In this extremely hot real estate market, some homeowners might consider selling their homes on their own which is known as a For Sale by Owner (FSBO). They rationalize that they donâ€™t need a real estate agent and believe that they can save the fee for the services a real estate agent offers.
However, a study by Collateral Analytics reveals that FSBOs donâ€™t actually save anything, and in some cases may be costing themselves more, by not listing with an agent.
In the study, they analyzed home sales in a variety of markets. The data showed that:
â€œFSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.â€? (emphasis added)
Why would FSBOs net less money than if they had used an agent?
The study makes several suggestions:
â€œThere could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales, particularly buyers who rationalize lower-priced bids with the logic that the seller is â€œsavingâ€? a traditional commission. Such buyers might specifically search for and target sellers who are not getting representational assistance from agents.â€? In other words, â€˜bargain lookersâ€™ might shop FSBOs more often.
â€œExperienced agents are experts at â€˜stagingâ€™ homes for saleâ€? which could bring more money for the home.
â€œProperties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.â€? If more buyers see a home, the greater the chances are that there could be a bidding war for the property.
Conclusions from the study:
FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
The data suggests the average price was near 6% lowerfor FSBO sales of similar properties.
As Dave Ramsey, America’s trusted voice on money, explains:
â€œResearch has shown that, between mistakes, lack of negotiating skills, pricing errors and general exposure on the market, youâ€™ll cost yourself more than the real estate commissionâ€¦Youâ€™ll come out slightly better and with a lot less hassle if you use a top-shelf agent.â€?
Interest rates for a 30-year fixed rate mortgage have climbed from 3.95% in the first week of January up to 4.61% last week, which marks a 7-year high according to Freddie Mac. The current pace of acceleration has been fueled by many factors.
â€œThe price of oil and inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up or down, inflation follows in the same direction.â€?
You may have noticed that filling your gas tank has become substantially more expensive in recent months. The average national gas price has climbed nearly $0.50 from the beginning of the year, leading to the highest price for Memorial Day weekend since 2014.
As rates go up, your purchasing power goes down, but donâ€™t worry; rates are still well below the averages weâ€™ve seen over the last four decades.
â€œFreddie Mac said this yearâ€™s higher rates have not yet caused much of a ripple in the strong demand levels for buying a home seen in most markets, but inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.â€?
Buying sooner rather than later will help lock in a lower rate than waiting, as the experts believe rates will continue to climb. Even a small increase in interest rates can have a big impact on your monthly housing cost.
If you are planning on buying a home this year, keep an eye on gas prices the next time youâ€™re at the pump. If you start to feel a big jump in price, know that rates are probably on their way up too.
According toÂ Freddie Macâ€™sÂ latestÂ Primary Mortgage Market Survey,Â interest rates for a 30-year fixed rate mortgage are currently at 4.61%, which is still near record lows in comparison to recent history!
The interest rate you secure when buying a home not only greatly impacts your monthlyÂ housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows the impact that rising interest rates would have if you planned to purchase a home within the national median price range while keeping your principal and interest payments between $1,850-$1,900 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). ExpertsÂ predictÂ that mortgage rates will be closer to 5% by this time next year.
Act now to get the most house for your hard-earned money.
Recently releasedÂ data from the National Association of Realtors (NAR) suggests that a now is a great time to sell your home. The concept of â€˜supply & demandâ€™ reveals that the best price for an item is realized when the supply of that item is low and the demand for that item is high.
Letâ€™s see how this applies to the current residential real estate market.
It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.
Supply is currently very low!
A report that was just released tells us that demand is very strong. The most recentÂ Foot Traffic Report (which sheds light on the number of buyers who are actually out looking at homes) disclosed that â€œfoot traffic grew 10.5 points to 52.4 in March as the new season approaches.â€?
Demand is currently very high!
Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, letâ€™s get together to discuss the conditions in our market.
Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values will fall. History, however, has shown this not to be true.
Where are home values today compared to the beginning of the year?
While rates have been rising, so have home values. Here are the most recent monthly price increases reported in the Home Price Insights Report from CoreLogic:
January: Prices were up 0.5% over the month before.
February: Prices were up 1% over the month before.
