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Buying in Montgomery County

Understand How Home Search Sites Work

December 22nd, 2009 Categories: Buying

Home search sites on the web are not the same

Differences The internet has revolutionized the home buying process. In the past, real estate agents were gatekeepers of critical real estate data: homes available for sale, past sales in a neighborhood and more. No more. Consumers can access information from a countless number of sites without the need of an agent. This is definitely good for buyers, sellers and the real estate industry. Unfortunately, consumers now have a new challenge when navigating a tidal wave of home sites — there’s a lot of bad information out there. To help find the good and avoid the bad, I’ll explain the basics of web home searches and review some of the popular home search sites for Montgomery County and the Metro Washington D.C. area.

The basics – Multiple List Systems (MLS)

The very best, most complete and most accurate database of home sale data is a “Multiple List System”. This is the database managed by real estate agents to enter new listings, record price and status changes and to record home sales information. It’s the gold-standard for an area’s home sale information. There isn’t a single MLS in the U.S., rather MLSs are managed throughout the U.S. by local professional real estate boards. MRIS (Metropolitan Regional Information Systems) is the MLS for the Metro D.C. area covering D.C., much of Maryland and Northern Virginia. Only real estate agents can access an MLS directly — home buyers and sellers cannot.

The basics – How home information gets to public websites

Don’t scroll down to skip this section! Yes, I know. Few things in the universe are less exciting than understanding how home information travels on the web, but it’s important when evaluating a home search site. Many sites obtain their data from an IDX (Internet Data Exchange) data file from an MLS and follow the MLS’s specific rules for presenting home data. When an agent updates an MLS entry, IDX-supported sites are updated automatically. These sites tend to have the most complete and accurate home search data.

An agent can take an extra step to syndicate listing information to other sites. Listing syndication is relatively new, there isn’t a single repository for syndicated listings and agents aren’t required to syndicate listings. Most important – this process is not managed by an area’s MLS. Sites that rely on syndication tend to have incomplete and inaccurate listing data.

Locked-in on a snowy day, I reviewed listings for Bethesda zip code 20814 in MRIS. I took a snapshot of all active listings of 72 homes and then conducted the same search on eight other sites. This wasn’t much fun, but was informative. Here’s the results.

Great Home Search Sites

MoCoRealEstate.com. I have to admit, I was a little nervous about how our site would do. I was relieved to find that all 72 listings were present except for three listings. No extra listings were included. The three missing listings were located in one new condo development. These three listings were missing in other sites (below), so MRIS must have an issue with these three particular records. Our site is updated via an IDX feed.

Realtor.com. This site has a special “IDX-like” update from MRIS. It had all 72 active listings except for the same 3 missing on our site. This site also shows all homes under contract, so the search indicated 99 listings. What I don’t like – you really have to look to see the home status. Most buyers will think that all homes are available for purchase when many aren’t. It’s accurate, but not as consumer friendly as it could be.

HomesDatabase.com. This is maintained by MRIS, so one would think this would be the very best website for local listings. Like my site and Realtor.com, it had every listing except for the same 3 missing on the others. It also includes homes under contract. Like Realtor.com, it’s very hard to see the status misleading buyers.

Long&Foster. L&F has a nice search site supported by IDX. The site reported 84 active homes for zip 20814 which was too high. The difference – several lots and two commercial listing were included which is OK. There were two listings with MRIS numbers that simply don’t exist. This site also includes homes under contract which is useful. And, unlike Realtor.com and HomesDatabase, the status is prominently displayed.

Good Home Search Sites

Remax.com. Re/Max indicated 182 active homes. This count was inflated since rentals were included. Take out the rentals and I got 99 homes. This included active homes, commercial properties and homes under contract. All active homes where here except for the 3 missing on other sites. All homes under contract were shown as ‘active’ which is clearly misleading to home buyers.

Redfin.com. Redfin has very nice search functionality. The quality of the data isn’t as high as others, however. Several other zips were included in the 20814 search. Take out the extra listings, and 67 homes were listed for 20814. Interestingly, they captured the “mystery 3″ that other sites missed; however, 5 other listings were absent. This surprised me given that Redfin is very tech savy company.

