Chad & Sara Huebener

By Sara & Chad Huebener

In this market, an offer on a home is precious! While not all-encompassing, there is a belief we hold that goes a little like this:

• First showing - No offer = Indicates initial interest in the home, but after viewing the property, the buyer has ruled out the home in favor of another.

• Second showing - No offer = Indicates definite interest in the home, but after viewing the property a second time, the buyer ruled out the home.

• Third showing - No offer = Indicates the buyer wants the house, but is looking for a reason NOT to buy it.

In this market, when someone expresses true interest in a home, our job when representing the seller is to do all we can to retain the potential buyer. Of course, not knowing anything about the buyer's needs, wants, and personal situation makes this difficult. In cases where a buyer has had multiple showings on a home but has not made an offer, something as simple as "cold feet" could be the issue. A proactive approach using a rather uncommon tactic called a reverse purchase agreement may be worth a shot.

With a reverse purchase agreement, a purchase agreement written by the seller is compiled. The purchase agreement contains the terms the seller will accept for his home. We then send this purchase agreement to the buyer who has expressed genuine interest but has not moved forward with the offer process. Seeing the terms the seller is willing to accept is sometimes enough to motivate the buyer to find value in consummating the sale.

The reverse purchase agreement is a relatively new concept in practice. We have used reverse purchase agreements in the past. Sometimes they work. Sometimes they don't. Regardless, in this market, we find it is certainly worth the extra effort to give it a try. Until our market resumes to more normal conditions, it is our job to find creative and innovative ways to bring buyers and sellers together. The reverse purchase agreement proves to be one of these methods.

By Sara & Chad Huebener

Short sales - we are hearing more and more about them, as well as foreclosures. What exactly is a short sale and how does this differ from foreclosure?

A short sale is the sale of real property where the value of the property is less than the outstanding mortgage and other liens against the property. The mortgagor (owner) must typically demonstrate financial hardship in order for the bank to accept a short sale, and often times, must have missed payments. The bank, through its loss mitigation department, agrees to accept less than the outstanding loan balance, and the seller must turn over the proceeds of the sale to the mortgage company at the time of closing.

The results of a short sale in terms of excusing a debt vary. In some cases, the bank will provide a satisfaction of mortgage and the owner will be debt free. If this is the scenario, the bank has the right to approve or decline the sale of the property. In cases where a satisfaction is not granted, the mortgagor (owner/seller) may be liable for the outstanding debt on the property.

Short sales are typically instigated by a homeowner in an effort to prevent a foreclosure, which has a longer lasting impact on the homeowner's credit score and ability to purchase a home in the future. If the homeowner has missed payments and the bank has issued a notice of foreclosure, the home will eventually offered for sale at a sherrif's sale. The homeowner has 6 months from the sheriff's sale to bring the delinquent loan current - these 6 months are known as the redemption period. During the redemption period, the homeowner may try to sell the home "short" to avoid having a foreclosure on his record.

The incentive for a bank to accept a short sale include the fact that short sales incur fewer costs than foreclosures, and are often faster to turn around in the long run. The challenge in our market in getting short sales accomplished include longer market times, which often exceed the redemption period of six months. Furthermore, banks have notoriously long turnaround times for offer acceptance - sometimes in excess of 6-8 weeks, so finding a buyer that is patient enough to tolerate the lengthy wait, and/or has the abilty to hold off moving while awaiting the bank's acceptance or decline of the offer, can be a challenge.

If a short sale can be accomplished successfully, the implications for the homeowner (seller) are more positive than if the seller is foreclosed upon. Once the seller is foreclosed upon, the bank retains ownership of the property and the resulting impact on the homeowner's credit is severely jeopardized. Many sellers believe that in a foreclosure scenario, they "walk away from" the house. In fact, in a foreclosure situation, the bank may hold the homeowner responsible for a portion of the debt in the form of a deficiency judgement. Many sellers do not understand that foreclosure is avoidable, but they must act before the expiration of the redemption period to successfully accomplish this endeavor.

