Sweeting the pot...too much of a good thing?

Ahhh...those lovely buyer incentives...they just want to reel you in, don't they? Don't get me wrong buyers incentives can be great...hey, who won't take a year free assessments or a free car? Yes, a free car. Take a drive down the Kennedy expressway and check out the screaming banner that say "Buy a condo, get a car." I'm half tempted just to call to see what kind of car they're "giving" away. I would have taken a picture, but driving and taking a picture at the same time could present some motor vehicle issues, if you know what I mean. The sign has been up for months and months, so it just got me wondering, what would drive a developer to offer a car to a potential buyer. And apparently they're not the only ones....I just saw an ad on craigslist with the same come on, but certain "conditions" have to be met to get the car. Never mind that whoever is holding the mortgage is really going to hate trying to value the property given the unusual addition of a car!

Before I get too far into this discussion, let me say, not all incentives are bad, nor all they all acts of desperation. Incentives whether you're looking at a resale or new construction, can just be used as a tool to distinguish yourself from the competition. For example, pre-construction pricing is just an incentive to get you to buy early in the construction process, and developers will partner with lenders for discounted rates. Or for a resale you might see a year paid assessments or some other sort of closing credit.

Ok, now back to this car deal. Let's be realistic, they're not going to be giving you a Lexus or a BMW, but it's certainly a hell of a way to distinguish yourself from the competition. So, let's say that the car is worth $18,000, sounds like a good number right? And let's assume that they developer is actually paying $18,000 for the car. So that could be construed as an $18,000 discount right? Well, kind of. In this case, I would want to raise the question of why is the developer offering such a "large" incentive. A plasma tv is one thing, but a car? As an agent the first thing I would be doing is checking the comps to make sure that the unit is priced in line with other new construction in the area. If it's not, that's a red flag. Next, does the property have a major flaw that is hindering it's current sale? If so, that's another red flag. Incentives, especially substantial ones, can become tricky and red flags in and of themselves. Which leads to the next question, is the developer artificially inflating the price on the home to offer the incentive? If the price is in line with the comps, then probably not, but buyer beware. They could be and all this means for the buyer is a potential train wreck down the road when they try to resell. Welcome to the legally gray area of buyer incentives.

So you ask, why not just take the dollar amount of the incentive off the price? Sure that would make sense, and that's what many developers do, but that also eliminates the wow factor of it all. And sometimes people just feel like they're getting a better deal if there is some type of incentive, period.

Ultimately, when it comes to the bottom line, the incentive should work for the you, the buyer. Paid assessments, a discounted mortgage rate, a closing credit, all those kind of things clearly work for the buyer, but if there are any red flags, it's time to do some digging. Be careful not to be drawn in by the "deal" because in the long run it might not be such a great deal after all.

Image from businessweek.com

So you think you know what you want in your new home?

So you think you have it all figured out right? You know exactly what you want in your new home....vintage, garage parking, wood-burning fireplace, balcony and the list goes on. You've been all over the internet and yep, that's the complete package. What if I told you that many buyers that I've worked with and am currently working with have started out with one picture in their head only to have the picture change once they start getting into properties. Sometimes priorities change like "I'd rather have a little more space/better location and forget the fireplace" or "I'd rather have less space and live in my ideal location." You name it, I've heard it. And is that a bad thing, no way, I'd rather see you end up with a home that really suits you and your lifestyle. Sometimes its the property that you least expect to interest you is the one that sends your home search in a tailspin or maybe after seeing a few homes with a particular "desired" characteristic, that characteristic loses its charm. The reason I mention this is that I think buyers feel like they have to have it all figured out before they start looking for a home, and that is so not the case. The internet is a great tool and puts all this information at your fingertips, which is great, but why add the additional pressure of having to have it all figured out to your already busy life. Also, sometimes going in with all these preconceived notions, buyers might miss a property that might be ideal except it doesn't have the fireplace or the parking is a space instead of a garage. If it had everything else that you wanted, wouldn't it be at least worth checking out? I think so. The other thing I find that comes up are the things that you don't necessarily think off right of the bat. I was out with a buyer last night that didn't realize how important being on a tree-lined street was to her until she started seeing properties. The first time I'm out with a buyer I always ask them to tell me how they feel about the places we saw....what they liked, didn't like, etc. There is always a point in the conversation where the sentence starts with, "I thought I was going to like ........... and I didn't" generally followed by a reason why. What's interesting is the reason is not always what one would expect and it could be anything under the sun, but more often than not its how something feels. Despite all of our rational thoughts about our needs, feel or some other emotion creates the bottom line. Like I always tell myself, don't over think it....it all works out for the best in the end.

