-New Home Price Premium

The residential real estate market is challenging, but buyers can often get a lower price and better terms if they are a skillful negotiators.

Newly constructed homes command higher prices than existing homes. Newer appliances, newer building materials and such, plus the new homes being generally larger-sized, account for most of the difference. Historically the premium of new home price above existing home price has been about 15 percent. However, recent price data say that the premium has risen to 45 percent. That is, the median price of new homes in January was $230,600 versus the median price of existing homes of $157,900. The much lower existing home price is partly due to distressed home properties on the market that are selling for much less than the replacement cost. Still, the exceptionally large price differential between new and existing homes may imply that either new home prices have to fall or that there is good growth potential for existing home prices.

The ratio of the new home price over the existing home price is shown in the graph above.

-Lawrence Yun, Chief Economist & Senior Vice President, Research 

So You Think You Can Negotiate: Ten How-To Tips for Buyers

The residential real estate market is challenging, but buyers can often get a lower price and better terms if they are a skillful negotiators.

1) Arm Yourself. This means hiring the best real estate agent you can get to represent you in your purchase. This person should know what you want and how much you can afford. He or she should be a person with whom you can communicate, who inspires your trust, knows the area where you want to buy, is ready to do research for you and can help you plan your strategy when you make the offer. An added bonus to using an agent is that your offer will be much better received when it comes through a third party, so let your agent do the talking.

2) Don't be greedy. Here's good rule-of-thumb to follow: never make an offer lower than the lowest price you think the seller might actually accept. Any offer lower than that will only be considered an insult, and when you make an insult instead of an offer, you end up having to overcompensate in your next counteroffer, because the seller is now mad at you!

3) Buying a home is an emotional buy. You are not buying stocks or bonds; you're buying a home for yourself. But, in any case, it's a statement of who you are and how you want to live. So, when you find yourself getting excited or angry, get advice from your buyer's agent and from friends. Negotiations can fail before they begin when a buyers lose their "cool".

4) Get the facts straight, and compare apples with apples. Let's say you are interested in a certain property. Your agent has access to the sales and tax records for all the properties "for sale" and "sold" in the area where the property is located. Pay the most attention to the "sold" prices of similar properties that have changed hands in the past six months. Drive by the houses, if you can, and get the details on the interior features of each one. Compare like properties; don't think you can get a house with a new kitchen for the same price as the one that needed renovation.

5) Concentrate on the sale rather than the sellers. Buyers are often tempted to assign all kinds of attributes to the sellers, even if they have no idea of what the people are really like. They might think the sellers are "cheap" or "unreasonable" or "stubborn", and use up all their energy second-guessing the sellers' motives, rather than focusing on how to get the price and terms they want.

6) Explain yourself. If you are asking for an unusual term, like a late settlement, make sure youexplain why. Buyers and sellers can agree on terms more easily if they understand the otherparty's objectives and needs.

7) Let them know you love it. It may sound corny, but you may want to accompany your offer with a letter telling the seller just how much you love their house and why. Like buyers, sellers get emotional, and it won't hurt to let them know that you really appreciate their home.

8) When you get an inch, don't go for a mile. Most inexperienced negotiators interpret any concession on that part of the seller as a total victory and end up losing by making unreasonable demands and "turning off" the seller. For example, earlier this year, certain buyers asked the sellers if they could put off reviewing contracts an extra day to give them a chance to sit down and write an offer. The sellers agreed and the buyers then asked if they could see the house one more time. The sellers agreed and the buyers then asked if the sellers would hold financing and include some of their expensive furnishings as part of the list price! Needless to say, these buyers did not get the house.

9) Stay in the game, and don't overreact. If you get a counteroffer from the seller that is higher than you expected, don't give up. A slight increase in price on your part and a change in terms that pleases the seller can still allow you to reach your target price range.

10) Be realistic; you never get everything you want. If the house is priced at $900,000, you won't get it for $750,000, no matter how clever you are. If the property is over-priced, it may eventually come down in price, but as long as the sellers' expectations are so high, you are not going to be able to pull them far enough in your direction.

Set your sights on the properties that are fairly priced, plan your strategy, stay calm and cool, and you have a good chance of saving money on your new purchase.

-Donna Evers, Broker and President, Evers & Co. Real Estate

The March 2011 Evers & Co Real Estate Report

Last year, March sales were roaring because of the First Time Homebuyer’s Tax Credit, so it isn’t surprising that the dollar volume of sales this March actually declined 3% from last year at this time. Properties stayed on the market 31% longer than last year at this time, again because last spring’s market was fueled by the tax credit.

