Tuesday, March 3, 2009

Buy My House...

It's a nice house, in a good neighborhood, with great neighbors. We have, however, been thinking for a while about selling it. In fact, we had planned on it.

Now, like so many homeowners in Charlotte, the recession has left us with a stagnant market and difficult choices. Beginning today, we'll help you navigate those issues by telling you the story of one house. My house.

(First, a disclaimer: No house will actually be offered in the making of this feature. I don't want to take advantage of this blog's public presence, so no picture of my house, no listing of features, no asking price *cough*whatabargain*cough*. Seriously, no deal making here.)

But today, a question: Should we even bother trying to sell?

Our story: We purchased our home in the University area in late 2004. Our mortgage was a five-year adjustable rate, and we made our payments and saved our pennies with the notion that before the mortgage adjusted, we would sell and move to a location closer to work and church.

Today, we are less than a year from that adjustment, facing a market in which good houses are sitting unsold for long stretches of time. We are fortunate in that we can afford to stay - our house has equity and value, and our mortgage payment won't rise too steeply when it adjusts. Do we test that market, anyway, to see if a buyer happens to fall in love?

Area Realtors, who tend to be chronically optimistic, think now is a fine time to explore a sale and purchase, especially if you plan to move to a neighborhood with higher home values. Charlotte's Allen Tate Real Estate calls it the Buy/Sell Equation. "This is a market where you're going to take less on the sale, and make it up on the buy," says president Pat Riley.

Makes sense. If you settle for 10 percent off your $300,000 home, then get a $400,000 home for the same 10 percent off, you'll net $10,000 in the process.

Still, the market that awaits us is not encouraging. While there are fewer homes to compete with - about 26,000 active listings in our region today, about a thousand less than a year ago - the average price has dipped from $218,000 in January 2008 to $189,000 in January 2009, says Donna Anderson, president of the Charlotte Regional Realtors Association. And, of course, housing sales are significantly down.

The snag, for those with adjusting mortgage rates, is that you have to sell your home now. Homesellers in this difficult environment often face an unpleasant surprise when they de-list their homes and apply for refinancing. In most cases, you're not going to get a new mortgage.
Lenders presume that if you recently tried to sell your house, you might try to sell it again soon, paying off your newly refinanced loan and costing them profit.

"It's expensive for bankers to put a loan on the books," says Bill McConnell, a mortgage broker with Charlotte's Cunningham Mortgage. "They all want a chance to make a return on their investment."

McConnell says that lenders typically want houses off the market for three months before they'll approve a refinancing. Some want more than three.

And so, the options: Refinance the house now, with closing costs (even if they are rolled into the new mortgage). Or roll the dice and offer the house in an area where a few houses are selling, but not many. It's a choice facing homeowners through Charlotte - and the country.

Says McConnell: "I don't know if there is any good advice here. You have to go with your gut."

We're mulling.


Are you facing a similar decision? Tell us about your house and the choices you've made.

And remember, we're taking entries in our Bad Financial Writing contest. Think you can write some terrible prose about how bad it is out there? Have a bit of fun in these difficult times and send us an awful paragraph. Winner gets recognition - and a Charlotte Observer coffee mug.


Keith Hall said...

My wife and I are considering putting our house on the market in April. While we are not in a "sell now" situation we would like to sell it as soon as possible so we can move back to the DC area.

We bought the house (a 3-bedroom townhouse in uptown) in 2006. We got a good price for it and have done some work on it such as installing a new bathroom and some painting. Comparable townhomes have sold in the area for 10-15% more than our purchase price.

As I said, we're not being forced to sell because of financial factors, we're just tired of living in Charlotte. I'm hoping a For Sale by Owner sign in the spring will speed up our departure.

Anonymous said...

I heard someone about 6-8 months ago on some random financial show saying it might not be a bad idea to yank money out of the stock market and payoff the mortgage. Considering what has happened to the market recently it seems not that bad an idea. A friend of mine did that and is better off for it.

Good luck to us all and let's hope things get better for all of us sooner rather than later.

Anonymous said...

Why not refinance now to get your payment to a good place and then list? You can't be punished by the mortgage company that way and if you end up not selling quickly you are good with the payment in place.

Anonymous said...

If you are in an ARM, why not just go with a fixed rate until you can sell?

