Utah Dave and Utah Homes for Sale

About 2 years ago, I had a buyer come to me and say he wanted to buy a million dollar home. Based on my knowledge of the market I suggested that he wait. He waited. He later told me, "Dave you were right....the cost of a million dollar home did exactly what you said it would do." He was glad he listened.

Today, I hear people say, "I am going to wait" but the situation has changed. There's a huge difference between 2 years ago and today. The Demand is different, there is huge variance in different price ranges, and interest rates 2 years ago were not nearly as low as they have been this year. Waiting was smart 2 years ago, waiting today can be costly.

There are 3 main reasons why waiting right now is financially dangerous.

1. Demand. Today demand is influencing the opportunity for a good deal. The best time to buy if you want to get a good deal is when supply is high and demand is low. That is called a buyers market. Right now we are in a recession. This is another great time to buy. Those who bought a home in the last recession in Utah won because they bought their home for a low price.

Utah has officially hit a bottom in demand. How do I know? Because I am in the market I see what is happening and know all the numbers before the reports come out. If things remain as they are, then we have hit a bottom. The only reason why this won't be a bottom is if unforeseen factors come into play. Right now June and July are scheduled to have more home sales than last year! If this continues we have hit a bottom in the Utah Real Estate market. This means that demand will increase from here. With demand going up, prices stabilize and begin to increase.

2. Variance in areas and price ranges. There are some areas where demand is high right now and prices are stable, other areas do not have such demand. We track and analyze areas and price ranges to know which areas sell and which areas do not. If you are a seller you can see your own area statistics at www.utahdave.com by using our crystal ball. It is important to sell your home when the demand in your area and price range is the highest if you want to get top dollar. Waiting can cause you to miss this opportunity and be stuck with your home on the market when demand is low.

3. Interest rates offset prices. In this recession interest rates are lower than they have been in over 20 years. Why is this relevant and important? I was talking with Clark Ivory of Ivory Homes and he mentioned how he is always trying to educate his buyers about interest rates. Every homebuyer should know that a .25 percent increase in interest rates requires a home price to fall 3% to offset that additional cost. Interest rates for some people have gone up 1% in just the past month. That means prices would have to fall 12% in order to offset the additional cost of the higher interest rate. It is highly unlikely that prices will fall another 12%. With the way the market is going it is more likely that prices will stabilize and begin to increase. As prices increase, so will interest rates. Those that locked in the low rates before they went up scored! Others can still get a good deal, but have to act fast to get the current rates before they go up again.

Right now, we are seeing multiple offers being placed on homes. When there are multiple offers on a home the price does not go down. Multiple offers are an indication of increased demand; when demand increases, so does price. With interest rates rising, multiple offers, and increasing demand the window of greatest opportunity is narrowing to a close. These times will be talked about for years to come. Don't be the one to look back and wish you'd taken advantage of today's market. The time to wait has passed, it is now time to act.

Loan products keep dying.

Loan options have been dying for the past 2 years and are vanishing even more lately. Last year we saw banks going out of business right before loans were scheduled to close. Subprime loans disappeared last year. And now in the past 6 months I have watched banks reduce people's credit lines to the amount they owe! Why are they doing this? They are trying to eliminate risk.

Loan Risks have Increased

According to KSL news, in a recent article, http://www.ksl.com/?nid=148&sid=6921232 FHA risk has increased 8 fold.

Relocation Industry is having new loan problems

Fanniemae has also changed their policies to not allow trailing incomes. In the past, when a family relocated Fanniemae would recognize income from a spouse that didn't have a job yet. Those rules are out the door now. The spouse has to have a job as well. In troubling times banks don't want to rely on 'hopefully, I will get a job.' They want solid income. This makes it harder for families who are trying to relocate.

These changes affect more than 40% of the population

It is harder to get loans unless you have a down payment, solid job, and FICOs above 660.

Is it a bad thing? Can this be a good thing?

In the short term people will not be able to have what they want immediately. In the short term there will be some pain. However, in the long term, buyers will be stronger. This eliminates future threats of housing bubbles, and the collapse of those bubbles. All in all, it requires us to step up to the plate and be prepared.

It is wise to act now and take advantage of low rates, low prices, and the recession in order to buy a house.

S.L.C. Realtors have been dropping out of this business like flies. Last December there were more than 8,000 agents in the Salt Lake Board. One month later? There were just over 6,000 reported agents. Why are they dropping so quickly? One reason is that last January only had about 500 homes sold in the entire month. How do 8,000 agents share 500 closings in a month? They don't!

There are agents selling bank owned homes and doing well, but we will exclude them from this analysis because they are an outlier. They are an outlier of success because when the foreclosures dried up during the boom years, their business also dried up. I'm looking at what promotes consistent success that anyone can achieve.

There is an agent that right now, today, has 10 homes under contract and ready to close. None of them are bank listings or short sales. Recently this agent went on vacation to Hawaii. While in Hawaii, she didn't work...she played. During the time she was on vacation she had 3 homes go under contract.