Horrible Sites to Find Homes

Zillow.com. Zillow relies on listing syndication to populate its database, not an IDX feed. 95 listings were shown as available in zip 20814. This didn’t seem too bad until I looked at the data. Only 36 of these were legitimate, active home sales. None of the rest were active listings. So, they only had 50% of the available listings and 59 other homes that aren’t available to home buyers. Zillow has other interesting home sale information, but I wouldn’t look for available homes here.

Trulia.com. Like Zillow, Trulia’s database is populated from listing syndication. Data quality is rotten here as well. Trulia showed 106 available homes, yet only 45 of these are really available; the other 61 homes are not. I’ve seen listings that sold two years ago indicated as “active” on this site. Like Zillow, you may find good real estate information here, but this is a terrible place to search for available homes.

RealtyTrac. ReatlyTrac lists foreclosures and distress sales. If you pay to access property addresses, you’ll see notifications of homes with foreclosure notices, auctions and properties owned by banks. This site is problematic for two main reasons.

#1 – Consumers are led to believe they can buy a home that is in distress or has received a foreclosure notice. You cannot. You can only buy from a homeowner if they want to sell. So the best way to see all homes for sale – distress or not – is to go to regular home search sites listed above.

#2 – Data quality is beyond horrible on this site. I’ve seen many properties listed as ‘bank-owned’ that have sold months before.

Find your next home

Any agent in the Metro D.C. area can setup tailored, timely and accurate home alerts using MRIS. Contact us anytime to be notified of homes that meet your specific needs. You can also search on one of the better home search sites listed here to find homes for yourself. Do you have comments or wonder about the quality of other sites not listed here? Make a comment and let us know!

Posted by Bruce Lemieux | Currently 1 Comment »

Top 5 Myths About Home Inspections in Montgomery County

December 1st, 2009 Categories: Buying, Selling

A buyer can only void a contract if a home inspection reveals serious/legitimate issues

2009 11 Home Inspection Shock The typical home inspection contingency allows a buyer to either negotiate home inspection items or void the contract and have his escrow deposit returned within a negotiated time frame (usually 7 to 14 days). Absolutely no reason has to be given for voiding the contract: none, nada, zip. Is that fair to buyer and seller? Absolutely. Ultimately, only the buyer’s opinion of the property matters. Imagine what would happen if the buyer had to provide a “legitimate” reason to void the contract. A buyer’s and seller’s definition of “legitimate” would rarely line-up. Since the buyer is the one taking possession, his opinion is the only one that matters. Is this a way for a buyer to back out of a contract for no reason? Yes, it is. It does happen, but not that often.

A buyer has only one opportunity to inspect a home

Typically a buyer will have only one inspection from a licensed home inspector, but a buyer could have several at his discretion provided they are completed within the agreed-to time limit. The best strategy is to have the primary home inspection completed as early as possible. If that inspector discovers evidence that requires more specialized inspections (e.g., evidence of potential structural issues, mold, etc), then a buyer has time for follow-up inspections. I’ve also had a general contractor come through a home to review specific issues to help estimate the cost of repairs.

A seller isn’t required to fix anything from an inspection — everything is negotiable

Not true. Both standard contracts used in Maryland (the Regional Contract and MAR Contract) have a “Property Condition” paragraph that states that the “Seller warrants that, except as otherwise provided, the existing
appliances, heating, cooling, plumbing, electrical systems and equipment will be in normal working order as of the Possession Date.” If the buyer’s inspection reveals that the garbage disposal and two GFCI outlets aren’t working, then the buyer only has to give the seller notice to repair these at the seller’s expense – no negotiation required. Same for a leaky faucet or any other item that falls under the Property Condition paragraph. What about the crack in the drive and the roof leak? These repairs must be negotiated between buyer and seller.