Buyers who go it alone...the flipside of FSBO

As realtors, we spend a lot of time talking about for sale by owners or FSBOs and you can't pick up a copy of a real estate publication without it talking about FSBOs. But sellers are not the only ones that choose to work on their own, there are plenty of buyers out there that choose to purchase a home without an agent. And of course there is an acronym for them as well, BUBBAs (buyers unrepresented by a buyers agent). Yep, I'm totally serious and it really makes you wonder who comes up with this stuff. Last year 23% of buyers did not use a real estate professional to make their purchase. Of that 23%, 13% purchased directly from a developer or developer's agent, 9% purchased directly from the seller, and that 1% that was up for a real challenge purchased a foreclosure or trustee sale. While those numbers are not huge, seeing that made me wonder what would motivate someone to purchase a property without an agent.

With the wide availability of all sorts of real estate information on the web, from listings to how-to guides, I can see why people would try to navigate a purchase themselves. While that didn't answer the why in my head, it was answered for me this weekend when I was out with a first-time buyer. They loved the properties I showed them and wanted to continue working with me. Then here came the question, "how much do you ask for commission and what kind of agreement do we need to sign." Despite the vast amount of information out there, these were two basic items that are clearly misunderstood. As a buyer, you do not pay your buyers agent a commission, that is taken care of for you courtesy of the seller. As far as a buyer agreement goes, I stand with my broker on this one, I don't have my client's sign them. Period. My relationship with my clients are built on mutual trust. Call me idealistic, but if my client's don't trust that I am doing the best possible job in their interest then the agreement is meaningless anyway.

Another point that comes to mind is the potential dollar signs that seem to spring into people's heads. The "if I don't have an agent then the seller might give me a better deal because they don't have to pay a commission to the buyers agent." This scenario gets a little trickier because the agreement on commission is between seller and the listing agent and both would need to agree to a reduction in commission. And whose to say that the seller is willing to give up their potential savings to a complete stranger.

That's not it...we realtors make it look so easy, sign a couple documents and you're all done right? While sometimes transactions do go very smoothly, others seemed destined to hit every bump in the road. Let's back up a minute though, before you ever get to signing contracts, you need to determine what to offer for the property. You offer too much, you get a quick acceptance and seller willing to give you a break because they're getting what they want and then some, or you offer too low, the seller is insulted and won't even counter. It's easy to say that you take x% off the price, but even a blanket statement like that can be inaccurate depending on the neighborhood. Market time and motivation are only some of the factors that come into play when making an offer.

Everyone is entitled to do their own thing, and I respect that. One of the things I always ask a buyer or selling thinking of going it alone is, "how much is your time worth?" Who isn't busy these days? We all have our jobs and other responsibilities that we need to meet. Do you want to spend your free time going to open house after open house not really knowing if that particular property really meets your needs or trying to hammer out difficulties that arise? In the beginning it's always a lot of fun, but after a while it's burn out time. Remember that "weekend" project that turned into weekends. Yeah, it's kind of like that. Study after study has shown that we have less and less free time compared to previous generations, so my thought it why not make the most of it.