Short sales have become a reality in our marketplace, and are not unique to any price bracket. Our goal is to make sure sellers understand the foreclosure is preventable. If we can prevent foreclosures, our ability to shorten the housing crisis is dramatically improved.

By Sara Huebener

These days, more than ever before, the status of the real estate market seems to be a hot topic. The years 2000-2004 were incredible times for the Twin Cities housing market for many local homeowners. The market was accelerating rapidly, and at its peak, houses were selling fast and for top dollar. People were making a good return on their investment. Many people used this real estate bull market to upgrade their homes and provide a higher standard of living for their families.

As is the nature of all markets, the bull was followed by the bear, causing people to unexpectedly see their home values decline and retirement accounts plummet. A myriad of questions now exist, ranging from "how much did the value of my home decline, if at all?", to "have we reached the bottom of the market?", and "how long will it take to get back to where we were?" Such reasonable questions deserve reasonable answers, however no one can provide a truly solid response. That said, there are some encouraging signs in the marketplace.

The Southern Twin Cities Association of REALTORS® Market Activity Report for January 26, 2009 reports that inventory is hovering around 25,000 homes. That's a 10% reduction since the same time last year. Pair that with a 13% increase in pending sales since one year ago, and I see signs of recovery on the horizon. These are promising statistics, and 2009 promises to be a year to "watch".

So what does all this mean for local homeowners? That depends on each individual's situation. Those who are planning to upsize (and are in a positive equity position in their home) should consider doing so now. Many high-end homes are being offered at fantastic prices. If you must sell before you upsize, consider that what might be a lower sale price than could have been obtained three years ago can quickly be recouped in the savings from the larger purchase.

Now that we are seeing favorable conditions for buyers, first-time homebuyers have phenomenal opportunities before them. Lower pricing caused by the rise in foreclosures, paired with a $7,500 federal tax credit offered through July 2009, provides first-time homebuyers with a great incentive to make a home purchase. A glance at the collective benefits of still attractive inventories and low interest rates creates an attractive opportunity purchase a home.

The often heard justification for not buying now - waiting until the market "hits the bottom" - is an erroneous belief. By the time we realize when the market reached bottom, it will already be on the way up. Just as we cannot determine when the stock market will rise and fall and positively secure our personal outcome, the same holds true for the housing market.

Should sellers in the mid-upper price range ($300-600K) be concerned about the first-time homebuyer market? Absolutely. The reason is simple. When first-time buyers can purchase a home, the sellers in those transactions (when not bank-owned) translate into more buyers for the mid-upper price point. Real estate sales can be analogous to a domino effect - when a home is sold, the seller often buys another home, and the seller of that home buys a home. The dominoes continue to fall. When a property is bank-owned, the transaction essentially stops when the buyer completes the purchase. As the foreclosed homes are absorbed into the marketplace via homeownership, we'll find that a higher percentage of homes for sale will be owned by someone who also needs to buy. And this is good for the marketplace as a whole because the domino effect will once again be in play.

Now is also a terrific time to build personal wealth and expand portfolio diversification. One of the unfortunate side effects of this economy is that many people may not be able to purchase a home for several years. Consequently, the rental market is expected to be quite strong for the next 3-5 years. This high probability, paired with current extraordinary real estate values, create a great opportunity to acquire investment property at a price where profitability is likely.

All said, there are some solid facts we can keep in mind during this time of uncertainty. While it is natural to be concerned about the value of one's home, we should keep in mind that if the market is always favorable for sellers, the ability for first-time buyers to enter the market (in the long run) would become increasingly difficult. Those planning to upsize have tremendous opportunity to capitalize on this market. And if you have ever wanted to invest in real estate, there is no time like the present. The market is cyclical, and with the overall philosophy of homeownership being for long-term gain, ebbs and flows are normal and should be expected. The key is to take advantage of the unique opportunities that each rise and fall in the housing market present to us.

By Sara Huebener

The year 2008 was certainly one like no other. A market where foreclosures and short sales have become commonplace is certainly uncommon compared to years past. The year presented new challenges to bringing buyers and sellers together. (Fortunately, there are some key initiatives in play to make this effort easier for all.) Here is a quick wrap-up of the 2008 housing market.