A seller must resolve any issues discovered at final walk-through before settlement

This one depends on the item. The seller is required to deliver the home in the same condition as of the Contract Date. As a common example, a buyer may only notice that hardwood flooring is much darker under area rugs removed by the seller after he has moved out. The seller is not required to remediate since the flooring hadn’t changed since the contract was written (hint – always look under rugs before you present your contract!). If the furnace or clothes dryer isn’t working properly at walkthrough, then the seller must address these items regardless if they were working during the home inspection. Again, the Property Condition statement is the guide — electrical, systems and plumbing must be in normal working order as of Possession Date.

A seller is responsible for existing issues discovered after settlement

In most cases – no. When a buyer takes possession of a property, there is no warranty provided by the seller. After settlement, the home — and all of its issues — are the buyer’s responsibility. A buyer can buy a home warranty from a third party for around $400 to help protect them from problems with systems, appliances and plumbing; but a buyer rarely can go back to seller to repair defects that were present in the home before the purchase. This re-iterates the importance of a rigorous home inspection before possession transfers.

Here’s the exception. What if the seller knew about material issues with the home that an inspector couldn’t readily observe and didn’t disclose to the buyer? This is a latent defect, and the seller is required to disclose all known latent defects to the buyer. Pin hole leaks in the plumbing or a basement that leaks water in certain circumstances could be good examples. The difficulty for the buyer is to prove that the seller knew about these problems and did not inform the buyer. If the buyer can prove the seller had this knowledge (from speaking to neighbors, previous owners, etc.), then they would need to get lawyers involved and then work this through the legal system.

Set your expectations properly before your contract is ratified

2009 11 Look at Contract Details A sales contract specifies all responsibilities for the buyer and seller for a particular sale, so these guidelines will not apply to all contracts. The key lesson here: understand the contract language when you are negotiating a sale. Don’t zip through the paperwork and assume that you know who’s responsible for what. If you are a seller and you know that certain appliances or systems have issues, either fix them, or make sure they are sold “as-is” in your property inclusions. The bottom line: don’t wait until after your contract is ratified to think about how you will handle issues that are inevitably revealed by a home inspection.

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Having experienced, expert guidance to ratify a contract and get it to closing is imperative for a smooth sales process. Contact us when you need representation to buy or sell a home in Montgomery County, Maryland.

Posted by Bruce Lemieux | Currently No Comments »

Is It Time to Move-up in Montgomery County, Maryland?

November 9th, 2009 Categories: Buying, Selling

2009 11 Move Up Credit The U.S. Government thinks so. Last week, the $8,000 first-time homebuyer credit was extended and enhanced to provide a $6,500 credit to current homeowners who purchase another home as their primary residence. Here’s the basics for the move-up credit:

A ratified contract must be in place by April 30th, 2010 and close by June 30th
Home purchases over $800,000 do not qualify
A buyer must be in their current home 5 of the last 8 years
The buyer’s income must be below $125,000 or $225,000 for married couples
The credit can be claimed on your 2008 or 2009 return

Unfortunately, there’s quite a bit of fine print with this credit. The National Association of Home Builders and IRS have FAQs to review. You should also talk to your accountant to make sure you qualify.

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Going from ‘Ratification’ to ‘Settlement’

October 20th, 2009 Categories: Buying, Selling

Once a Buyer and Seller ratify a sales contract, they must jump through a few hoops for ownership to finally transfer. In this video, I’ll walk through the steps of a typical contract. There’s a zillion ways to mix and match terms to meet the requirements of the Buyer and Seller, so each contract is different. This video will help give you a framework for what to expect.