And it doesn't cost a dime to list, so I'd say go for it.

Anonymous said...

Keith, unless your townhome has fantastic visibility and you are willing to work with a buyers agent (meaning pay them a commission), FSBO and speedy sale don't go together. Just my experience in selling a home recently.

In answer to the article, I found that every buyer is looking for a deal. No matter what the house is listed at, be prepared for offers 10-15% lower.

JAT said...

Whoa, Cap'n.

You really want to incur all the cost -- in time, money, and labor -- involved in moving JUST to get away from an ARM?

More to the point, you either like your house and your neighborhood or you do not. If you do, stay put and ride out the next 6 to 12 months then reassess. If not, get out and target one of the many spec-build homes builders have sitting empty -- perhaps even half-finished for some sweat equity opportunity.

Oh, and ignore everything Realtors say. They have absolutely no experience with the current situation. Pull comps from zillow and other open-source sites and PRICE TO SELL right out of the gate.

Good luck.


Anonymous said...

No brainer... Refi now, some brokers offer a *no cost* option for between 0.25% and 0.35% higher than the published rate. You should also consider paying down your mortgage during the process and apply for a home equity line of credit afterwards if you needed access to liquidity post close. Then, go list the house whenever the time is right.

Anonymous said...

The majority of what I am hearing is to go ahead and refinance your home to a FIXED rate BEFORE you list it. That is always good advice. Why would you want to incur additional expense by moving especially if your house suits you well enough right now. If you feel you really must move, then refinance first. That way, in case it does not sell, you won't have to worry about the adjustable rate costing you more.

pstonge said...

Good thoughts, all.

To answer a couple of questions:

Anons, 12:34: Refinancing now means a higher rate and monthly payment than my ARM, plus incurring refi costs (yes, I know they can be rolled into the refi.) So the choice is whether to avoid the bigger monthly payment/refi costs and try the market, or bow to reality and pay more now.

JAT: Not just running from the ARM. See the paragraph - church, work, proximity.

Keep the thoughts coming. Thanks...


Anonymous said...

Just took my house off the market after 6 months. We live in the Cotswald area and were selling a 3 bd 1 1/2 bath for under 180,000. We had a total of 7 showings and no offers. We are not in a need to sell situation so it's fine and we are planning on staying put, but it's tough out there. Our neighbor who just moved to a retirement village and is selling dropped his asking by $12,000 after just one month. If I were a first time buyer I'd be all over this market, otherwise I'd sit.

Anonymous said...

A record 57% of homeowners are not making their payments today apparently waiting for Obama to rescue them and make their payments for them. Bush has weasiled away leaving this mess. America may never come back. This is unchartered waters as a global crisis that began on Wall St and NYC mortage bankers with the Iraq war of choice the root cause.

Why is Bush not being held accountable? His worthless name has not even been mentioned although forgetting this silver spoon spoiled rotten brat spendthrift puppet of the neocons is needed.

Obama also has stumped a lot of people with his idiot logic that spending more trillions will somehow solve the problem or throwing gas on a fire to extinguish it driving up the already astronominal 15 trillion debt.

In the end if everything fails America will have no choice but to break up like the USSR although this is not a bad thing and creating multiple nations would allow for more responsibility and better efficient micromanagement.

The break up of America could be orchesrated systematically and boundaries drawn like a political district.

America could even easily break into 50 separate nations and this is a possibility.
Washington DC could be leveled and turned into a parkling and given back to Virginia and Maryland.

Each state in America is fully self contained already anyway with its own state capital and government.
This actually may be the best solution with 50 separate nations. Many states have proposed being their own nation anyway since technically the founders wanted nation states loosely confederated with no socialist fascist centralized government as DC has become.

Nickname unavailable said...

As a Realtor for over 16 years in Charlotte, one reader was correct that we're in uncharted territory when it comes to selling non-foreclosure / short sale properties right now.

Lets review your situation in detail:

Today's market:
Buyers out in the current market are looking for deals. They don't care if it's the perfect neighborhood or location and you just put it on the market. They expect heavy concessions and probably will for the next 12 to 18 months.

Most people are unaware that today's pricing has drastically changed in the past six months. If I can't pull comps within 6 months and within your neighborhood, it's going to be a shot in the dark. Our firm is starting to use appraisers prior to listing a home now to avoid problems later. What you think your house is worth vs. reality may come as a shock to you right now.