Those of us involved in the real estate market anticipated that this March would show a great improvement over February, and indeed it did, with a 53% increase in dollar volume of sales. While April 2011 should be even better than this past month, it will be hard to meet the landslide of sales we saw last April with buyers rushing to purchase before the April 30th tax credit deadline. The good news is that the average price of property, which is the last thing to improve in a market recovery, has gone up 11 out the past 12 months, with a whopping 10%increase this month over March 2010.

*Statistics are taken from the Metropolitan Regional Information System for three areas: Washington, D.C.; Montgomery County, Maryland; and Fairfax County, Arlington, Alexandria and Falls Church in Northern Virginia. . 

New green tips in Maryland

The MEA Home Performance Rebate Program offers homeowners bigger rebates than ever for home energy efficiency improvements. By combining a 35 percent rebate (up to $3,100 total) from the Maryland Energy Administration with a 15 percent rebate from your utility, you can save a total of 50 percent on home energy improvements.

So you are thinking about selling your house?

Over the past couple of years, the most common question we've been asked over and over is how to price your home to attract buyers. After deciding to put your home for sale, the next crucial decision is pricing your property according to the market and at a figure that will attract buyers. If the price is too high, no matter how much money is spent to market your house, or is spent by you on updates, etc... absolutely nothing will happen. Overpricing a property is actually helping the sale of the competition and is the biggest mistake a homeowner can make in this market or any market. Your real estate agent want to sale your house as soon as possible. In order to do so they will analyze the market, do comparative market analysis (CMA) based on previous sales of similar houses in your area, and so on. If there is no action on your house any real estate professional will tell you that you have to reduce the price. Sometimes, and in this market it is unfortunately quite common, one price reduction is not enough and the danger of pricing too high originally might stigmatize your house for a while. Rely on professionals to help you get the right picture from the get go.

The best advice we can give our sellers is to price their house accordingly and correctly, based on the market, to ensure a quick sale. Good luck!

P.S. If you have any questions do not hesitate to contact us.

The January 2011 Evers & Co. Real Estate Report

The January market is off to an uneven start with many more buyers out looking, and fewer desirable properties for them to look at. While the flow of new listings was probably delayed by bad weather, the numbers are still looking good. The average price in the close-in Metro area was up 5% over last January and that’s an increase for the 14th consecutive month. The dollar volume of solds was up for the 2nd month in a row, with a 6.5% increase over last January. With the combination of low mortgage interest rates and increased consumer confidence, we should see a steady, strong pace of sales in 2011. *Statistics are taken from the Metropolitan Regional Information System for three areas: Washington, D.C.; Montgomery Country, Maryland; and Fairfax County, Arlington, Alexandria and Falls Church in Virginia.

-D.Evers Broker

10 Cities Where Home Prices Will Rise in 2011

While home prices are expected to continue to fall in most metro areas, Clear Capital’s Home Data Index report says a few cities are already on the rebound and showing some gains in home values.

“There really is this segmentation of these markets occurring where the one-size-fits-all national level numbers to represent all numbers really isn’t valid anymore,” Alex Villacorta, senior statistician at Clear Capital, told MSNBC. “Overall we’re seeing prices start to stabilize going into 2011, but unfortunately some of those markets will stabilize in the downward direction where others will see a sustained recovery.”

Clear Capital takes into account unemployment rates, foreclosure rates, and real estate inventory in its index.

The following is a list of 10 cities that Clear Capital expects will rise in property value in 2011:

1. Washington, D.C.: 6.5 percent price increase
2. Houston: 3.6 percent price increase
3. Honolulu: 3.4 percent price increase
4. Memphis, Tenn.: 3.2 percent price increase
5. Columbus, Ohio: 2.1 percent price increase
6. Dallas: 1.4 percent price increase
7. New York: 1.3 percent price increase
8. Birmingham, Ala.: 0.9 percent price increase
9. Pittsburgh: 0.8 percent price increase
10. New Orleans: 0.5 percent price increase

Meanwhile, Clear Capital reports that real estate markets in Florida and the Western parts of the U.S.—such as cities in Arizona and “Breadbasket metros” like Oklahoma City, Okla., and Dayton, Ohio—likely will see the largest price drops in home values over the year. Virginia Beach, Va., is expected to have the highest drop in 2011, with a 12.8 percent price decrease, according to Clear Capital report.

Source: “Where Home Prices Will Rise, Fall the Most in 2011,” MSNBC (Jan. 26, 2011)