Here’s an overview of the steps outlined in the video:

Steps Tied to the Ratification Date

Your contract is ‘Ratified’ when the buyer and seller agree to the sales price and all terms. It typically takes 30 to 45 days for a contract to settle.
Several activities are tied to the ‘ratification’ date. Don’t confuse this with the ‘Contract’ date which is the date the buyer submits the offer to the seller. It can take three hours to three weeks or more to finalize negotiation to obtain a ratified contract.
The typical contract specifies that the seller will insure that all existing appliances, heating, cooling, plumbing, electrical systems & equipment will be in normal working order as of Possession Date. A typical home inspection contingency gives the buyer time to have one or more professional inspections. If the buyer’s inspection discovers any of these types of issues, they can provide notice to the seller to make repairs at the seller’s expense — no negotiation is required. The buyer can negotiate other items for the seller to repair or to provide a credit. Or, the seller can simply void the contract and have his escrow deposit returned.
Once the home inspection contingency expires, a buyer cannot void a contract based on the home inspection contingency.
In Maryland, a home buyer also has five days to review the community’s HOA documents. If the buyer doesn’t like the HOA’s restrictions, he can void the contract within this review period and have his escrow deposit returned. This contingency starts once the HOA documents are delivered which is typically soon after ratification date.

Typical Financial-Related Contingencies

The buyer’s escrow is deposited immediately after ratification. This deposit is applied to the downpayment at settlement.
The buyer is typically required to apply for financing within 7 days or less of ratification. Although the contract gives the buyer time, they really should have applied before the Contract Date. By selecting a loan officer and providing all information up front, they’re ready to go once a contract is ratified.
A typical contract specifies the days allowed to get final loan approval for this loan. The loan’s underwriter will have reviewed the contract and verified the buyer’s income, debt, cash and credit scores. At this point, the loan is fully approved with a couple of conditions (proof of homeowner’s insurance, termite report, etc).
If the buyer doesn’t obtain financing within the deadline, the contingency doesn’t automatically expire. This contingency will continues all the way to settlement. However, after this contingency expires, the seller can give the buyer notice to remove the contingency, or he will void the contract.
The typical appraisal contingency works the same way. It will continue unless the seller gives the buyer notice to remove it, or the contract becomes void.
If the appraisal comes in below the negotiated price, the buyer can proceed as is, or negotiate with the seller to accept a price no lower than the appraised value. The seller is not required to accept a lower price. If the buyer and seller can’t agree, the contract becomes void and the escrow is returned.

Steps Before Settlement

The typical contract requires an inspection to verify the property is free of active termites or wood-destroying insects within 30 days of settlement. The property is also to be free of damage from insects. If these are discovered, the seller typically repairs this at the seller’s expense.
If the property is on private well and septic, these inspections are also conducted within 30 days. The seller is required to deliver potable water and a working septic to the buyer and must make any repairs at this expense if needed.
Although not specified in the contract, the buyer and seller notify the utilities of the upcoming change in ownership.
Lastly, just before settlement – that day or the day before – the buyer takes a final walkthrough of the property. The main purpose of this walkthrough is to insure the property is in the same condition as it was on ratification. If any of the systems, electrical, etc aren’t operational, this is the last opportunity for the buyer to have the seller resolve the problem.

These are the steps in a typical contract, but the process can be more or less complicated given the specific terms negotiated. For example, a seller could rent-back from the buyer after settlement, there could be additional inspections, the buyer could have a home to sell, etc. Buyers and Sellers benefit from experienced representation to insure that their contract protects their interests and needs.

Posted by Bruce Lemieux | Currently No Comments »

Montgomery County Closing Costs and HUD1 Overview

October 1st, 2009 Categories: Buying, Selling

Perhaps the best way to understand the costs required to buy and sell a home is to understand the HUD1. This is a standard two-page document that details all expenses and credits for a home sale. This video walks through a HUD1 so you can understand the basics:

Closing Costs Estimates for Buyers

Here’s the top four expenses for home buyers in Montgomery County, Maryland:

Transfer and Recordation Taxes. The state of Maryland and Montgomery County collect taxes that total between 2.2% and 2.5% of the total purchase price. This is typically split between buyer and seller, so estimate this at 1.2% of the purchase price.
Title Insurance. This insurance protects you and your mortgage provider from any defects in title which crop up after settlement. The details of a title insurance is an article on it’s own. I find that 0.4% of the purchase price is a good estimate.
Prepaids and Escrow. Escrow accounts to pay for future property taxes and insurance will be setup. The amount of property tax that you’ll pay at settlement depends on the timing of settlement.
Loan Charges. I typically see around $700 for an appraisal and $600 for underwriting and document preparation. However, this can vary widely by mortgage providers. When comparing different loan programs, don’t simply compare the total closing costs estimated. Item’s 1 – 3 are calculated by the settlement attorney and will be the same regardless of the mortgage provider. Details of this item will be covered in a separate article.