So what is her secret? Is it the websites? The billboards? The newspaper ads? Her number of cold calls? Is it because she was raised in the area? A secret fsbo or expired mailing campaign? What is it?

This agent found one of the secrets to consisten success. Last year this agent was recognized as a top producer at one of the largest brokerages in Salt Lake. What did it take to be a top producer at this brokerage? She sold approximately 10 homes in a year! Today she has 10 under contract! Now THAT'S a top producer! What is different from last year to this year for this agent? There are many secrets to success, but one of the reasons why her success has increased this year has to do with working in her innate ability.

This agent joined the UtahDave team and only works in areas that utilize her natural talents. While thousands of agents have reverted to part time jobs, other full time jobs, or even left the business completely, this agent has increased her business 10 fold. The reason why thousands of agents are hanging up their real estate hats for a season is because they haven't been working in their innate ability. If you have read the E-MYTH Revisited, you know what I'm talking about. When you are working in your natural talent you feel like you get more done in less time, you are happier, and experience less stress. Your results start to multiply.

The secret of the week for increasing your business is to work in your innate talent.

Buzz! There's a buzz in the air.

The news says the market is picking up in real estate and even people in the local industry say business is growing again. Why are they saying this? They are saying this because home sales have been going up nation wide! But, why wouldn't they? With homes in Phoenix are selling for $50,000, and other great deals to cultivate the market, the ground is fertile for growth!

Lenders claim it has picked up. If you talk to a mortgage person they should say they are busier than ever. Why? Because mortgage rates have not been this low in decades. It is history in the making for low interest rates. People are refinancing, or trying to, in record numbers. Lenders are swamped, but this is only temporarily. Either the number of hopeful refinancers will decline or the interest rates will go back up. Of these two alternatives, interest rates are starting to go back up.

Locally, people say business has increased....is this true?

What about here locally? People are definitely recognizing the proliferation of business compared to a few months ago. Many professionals say their business is blooming and things are better than they were earlier this year. This, however, is a typical business trend. Just as the barren ground struggles to produce in January, it is historically the slowest sales month of the year. As we reach spring the desolate landscape begins to flourish, as the sown seeds of success begin to produce. By the time we reach the second quarter the sales have typically doubled. Yes, everybody's business should pick up from January to June. We are living in a time when business is most assuredly picking up. But you could say that about every year when you go from winter to spring or 1rst quarter to 2nd quarter statistics.

What about here locally? What is really happening?

There has not been a huge upswing locally yet! I'm talking about Salt Lake County as a whole. Let's break down the numbers:

The number of homes sold during the 1^st quarter of this year was down 20% from last year.

The number of homes expected to sell during the 2^nd quarter of this year is currently down 13.6% from last year.

It is possible that June this year will surpass last year's June. Last June there were over 1150 homes sold. This made June 2008 the biggest month of the year for home sales. This was followed by a 3rd quarter slow down during July, August, and September where homes sales were consistently around 1050 each month.

Things are not really picking up as much as we have been told are they? This annual explosion of success is helping the market recover from the slow down. Still, there have been no substantial pick ups yet. Maybe next quarter will show some uncharacteristic increase. We will not know anything for certain for another month or two.

What does this mean, what is the forecast?

For June this year, I am predicting that the number of homes sold should be equivalent to last year. It is possible that there will be more homes sold, but I wouldn't expect any more than a 10% increase over last year. The hardest thing about predicting how many homes will sell is the huge amount of homes that are 'falling through.' There are more homes under contract, but there are also more deals falling through than normal. The amount of actual closings is lower due to the lending problems and new appraisal rules that came out last month. However, it appears that the percentage of decreasing home sales is slowing. This indicates that we may be at a bottom for the number of homes sold. Interest rates are creeping back up and grant money is starting to run out. This historically opportune time to buy a home is probably just about over.

If you have been thinking of buying a home, it is time to act on those thoughts and take advantage of today's market. If you are thinking of trading up into a new home, the time is right for you. If you are thinking of downsizing, you may want to wait another year depending on where you live and where you want to move to. At any rate, start your process today! This excellent buyers' market is almost over and you don't want to miss this!

Recently I had a buyer call our office wanting to see a home. We showed him the home and when it was time to write an offer he expressed that he didn't want to be represented. When his offer was submitted the bank countered back with a price 3% higher than a buyer who was represented by an agent. What?! Really?! The buyer with no agent was countered 3% higher? Why would this happen?

3 Reasons why prices go up when you don't have an agent.

Economists have a term called ceteris paribus. This term used to drive me crazy in economics classes. It means that all other factors remain the same. This drove me crazy because they use the term every time they change one factor in a model (such as price or demand). They really drilled in the fact that their predictions require all other factors to remain the same. However, they always taught that never, ever, do all things remain the same. Other factors always change. It is the same in real estate. Some buyers have said that if they went directly to the agent listing the property they would save on commissions and get a lower price. Yes, that is possible... ceteris paribus. But not all things remain the same when you are unrepresented. What are the factors that change? Here are the top 3 reasons why prices go up for those who don't use an agent.

