Monday, April 06, 2015

March Madness [Analyze This]

by Osman Parvez


We posted our analysis of recent bidding wars last week in The Over-Under in Boulder Real Estate. Here's a comparison to last year. 




The percentage of properties which sold for more than asking in March expanded from 20% to 34% of sales, year over year. Sales volume dropped 10%.  

Keep in mind that this analysis is for the overall market for residential property in Boulder, which includes attached and detached dwellings. 

Takeaways 
No surprise, the market is tight. Inventory in Boulder is tracking about 70% below average, mortgage rates are still near record lows, and the economy continues to improve. 2015 is an even stronger seller's market than last year. 

Sellers
In this market, it's tempting to FSBO or find a discount broker to save on the commission. The house sells itself, right? Wrong.  

There are many risks but here's one of your biggest: buyers always want to know what's wrong with a property if it doesn't sell quickly. They automatically assume it's undesirable. If you care about maximizing sale price, "Something wrong with it" is the last impression you want buyers to have.  

Fact: 40% of Boulder sellers accepted offers for less than asking last month. This was largely due to bad marketing and poor negotiation skills. The median discount was $35,000. In this market, your property should be getting offers the very first week it's on the MLS. If it didn't, you chose the wrong listing broker.  

Before you sign on a listing agreement, have a discussion about valuation and ask specific questions about multiple offers and negotiation skills. Ask in what scenarios competing offers will be revealed to bidders. If they say anything that sounds like "offers are confidential," cut them loose. Unless your broker proactively chose that option in the contract (see §5.8), it's not the default.  It's just the old school way of doing business.    

Confidentiality is only mentioned under the mediation section of the Colorado Contract to Buy and Sell Real Estate. It's not even binding language, it's only a desired outcome if the you know what hits the fan. You don't want your broker using used car lot tactics to sell your home. Transparency builds trust and increases buyer confidence, resulting in a higher price and increased probability of closing. 

Choose your listing broker carefully. 

Buyers
Some houses are worth a premium and some are not. If your agent is just driving you around and opening doors, they're not adding much value. To make a smarter real estate decision, you need to understand valuation, appreciation trends, and how to conduct thorough due diligence while under pressure to remove contingencies. You need market intelligence delivered in real time, specific to your unique real estate situation. Because inventory is so low, you also can't just rely on the MLS. You need effective strategies to find unlisted properties. There is no shortcut to tracking the market. If your agent is sending you generic stuff from their office or Zillow articles, they likely don't understand the market.  

Choose your buyer's agent carefully.




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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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