Buy/Sell Equation theory:
While the math makes sense and has merit... there are NO guarantees. If you took 10% less on your home there are no guarantees you will get 10% off your next one. Also a word of caution here. I have seen people chase a deal for the deal instead of the right home. Real Estate will always be location, school district and quality of life. Are you willing to give one of these up for $30,000 or $40,000?

Bottom Line:
Review all your options... sure placing it on the market costs you nothing and it may sell depending on location, appeal and demand for your area. Since you're not in a financial crisis (loss of job etc.) and just moving within town... you're in better position than most. I would advise you to study where you'll be relocating to and be sure that the deals exist prior to placing your home on the market.

Also understand that selling a home FSBO is only effective in hot markets. Since we're not in a hot market, it would be an utter waste of your time to do so and you may even lose some valuable Spring time sales opportunities. Best of luck...

matt said...

Anon at 1:37... what? Go away with that drivel. No wonder you wouldn't sign your name to that load of crap.

Anonymous said...

I find it interesting that a realtor would say that selling a home FSBO would be an "utter waste of your time."

Seems that it would be in the buyers and sellers interest that the home's selling price would be 4 to 8% lower if realtors were not involved.

cltindependent said...

I thought about selling two years ago, (I got married and would like to live in Uptown Charlotte). I waited and now there are two forecloses in my neighborhood selling for $50,000 less than the value of everyone elses home. I think we will stay put now for a few more years. If you are thinking about it and will be in the next home for some time, I would do it. I regret waiting. Anony 1:37 (WOW!) Doesn't matter who's fault it is, everyone's going to through this together.

Anonymous said...

Does anyone have anything positive to say? Here we are commenting on an issue that is heavily media-driven and has everybody sitting on a fence, trying to wait out a storm. Every headline the media puts out there has been "decline, decline, decline." The majority of people who read newspapers only read the "headlines." I have spoken to so many homeowners who say, "not in this market," and "there's no way I'd do anything in real estate right now." I always use my follow up question and that is, "what SPECIFICALLY are you afraid of?" Nine out of Ten people CANNOT follow up why they dont want to involve themselves in a real estate transaction. If there were a headline that said, "Things Looking UP, start investing, start buying," 9 out of 10 would start thinking differently.
As for FSBO's - get real. It is an utter waste of time and I strongly agree with that. Think about it - when you go to the grocery store, do you buy Pepsi, Coke, or store brand cola???
When a buyer looks at homes, do you think they go for the store brand cola? Buyer's want to buy from trusted, proven, professionals, not some "schmoe' who is trying to sell on their own and has no clue what they're doing. So let the professionals do what the professionals do. I wouldn't try to perform my own open heart surgery just so I didnt have to pay medical bills. Wake up!

Jen said...

Certainly a realtor may have an agenda behind saying that FSBO is not a good idea, but having seen friends and family members try this, I agree. If you want a quick sale, you need to have a lot of advertising and a lot of traffic, and if you are selling FSBO, that is a lot of out-of-pocket money and time spent. Can it be done, yes, but you are your own little island out there.

twins said...

Makes sense not to use a realtor??? Try dealing with everything you have to now a days on your own. Do you do surgery on yourself? Do you got to court without an attorney?
Hello. Take advantage of the training and use their expertise. Do your home work, get a good one. All the stats show not using one costs you in the long run. Your "net" number is almost always higher when you use a professional!!
Good Luck.

Anonymous said...

I think realtors have a service to offer, but we all do ourselves a disservice if we continue to allow themselves to monopolize the market by pretending what they do is rocket science and that buying from a realtor offers some additional protections - it doesn't. They are in the market to sell. Some are better than others and there are enough unscrupulous ones out there that you have to be careful. I've bought and sold FSBO and have had good experiences each time. I have used a realtor twice, but wasn't as happy. My last house I sold on Craigslist to the first folks who looked at it. I made more money than I would have with a realtor and they paid less than they would have using a realtor.

Anonymous said...