A buyer will have other charges at settlement that often total between $1,000 and $2,000.

Closing Costs for Home Sellers

Costs for home sellers are more straight forward:

Brokerage Fees. This is the fee that compensates the listing and buyer agent to market, service and eventually close a sale. The amount of the commission is negotiated between the broker and homeseller and is typically between 5 and 6% of the sales price.
Transfer and Recordation Taxes. Assume this is split between the buyer and seller, so estimate 1.1 to 1.2% of the sales price .
Mortgage Payoffs. All loans secured by the home’s title – including all home equity loans – are paid off at settlement.

Understanding costs associated with buying and selling in Montgomery County is essential when planning a sale. Contact us anytime when planning your next move.

Posted by Bruce Lemieux | Currently 8 Comments »

Buying a Home in Montgomery County, MD

August 28th, 2009 Categories: Buying

The basic steps to buying a home in Montgomery County are pretty close to that for other areas. I find that fundamental changes in financing and Montgomery County’s contract requirements can catch even an experienced buyer by surprise. This brief video walks through the basics:

Here’s a summary of the highlights:

Line-up Financing. You have a great job, you’ve got great credit (do you know what qualifies for “great” today?), so there’s no need to worry about financing until later. Right? Wrong! Especially if you’ve bought in the past, you need to get up to date on current programs and the cash required to close. And your good credit score may not be good enough to get the best interest rate. Don’t be surprised later – talk to a local loan officer now.
Define Your Criteria. You probably know what you want. For buyers in Montgomery County, I often find that some of a buyer’s key criteria can conflict. Get educated on the market and narrow your areas of interest. A good first step is to understand home prices throughout Montgomery County.
See Homes. See them online, see them in person. Setup email alerts to keep you current on available homes in your areas of interest.
You Find a Home to Buy. Before you slog through writing a contract (step #5), complete a detailed home valuation. By analyzing the details of comparable homes that have sold, active inventory and availability of competing homes, you’ll know what to offer for the home.
Write a Contract. A contract in Montgomery County typically runs between 50 and 60 pages. I’ve yet to find an area of the country with a bigger contract. What’s in it? The price and all terms, numerous disclosures and all dates – closing dates, home inspection time periods, financing contingencies and more – are there. What happens if the house doesn’t appraise? What are my rights if I don’t like the rules of the home owner’s association? What if I simply change my mind on the purchase? It’s all there.
Present the Contract. Especially in a changing market, we find that a professional presentation of the buyer’s qualification and market data to support the asking price is critical to a successful negotiation (next step).
Negotiate. This is the back and forth required to get a contract ratified typical of any area. Once a contract is ratified – e.g. all parties agree to all contract terms – then it takes anywhere from 30 to 60 days for most contract to actually settle and ownership to transfer to the buyer.

You don’t have to go through this process alone. Having professional, experienced and honest representation is the most efficient way to get the right home at the right price. Contact Jeannette and me with any detailed questions on the process and how to take the next steps.

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Do you have questions about buying a home in Montgomery County? Call us at 301-527-9079 or send an email for more info about buying, selling and living in Montgomery County, Maryland.

Posted by Bruce Lemieux | Currently No Comments »

You bargain hunters are driving me crazy!

June 8th, 2009 Categories: Buying, Foreclosures, North Potomac, Potomac, Rockville

2009-06-bargains-in-montgomery-county-real-estate1

At least once a week I have the following conversation with a buyer:

Buyer - I’m really interested in foreclosures so I can get a great price.

Me - OK, foreclosures have pushed prices lower in several segments of our market. What else are you looking for?