The resources available on the web for buyers is astounding and I think it will continue to be a great resource for buyers and sellers alike. And if you start hearing the term BUBBA, don't blame me, it wasn't my idea.

The spring market has arrived, so why is it so cold?

So you always figured the spring real estate market started in March/April, yeah, in the spring. WRONG! Guess what in real estate "spring" starts shortly after the first of the year and continues through June. So we in real estate tend to get a jump start, but so do the buyers. While plenty of people still move after June, when that hot muggy summer starts rolling around, most people want to be on North Avenue beach or in the cool air-conditioning.

Since the beginning of the year I'd have begun working with several new clients, from first time buyers who made it their New Year's resolution to stop renting, to existing homeowners who are ready to make that next move. Many of these clients are in a position where they want to be in their new home in that March/April timeframe, so we're aggressively looking now. Some of my clients have more time so it's casual. I've always been an advocate of giving yourself more time as a buyer, so you're not in a pressure situation as you near your deadline.

For you potential spring sellers out there, my advice...don't wait until March to put your home on the market, unless you have a really good reason not to. You might have already missed that buyer who is looking for exactly what you have. It doesn't hurt to break away from the pack, it's just another way to distinguish your home for potential buyers. And if you're one of the seller's with a really good reason not to list early, don't fret, there is still 3 months left in the market, make the most of it. Most importantly, regardless of when you're placing your home on the market, make sure you price it right from the start. That one factor can make all the difference in the world.

While the weather might be deceiving, spring is here, so make the most of it!

Photo courtsey of Charlie James

Recent Headlines

House prices are heating, cooling, freezing, holding - (chicagotribune.com)
As much as the media would like to portray imminent doom of the housing market as a nationwide event, Ken Harvey does a great job bringing reality into the local real estate picture. Some markets have double digit appreciation, while others have the dreaded depreciation, while others like Chicago have a modest & positive 5.2% appreciation

It's all about the pricing for those seeking a timely sale - (chicagotribune.com)
In today's market, and in any market for that matter, pricing correctly will always be key to selling a home, as I've mentioned in previous posts. The last thing any seller wants to have is their property sitting on the market day after day without any interest. This article, in a quick snapshot, touches on many of the same things I discuss with my clients before taking the listing.

Fresh start at Cabrini-Green - (suntimes.com)
To be fair they really should say the former Cabrini Green. The few buildings that are left are coming down quickly, dinosaurs of another time, another hope. It will be interesting to see what will become the new face of what was Cabrini Green and if the mixed-income project will continue to bear the burden of the past.

J. Hancock Center gets no love - (chicagoist.com)
It seems not only do consumers love new construction, but so do businesses, at least that's my speculation since I haven't done any scientific studies. After 9/11 businesses vacated "high-risk" buildings like the Sears Tower and John Hancock, but within a few years the Sears Tower at least was again filling those vacant offices. With the availability of new construction in the Loop, and businesses like IBM abandoning their flagship building, it seems that the John Hancock has also fell victim to this trend as well.

Picture from Tewksbury Borough Council

To do or not to do Dual Agency

Dual agency is one of those terms that as a realtor was drilled into my head during training, but one sellers or buyers rarely think about or even know about. First, let's start with a quick definition of dual agency. Dual agency is the practice of "representing" both the buyer and the seller in the same real estate transaction provided each have given their written consent. You may ask, well how can a dual agent represent both the buyer and the seller, isn't it a conflict of interest? In reality you don't truly "represent" the best interests of buyer or seller. The seller is looking to get the highest price possible for their property, and the buyer is looking to pay the lowest possible price and in the midst of this the agent needs to remain impartial and keep each parties position confidential. In my opinion as an agent, I think it's a tricky place and I find that my clients, buyer or seller, want to have someone to advise them and look out for their best interests exclusively. I'd love to hear your opinions or if you have been involved in a dual agent transaction, how it went and if you would do it again.