I bought a townhome in Davidson in 2002 for 160,000. It was a nicer one in the area. By 2007 one townhome in my neighborhood sold for per square footage what would have netted me over 210,000k. I saw a home in Cornelius which was apples to apples a leg up. I put in an offer and the next day put the townhome up FSBO. I was lucky enough to sell the townhome about 4 weeks after I put it up and the week after I bought the single family in Cornelius. I lucked up and got exactly what I asked for for the townhome in Davidson. My Cornelius house has lossed about 16k in value, so says zillow.com. But the townhome in Davidson has faired worse it lossed about 26k of what zillow said when I sold it. The area in Davidson is booming so I know value is still there.

A refi loosely commits you to 2 years depending upon how much equity you want to burn in closing costs. I refied about 2 years to before the sale in Davidson. I cleaned up, right before the market went south.

Ironically homes in my Cornelius neighborhood are renting for about 700 less than what I am paying for mortgage payments. Buying up is what hurt me. Sometimes I think I should have rented after the Davidson sale. I probably would have gotten hurt on Capital Gains and loss of interest payments but 700 over 12 months is a lot of money within its own right.

If you are comfortable with your mortgage payments you may want to consider refi waiting a few years than selling/buying when the market bottoms out. There are a lot of lost bonus checks in the financial markets to drop the prices of high end homes. They need to be worked out and they haven't begun to put a dent in higher end homes.

Anonymous said...

Interest rates are down right now and may well be in a year when your first adjustment occurs. There may be no significant change in your monthly payment after it adjusts. Refinancing usually requires some period of time to recoup the cost of refinancing (fees, closing cost, etc.) unless you currently have a really high rate. If you want to sell, that is fine, but it would probably be a bad decision to re-fi and then put the house up for sale. But remember, people are looking for bargains in this market.

Anonymous said...

One problem with FSBO is that buyers know you aren't paying a commission and they too want their share of the savings. If you have never sold by owner, you are in for a real treat when it comes to answering all the calls, scheduling time to show the house, being their to show the house, negotiate the price, write up the contract, and hope you know enough about contracts so you don't get the bad end of the stick. To me it is worth the commission to just hand it over to someone else to take care of. It isn't as easy as it looks unless houses are just flying off the market...and they aren't right now.

Anonymous said...

One more thing.....If you try to sell your home FSBO be very, very careful. The new NC Offer to Purchase has a lot of 'set in stone' dates in it...you would be very well served to have an attorney review every offer you get on your home. Otherwise a savy buyer can really take advantage of you. Like one other guy said, why would you perform surgery on yourself (not that what an agent does is that complicated, but when it comes to the biggest investment of one's life why would you not want a professional to help you get the best terms?).

Ive done many FSBO's and every time I feel bad for the seller because I know they dont know what theyre doing, and yes, I do take advantage because my job is to represent my client's best interests.

barkomomma said...

"If you settle for 10 percent off your $300,000 home, then get a $400,000 home for the same 10 percent off, you'll net $10,000 in the process."

As stated earlier, simple math doesn't apply in real estate, especially now.

And, besides, doesn't that "sell a 300K home and buy a 400K one" sound exactly like what got this ball rolling in the first place?

How about "sell a 300K home and buy a 200K one?"

bonjeanie said...

I find it interesting how Realtors haven't changed the way they do business. While everyone else has to take a hit on the chin, they still charge the same percentages for commission. There is no way that their 6-7% commission is justified (never has) and they are part of the reason home prices kept rising.

LoanSharkCharlotte said...

Realtors do bring some value to some transactions, and should be REASONABLY compensated for such; however, to compare their expertise or impact to that of a surgeon is quite an exaggeration.

Anonymous said...

Peter, if you want to move, put your house on the market. If it doesn't bring the price you want, keep it. That simple. At least you can afford it.

Too many people bought too much house for the wrong reasons and then the economy turned and bit them.

Anonymous said...

I refinanced in December and I'm saving a whopping $600 a month on my mortgage, however I am also tempted to sell and buy a foreclosure dirt cheap. Unfortunately, there are so many good deals on foreclosures out there right now, nobody would buy my house for what I have in it when there are better deals to be had.

Anonymous said...

My only issue with Realtors is that they have a 6% fixed commission. They make up stories to justify why this is the right number. They are taking no principal risk. If they do not sell my home or sell it for less than I expect, there is little to no downside. I know it is not easy to sell a house, but there has to be more competition in the industry.

Anonymous said...

