once you get to the search results you can view the names, addresses, crimes and photos of registered sex offenders. You will also find some great frequently asked questions on the VSP site.

If you haven't already figured it out, the image at the top of this post is the map search result for Harrisonburg --- each red balloon shows the home address of a registered sex offender.

Again -- if it is important to you to buy a home in an area where there are not a high number of sexual offenders (currently) living, you ought to do your research before we start looking at homes for sale.

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Back in February '08, I wrote about buyer and seller perspectives on our real estate market, and pointed out that many buyers are bashful right now. They will look at quite a few houses, and find one or two that they like, or really like, or can't live without --------- and then, they will decide not to make an offer on the property.

Why, you might ask, would a buyer decide not to make an offer on a house they want to purchase?

Most often, it is because they think the asking price is too high, they aren't sure whether they will be able to negotiate it down, and thus they don't want to anger the seller or embarrass themselves by making too low of an offer.

I'm here to tell you --- make the offer! I have seen several offers work out very well for buyers over the past few months --- because the buyers stepped up to the plate and made an offer that they thought was reasonable for the house in question.

As we are evaluating properties, if a buyer seems to really like a house, but doesn't particularly care for the price, I ask the question... is there a price at which you would buy this home?

If there is, let's make an offer and see where we can go from there!

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My column from the May issue of the Shenandoah Valley Business Journal...

Between 2003 and 2006, buyers were stumbling over themselves to buy real estate – it was a fast and furious time, and buyers didn't have time to stop to think about their purchase. Since 2007, home sales have slowed to a more normal pace (or sub-normal pace, depending on your perspective), and this has once again made room for the buying process to be a more rational, thoughtful endeavor.

CONSIDER THE OPTIONS – As a buyer, you can and should take the time to consider all possible properties that may fit your needs and wants. Sometimes these needs and wants become clearer as you start to look at possible homes and further understand what would work or not work for your situation or circumstances.

EVALUATE SCHOOLS – Everyone has their own opinion about which schools are good, great, or the best – and these judgments are based on many criteria such as test scores, class size, etc. A great resource for evaluating or comparing schools is greatschools.net, a comprehensive web site with data on area K-12 schools.

DETERMINE ZONING – Depending on whether you are buying a home in a subdivision or an open tract of land, it will be important to check the zoning for the property. Zoning can affect important aspects of how you use and enjoy your property.

SEARCH FOR DEED RESTRICTIONS – It is best to know about any covenants/restrictions, easements or right-of-ways before making an offer on a property. All of these items can be found with a quick search of the recorded court documents to pull the most recent deed that conveyed the property in which you are interested.

ESTIMATE LIVING COSTS – It may be worthwhile to compile information on utility costs, commuting costs, and more as you consider the purchase of a particular home, or as you compare homes in different locations or with different building characteristics. After all, it's not just the mortgage you'll be paying each month!

EXAMINE NEIGHBORING USES – As they say, real estate is all about location, location, location! Thus, it is crucial to understand the properties surrounding the home you might purchase, and how the permitted uses of such properties might affect you in the future.

DETERMINE CONVENIENCE – Many buyers don't conduct this step in a highly methodical manner, but it can be helpful to run down a list of common destinations to compare their location to where your potential new home is situated. Examples include: office, schools, grocery store, gas station, friends' homes, family's homes, church, recreational facilities, etc.

ESTIMATE UPGRADE COSTS – Unless that home is exactly how you will want it for the next year or two, it would likely be helpful to develop a short list of anticipated upgrades or changes. Once you have priced out the materials and/or labor for the improvements, you can assess how quickly you will be able to make the changes.

RESEARCH MARKET VALUE – A "Comparable Market Analysis" isn't only for a seller --- by looking at properties that have recently sold that are similar to the home you might purchase, you can better understand what a reasonable offer would be on the property.

INSPECT HOME, WATER & SEWER – Once an offer has been made and accepted on the property, several formal steps may/should take place. These may include a home inspection, well/septic inspection, a radon test, a termite inspection, or more. Permission to conduct these tests and to negotiate based on their results needs to be included within the sales contract – so as you are considering a particular property, be thinking about what types of formal inspections you may want to conduct.