1. Prices have fallen. It is the reality of the marketplace, and many homeowners are finding that their homes are worth less than they paid for them, even after substantial improvements were made to the property. The good news is that housing affordability is now more in line with historic norms.

2. The number of sales for 2008 did not drop as much as it did in years past. Sales are still steady. The composition makeup of the sales is what has changed. More lower priced homes are selling more quickly.

3. The average square footage of closed sales declined, mostly in part to the rise in foreclosure sales, which tend to be smaller in structure as a whole. Also, fewer new construction permits have been pulled, and most new construction plans tend to be larger than older homes built decades ago.

4. The price per square foot declined in 2008, as did the median home sale price.

5. The percentage of list price received has dropped from over 98% to 91% on average. Motivated sellers are offering more concessions and greater discounts to get a home sold in today's market.

Now is a good time for homeowners to sit tight if downsizing, upsize if that is the need or desire, refinance if "staying put" is an option, and invest in real estate if owning a rental suits you.

By Sara Huebener

At first glance, the title of this article initially appears to ask whom will purchase your home once it hits the market. And to a seller, that is the most important component - getting a home sold for the highest price possible, especially in this market, where we have seen declines in property values.

The title of this article is actually referring to a common and unethical sales tactic among some agents in the industry. The tactic is called "buying the listing" and refers to the situation when an agent intentionally overprices a home in an effort to secure the listing contract with the seller. In such cases, the agent most likely knows the property will not sell for list price, and plans to rely on market time and price reductions from the seller to eventually get the home sold. In a market where property values are down and fewer sellers are in a positive equity position, this practice is becoming more commonplace as agents compete for listings.

Here is a common scenario that plays out: Mr. and Mrs. Seller are aware that the housing market has cooled. Regardless, they must get their home sold, and they need to take a certain amount of money from the sale. Mr. and Mrs. Seller interview agents A, B and C. Agents A and B come in with comparable market analyses that provide sales data on comparable properties in the area. Unfortunately, the market price provided by Agents A and B is not the price Mr. and Mrs. Seller were hoping to sell their home for. They are disappointed. It will not provide them with the balance they need to clear from the sale. Agent C comes in with a price more in line with what Mr. and Mrs. Seller were hoping. They are excited that an agent says he will list their home for a price they are glad to hear about. They sign the listing contract with Agent C. Agent C has just "bought the listing".

The first two weeks of market time should be busy with showings - if the home is appropriately priced. Many agents who know the market and have active buyers will preview new listings to stay abreast of inventories and preview for buyers. If an agent knows a property is overpriced, she will often forego the preview - the home is priced far out of line for the market and a buyer will not be willing to pay asking price.

After the first few weeks, the lack of activity from overpricing will be the perfect tool for Agent C to utilize when asking Mr. and Mrs. Seller to reduce the price. By the time Mr. and Mrs. Seller have reduced the price low enough to where the property should have been originally listed, the property will have accummulated market time that is harmful to their negotiating situation. Rarely does a home with high market time ever receive a full-price offer. Now, Mr. and Mrs. Seller are in an even more difficult position.

Sellers who live in neighborhoods with a limited number of floor plans are among the most likely to fall into this scenario. Suppose Mr. and Mrs. Seller reside in a development has 6 floor plans. These homes prove to be excellent comps, yet Mr. and Mrs. Seller feel their home is worth much more than the home down the street, even though the house is in the same neighborhood, with the same (or similar) floor plan, and built by the same builder. Of course, upgrades such as a basement, deck, or granite countertops have an effect on price, and in scenarios where such upgrades exist, sellers may price accordingly, and must still be realistic.

Any agent can list any home for any price. (If I wanted to list my home with an agent tomorrow for $800,000, I could. But it would not sell!) If Agent C suggests a list price that cannot be supported with current and local sales data from comparable properties when such data is otherwise available, and instead ignores the comps or offers "promises" based on data not current or comparable, then Agent C is attempting to buy the listing. And for that, sellers must be wary.