So is placing an ad on Craigslist, adding a lockbox and putting a property in the agency's weekly ad run worth 6-7%? No. Good luck to the FSBOs. Give 1% to a good attorney. Like the commenter said, "it's not rocket science."

Anonymous said...

I own a small firm designing homes with a degree in Architecture. A well designed home will sell much faster than a poorly designed one no matter who the Realtor is yet people will complain about my charges although they are less than half of what a Realtor charges. Who will have more time involved and who has the highest education level? I spend more time on one project than a Realtor spends in school learning how to sell a home, who is more valuable?

Anonymous said...

Okay - do it. Put your home on Craigslist today at 2 p.m. Then see how many more ads arise at 4 p.m. You have to scroll through pages upon pages for your home to be seen in a matter of 2 hours. Give it a shot FSBO! Great Exposure. (sarcasm)
Secondly, REALTORS don't sell homes, they market homes.
If you don't like the commission, then negotiate it, but DONT expect full service if you go for less than 6%.
There is competition out there for REALTORS. They are called FSBO's.
It's not "Rocket Science." But hey genius - go pass the NC Realtors Exam and get your license. Then start talking about how REALTORS don't have to do anything and take no risk. Are you kidding me? No base salary, all commission and you're telling me there's no risk if your home sells or not?
Equation - A REALTOR will list a home and get a 3% split with co-broker. Then a portion goes to the brokerage company. A REALTOR sees about 1.5% end game. Now, if your $100,000 home sells at the the 30 day mark, the REALTOR makes $1500 in a month. Or - 50 dollars per day, or 6.25 an hour. So don't tell REALTORS there is no risk. The ambitious ones want your home to sell just as much as you do and some do care. Think about it.

Anonymous said...

I have been out of work for over 6 months now. I don't know when or whether I will find work here. And, I don't think anyone out of state that I've applied to is remotely interested in hiring someone outside their local area. Unfortunately, corporations can spend less money to outsource my job and the government rewards corporations for sending my job overseas rather than for hiring American workers.

I have done everything right. I have an excellent credit score. I didn't buy (build) too much house. The market wasn't booming when I built it and I had a good income. I have a 30-year mortgage with about 20 years left. I have considerable equity in my home. My interest rate is low and my payments are reasonable---as long as I'm working. I saved for a rainy day, but my savings are worth considerably less than they were when I was laid off. I am using my savings to meet my monthly expenses, but those savings won't last forever. And, I am afraid that if I don't get work then I will be one of those people to join the ranks of those who are in foreclosure. I want to sell my house and buy a place by using the equity from my current home. I don't think I ever want to have another mortgage again.

I would be cautious about using Zillow as a guide to how much one's property is worth. From what I see, Zillow is comping my property against properties that are not similar and it is not making adjustments for the differences, something an appraiser would do. The properties just happen to be in the same general area as my property.

Anonymous said...

Two people you probably shouldn't listen to are a stockbroker and a realtor.

They make money no matter what, so it is always to their advantage to buy and sell as quickly as possible.

That line about making up on the buy what you lose on the sell is a classic.

It is still going along the same dumb assumption that your new house won't also start dropping in value.

Also, you can bet that $300K and $400K homes are in different "markets" and you just may be surfing from a trough in one to a trough in the other (if the $400K houses are just holding their value a little longer).

I've never gotten good advice from either "professional".

I've even had realtors say really stupid stuff like "I've been in the business 20 years and I've never seen interest rates drop" when I told them I was expecting rates to drop.

Some of them will say nearly anything to get a sale moving.

They all have to make a living and their percentage of the deal doesn't change much whether they give you good advice or a total snow job.

Anonymous said...

If you DO decide to put your house on the market don't forget that there is another option other than FSBO or traditional Realtor. If you go with a traditional Realtor you generally wind up paying 6% - 3% to your Realtor and 3% to the Buyer's realtor. 6% on a $200K home is $12,000 - a sizeable chunk of change. So, the other option is to list with someone like Lead Dog Realty (they charge a flat fee and list you on the MLS) or there are companies on line that will post your pictures and get you an MLS#. With this option, you still get the MLS exposure so that all the realtors in town have access to your listing. AND they will still show your house because the buyer's agent will still get their 3% commission, but you pay a lot less than 3% for your listing. Going totally FSBO is a tough row to hoe.