Buying a home doesn't need to seem like an overwhelming task – but it is one that that deserves an intentional, thoughtful decision making process.

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Are you considering purchasing a home? Do you have questions about the neighborhood? Ask the neighbors!



I showed a property this afternoon in a neighborhood where I had not shown a lot of property --- and my buyer clients were not familiar with the neighborhood either. We had a variety of questions in regards to safety, noise levels, etc.

Just as we were about to leave the property, we saw one of the neighbor outside of his house, and we stopped to ask him a few questions. My clients were able to learn, firsthand, from the neighbor:

• the neighborhood is usually very quiet
• he doesn't remember having very many issues or problems
  
• a sheriff's deputy lives just up the street
• a single older woman lives next door
  
• most people in the immediately surrounding properties have lived there for quite a few years, and generally keep to themselves

This was wonderful information for my clients --- and beyond the questions that it answered, it provided them with a general sense of comfort and reassurance that they would likely enjoy life in the neighborhood. AND --- if they do buy this house, they already have a friend in one of their new neighbors!

So --- as a buyer, don't hesitate to stop and chat with the neighbors --- they can be one of the most valuable sources of information about what life would be like in your potentially new neighborhood!

P.S. If you're a bit bashful, let me know --- I'll be happy to start the conversation and keep it going so that we can glean some useful information!

A few other thoughts on the buying process:

• Searching For A Home Online --- Which Web Site To Use!?!
• Stalking Is NOT Acceptable, But In Real Estate . . .
• Are CMA's Just For Sellers?
  

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No --- that's not a cap rate!!

Simply put, a "cap rate" is a measure of how quickly your investment is being returned to you.

By your "investment" I mean the value of property that you have purchased. 

by "returned to you" I mean the amount of money that a property generates in a year.

The cap rate formula is . . . Net Operating Income / Purchase Price

So if you buy a property for $160k, rent it for $975 per month, and have $1,500 of annual expenses, you have a cap rate of 6.375%.
( ( 975 * 12 ) - 1500 ) / 160,000 = 6.375%

Care to know more?  Read these . . .
What Is A "Cap Rate"?
Harrisonburg Single-Property Cap Rates
Harrisonburg Multi-Family Cap Rates

Would you like help calculating the cap rate on a property you own, or are considering purchasing?  Call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com).

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For some time now, I have provided monthly updates on the months of supply of housing available in four price ranges.  (see May's update)

Per Andy's request, I will now also graph the trends in these supply indicators.



How it works . . .
Months supply is an measure of the relationship between our market's supply and demand in four price ranges. The numbers represent the months of supply of properties available in each month based on average demand per month during the past twelve months.

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In a comment on a recent blog post, Josh stated:

"So when I was searching for my place, I rarely used realtor's websites.I stuck to hrar and realtor.com. Do most of your home buyers find your listings through your website?"

I find it fascinating whenever I have the chance to learn about which web site or web sites people use to search for homes in the Harrisonburg area. Here's why I find it interesting . . .

Some people (like Josh) don't want to use a particular company or agent's web site -- they will often use www.hrar.com, or www.realtor.com -- but I'm not sure exactly why. In the past, you would only find that company or agent's listings on their web site --- but now most company and agent web sites will allow you to search all homes currently on the market.

Josh (and others) -- help me out here . . .

1. Would you feel an obligation to use the services of a company or agent if you used their web site?

2. Do you wonder if you are really seeing all of the listings on their web site?

3. Do you wonder if the company or agent's listings will be given preferential ranking on their web site?

4. Do you find www.hrar.com, or www.realtor.com easier or more enjoyable to use for finding properties?

5. Is there something else that I am missing?

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This is an illustration of the relationship between our market's supplyand demand in four price ranges. The numbers (6, 11, 14, 25) representthe months of supply of properties currently available based on averagedemand per month during the past twelve months.