With real estate, those with experience can easily read the 'cards' of everyone at the table. I have been in two recent situations where buyers gave the other side an advantage. In the first situation, I was representing the sellers. An unrepresented buyer came to me to write an offer and engaged me in small talk. Over the course of our conversation the buyer made some comments that insinuated how much more he was willing to pay above the offer he was currently writing. Because of my experience I knew his current offer was fluff and he was willing to pay a lot more. I saw all his cards. An unrepresented buyer will let these details slip, not even realizing what they have done.

The second situation occurred when I represented the buyer. We had put an offer on a for-sale-by-owner home. The buyer was under the impression that because it was a for-sale-by-owner they would be able to negotiate a better deal on their own. So they talked with the seller without me there. Following the unrepresented bargaining session the buyer came to me confused because the seller actually increased the price to $175,000. I was a little irritated of course because I had already negotiated it down to $170,000. Because they decided to negotiate without me I had to do extra work to get it back to the original price. There is something about talking directly to the seller (or their agent) that always makes the buyer lose more money than they would with an agent representing them.

Too much focus placed on a single desired outcome violates a fundamental negation rule. Without an agent the buyers don't know the rules and consequently don't follow them. There are several good books out there on negotiation. One great negotiating book is written by Chester Karrass who is renowned as a negotiation master. His book title captures the danger of breaking rules, "In business as in life, you don't get what you deserve, you get what you negotiate." Another great book is, "Negotiate This" by Herb Cohen. These books talk about the rules of negotiating. Whenever I see a buyer negotiating by themselves they always break the rules of effective negotiation. As a result they don't get a deal done as they would like. What are some of the rules that are broken? Here are some examples: they don't know when to be silent, they don't know when to talk, they don't know what to ask for or how to ask for it, they don't know how to overcome a standstill, or they focus too much on one issue. The ironic thing is that people who break these rules are often the ones that believe they are the best at negotiating.

Spcial thanks to Scofield Editorial, Inc. for putting together this little video demonstrating buyers' negotiations.

Historians believe that the Treaty of Versailles imposed too many harsh restrictions on Germany which unintentionally caused World War II. The only way to prove this would be to go back in time and change the treaty and keep everything the same (ceteris paribus). However, the fact remains that this is a prime example of the law of unintended consequences. Because not having an agent changes the situation there are many unintended consequences when buying a home unrepresented. The result of these unintended consequences is an increased price of the home.

Recently we had a buyer have us show them a home, answer questions, and write up an offer on one of our listings. Then, they demanded we give them half of our commission because they didn't have an agent. This same scenario has played out about 3 times this year so far. What the buyer failed to realize is that commission is between a seller and their agent. The buyer had not signed any documents which would entitle them to a percentage of that commission. What makes a buyer feel entitled to the seller and agents' money? When you want a good deal on a home you should not make such demands of the person providing the deal.

So what happened? Our sellers flat out refused to work with the buyer because they perceived them as being dishonest. On all of these occasions the home was sold to a represented buyer, not the one demanding a percentage of the commission. The unrepresented offer encouraged others to make offers. These offers were made by represented parties and every single time, the sellers sold the property to the represented buyers. This is the law of unintended consequences in action. In an attempt to get someone else's commission some buyers sacrifice the home they want. Their focus should have been on buying the home instead of getting a commission split.

We had a similar scenario with one of our bank owned listings. The bank sees an unrepresented buyer as risk. As a result they increased their price to compensate for the increased liability of an unrepresented buyer. Without representation there is the risk of the deal falling through. When a buyer has a real estate agent, they have someone to hold accountable. When a buyer is on their own, there is no accountability.

If the price of a home goes up without an agent why would anyone attempt to purchase a home without one?

1 - They believe they can do it themselves and save money (Ceteris Paribus Paradox).

2 - They had a previous bad experience with an agent.

3 - They knew the person they were doing the transaction with.

These reasons may sound legitimate, but watch out for the unintentional consequences of un-representation. The price goes up, rules are broken, and opportunities are lost.

How did it work for those who tried it on their own? According to NAR Profile of Homebuyers and sellers (2008) only 16% said they would do it by themselves again. That's right, only 16% of for-sale-by-owners, or those who sold their home to someone without an agent, said they would do it again. Even when selling to someone they knew the majority believed having a real estate agent would be better next time.

You call an agent with experience to help you! An agent will avoid all the problems listed above that cause people to pay more for a home. Most times, un-represented buyers don't even realize how much additional money they are spending because they don't have an agent. Should I call any agent? No way! Interview your agent and make sure they are going to fit what you are looking for. They need to have extensive knowledge about the business as well as the experience to adequately represent you. The number one mistake people make is choosing an agent based on commission. If you have agents offering you cheap discounted commissions, you know you chose the wrong agent. I have 20 reasons why choosing an agent based on commission causes you to lose every time. The main reason is that the focus is on commission....not on the quality of the agent or the service you want to receive. The result of this narrow focus is unintended consequences. Focus on the service you want to receive and you will find that quality agent who is right for you. Good luck!