March: Prices were up 1.4% over the month before.
Not only did prices continue to appreciate, the level of appreciation accelerated over the first quarter. CoreLogic believes that home prices will increase by 5.2% over the next twelve months.
How can prices rise while mortgage rates increase?
â€œIn the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.â€?
If you are thinking about moving up to your dream home, waiting until later this year and hoping for prices to fall may not be a good strategy.
Every year, the New York Federal Reserve publishes the results of their Survey of Consumer Expectations (SCE). Each survey covers a wide range of topics including inflation, labor market, household finance, credit access and housing.
One of the many questions asked in the housing section of the survey was:
Assuming you had the financial resources to do so, would you like to OWN instead of RENT your primary residence?
Over three-quarters of respondents under the age of 50 said that they would prefer to own their home, rather than rent. While only 52.6% of those over 50 would prefer to own. The full breakdown can be found in the chart below.
When renters were asked what the average probability of owning a primary residence at some point in their future was, 66.4% of those under 50 believed that they would eventually own their home, while only 23% of those over 50 did.
Many had wondered if young Americans had lost their desire to own a home, but for those renting now, that dream is still alive.
So, youâ€™ve decided to sell your house. Youâ€™ve hired a real estate professional to help you through the entire process, and they have asked you what level of access you want to provide to your potential buyers.
There are four elements to a quality listing. At the top of the list is Access, followed by Condition, Financing, and Price. There are many levels of access that you can provide to your agent so that he or she can show your home.
Here are five levels of access that you can give to buyers, along with a brief description:
Lockbox on the DoorÂ â€“ this allows buyers the ability to see the home as soon as they are aware of the listing, or at their convenience.
Providing a Key to the HomeÂ â€“ although the buyerâ€™s agent may need to stop by an office to pick up the key, there is little delay in being able to show the home.
Open Access with a Phone CallÂ â€“ the seller allows showings with just a phone callâ€™s notice.
By Appointment Only (example: 48-Hour Notice)Â â€“ Many buyers who are relocating for a new career or promotion start working in that area prior to purchasing their home. They often like to take advantage of free time during business hours (such as their lunch break) to view potential homes. Because of this, they may not be able to plan their availability far in advance or may be unable to wait 48 hours to see the house.
Limited AccessÂ (example: the home is only available on Mondays or Tuesdays at 2pm or for only a couple of hours a day)Â â€“ This is the most difficult way to be able to show your house to potential buyers.
With May proving to be the best month to sell your home, access can make or break your ability to get the price you are looking for, or even sell your house at all.
The famous quote by Walt Whitman, â€œA man is not a whole and complete man, unless he owns a house and the ground it stands on,â€? can be used to describe homeownership in America today. TheÂ CensusÂ revealedÂ that the percentage of homeowners in America has been steadily climbing back up since hitting a 50-year low in 2016. The homeownership rate in the first quarter of 2018 was 64.2%, higher than last yearâ€™s 63.6%.
Chief Economist, Dr. Ralph McLaughlin, in his VUE Blog gave these new homeownership numbers some context:
â€œThe trend is clear: the homeownership rate has been ticking up for five consecutive quarters, and the number of new renter households has fallen for four consecutive quarters. Owner-occupied households grew by 1.345 million from a year ago, while the number of renters actually fell by 286,000 households.
The fact that we now have four consecutive quarters where owner households increased while renter households fell is a strong sign households are making a switch from renting to buying. This is a trend that multifamily builders, investors, and landlords should take note of.â€?
In a separateÂ articleÂ comparing the rental population in America to the homeowner population,Â Realtor.com also concluded that the gap is now shrinking:
â€œThe U.S. added 1.3 million owner households over the last year and lost 286,000 renter households, the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier. That could pose challenges for apartment landlords, who are bracing this year for one of the largest infusions of new rental supply in three decades.â€?
Americaâ€™s belief in homeownership was also evidenced in aÂ surveyÂ conducted byÂ Pew Research. They asked consumers â€œHow important is homeownership to achieving the American Dream?â€?
43% said homeownership was essential to the American Dream
48% said homeownership was important to the American Dream
Only 9% said it was not important
Homeownership has been, is, and always will be a crucial part of the American Dream.