This month (May 2008) shows an increase in months supply in all except the lowest price range.  The most significant increase was in the $400k+ price range where the months of supply available jumped from 21 months to 25 months.  This was largely because of the increased supply of homes --- 152 homes for sale in May as opposed to only 137 in April.

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I have many clients who are very knowledgeable about free resources for finding information about houses for sale.  In conversation with one such client this past week, she made a joke about it being akin to "stalking" -- which we had a good chuckle over.

Stalking has several less friendly definitions on dictionary.com, but if I pick the least offensive, and creatively edit, we'll call stalking "to follow or observe persistently".

Back in January, I posted a list of those online resources for researching property, one of which my clients especially like if they are house hunting in the City of Harrisonburg --- the City of Harrisonburg's Real Estate Information System.

Through this online system you can view property details (lot size, bedrooms, baths, square footage, age, etc), as well as find out when the property was sold last (and for how much), as well as the current assessed value of the property.  And it's all free, online, and very easy to use!

I, of course, am certainly willing to help my clients research properties that they are may be interested in purchasing.  There is often a long list of information to collect to have a well rounded understanding of a property (for example, in buying acreage to build a home).  However --- for those buyers who love to sniff out the details and do some of the peripheral research themselves, I am happy to help them find all of the resources they need. 

So --- let me know if I can help you research a property you might purchase --- or let me know if you need assistance in using some of the freely available resources for doing some research on your own.  Regardless of how we accomplish it, my goal is for my buyer clients (sellers as well) to be highly educated and informed for the home buying process!

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Have you checked out the power search on this web site? 

You can quickly and easily search for homes based on:
      - single family vs. detached
      - list price
      - bedrooms
      - bathrooms
      - square footage
      - age of home
      - number of acres
      - geographical area
      - elementary school
      - high school

But now, you can also search by keyword! 
Try typing in words such as:
      - pool (232 results)
      - porch (318 results)
      - "closing costs" (80 results)
      - "bonus room" (59 results)
Hopefully this will be a helpful new way to search for homes currently offered for sale.

Additionally, don't forget some of the other great features of the power search, such as the ability to see your search results as you refine your search criteria. 

And, there are five different property types that can be searched (residential, land, multi-family, farm and commercial). 

AND, in addition to the Power Search, don't forget to check out Quick Search, Community Search, New Listing Search, and Open House Search.

As an aside, if you have an idea for a way to make this web site's search functions easier to use, or more powerful or flexible, please leave a comment on this post, or send me an e-mail at scott@cbfunkhouser.com.

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Cap rates vary over time, as market conditions change.  Here is a brief analysis of current cap rates for single properties in the Harrisonburg area as of May 2008.

1337 Devon Lane, Harrisonburg = 6.5%
3 bedroom, 1.5 bathroom, 1254 SF townhome
Sold for $130,000 in March 2008
Projected rental rate = $900/month
( ($900 per month x 12 months) - ( $328 insurance + $778 taxes + $708 POA + $500 repairs ) ) / $130,000 sale price

1308 Bradley Drive, Harrisonburg = 6.7%
4 bedroom, 2 bathroom, 1352 SF townhome
Sold for $147,900 in January 2008
Rental rate = $100/month
( ($1100 per month x 12 months) - ( $373 insurance + $821 taxes + $1620 POA + $500 repairs ) ) / $147,900 sale price

1014-6 Blue Ridge Drive, Harrisonburg = 6.0%
3 bedroom, 2 bathroom 1108 SF condo
Sold for $103,500 in February 2008
Projected rental rate = $750/month
( ($750 per month x 12 months) - ( $261 insurance + $587 taxes + $1560 POA + $400 repairs ) ) / $103,500 sale price

You can see in the examples above, that current cap rates are in the 6% - 7% range.  However, these cap rates decrease if an owner is paying a management fee for someone else to manage the property for them.  With a management fee of 9%, the cap rates above would be 5.8%, 5.8%, and 5.2% respectively.  The cost analysis above also does not include utilities, advertising, or vacancy.

Related Posts:
Harrisonburg Multi-Family Cap Rates
What Is A Cap Rate?

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