Buyer - I would like a single family home in Potomac, Rockville or North Potomac under $1M in a good school district.

Me - Now we have a problem.

Don’t get me wrong, no one loves a bargain better than me. When buying a home, however, having “get a bargain” as the #1 purchase criteria is a recipe for disappointment. Why? Primarily, the inventory of distress sales is very low — and getting lower. This removes 80% of the available market for consideration.

But getting a bargain isn’t the primary criteria, is it? You also want a home that meets your needs and is located in your desired area and goes to your preferred school district. Filter the inventory of distress sales with this critieria and there’s nothing left.

Take a different approach. Even if distress sales are unavailable for homes that meet your needs, you can still find good values. Step #1 – Focus on the homes that meet your needs first. Step #2 – Find the best values within this subset of homes. Some distress sales may now be worth a look, but don’t overlook regular resales. For my buyers, I’ve negotiated the very best values with sellers who are motivated and have a lot of home equity.

Don’t be disappointed. First – find homes that meet your needs. Next – narrow in on the bargains.
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Do you have questions about the Montgomery County real estate market? Call us at 301-527-9079 or send an email for more info about buying, selling and living in Montgomery County, Maryland.

Posted by Bruce Lemieux | Currently 1 Comment »

Tour of home prices in Montgomery County

May 8th, 2009 Categories: Buying, Market Updates

Where should I buy in Montgomery County?

That’s easy. Where do you work? What kind of home would you like? And how much do you want to spend? OK, so it’s not so easy. For most of our buyers, the desire for a close-in, commuter-friendly location and finding the right home at the right price can be tough to reconcile.

To help give a more complete view of what’s available in Montgomery County, I took a snapshot of all homes available and organized them by their distance to Washington D.C. Starting ‘closer in’ and then moving out, I’ll provide an overview of what you can expect in each area of the County.

Here’s a summary of stats referenced in the video. All prices are list or asking prices from a snapshot of data taken in April, 2009.

Neighborhoods within 10 Miles of The National Mall

Area	Units	Median	Min Price	Max Price
Bethesda	426	$949,000	$150,000	$10,750,000
Chevy Chase	157	$1,234,500	$195,000	$4,975,000
Kensington	92	$485,000	$141,000	$1,999,999
Silver Spring	385	$350,000	$85,000	$1,900,000
Takoma Park	54	$299,000	$124,500	$949,500

10 to 20 Miles Out

Area	Units	Median	Min Price	Max Price
Potomac	291	$1,375,000	$410,000	$9,900,000
North Potomac	194	$449,999	$89,800	$1,595,000
Darnestown	46	$850,000	$525,000	$2,900,000
Rockville	439	$398,000	$130,000	$1,899,000

Gaithersburg	210	$235,000	$47,900	$850,000
Montgomery Village	206	$170,000	$60,000	$649,000
Derwood	59	$479,000	$200,000	$1,900,000

Olney	74	$481,500	$179,000	$2,599,000
Silver Spring	810	$275,000	$42,900	$1,900,000
Burtonsville	61	$290,000	$174,900	$850,000

Over 20 Miles Out

Area	Units	Median	Min Price	Max Price
Poolesville	33	$550,000	$180,000	$3,950,000
Boyds	32	$550,000	$175,000	$1,557,000
Germantown	328	$250,000	$95,900	$1,695,000

Clarksburg	98	$469,900	$144,900	$1,190,000
Damascus	56	$385,000	$150,000	$1,299,000
G’burg/Laytonsville	129	$450,000	$124,900	$2,600,000

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Do you have questions about the Montgomery County real estate market? Call us at 301-527-9079 or send an email for more info about buying, selling and living in Montgomery County, Maryland.

Posted by Bruce Lemieux | Currently No Comments »

Should you offer $1M on a $1.2M listing?

April 10th, 2009 Categories: Buying, Market Updates

How low can I go when making a purchase offer?

I get this question a lot these days. I took a detailed look at all sales for 2008 and provided an analysis for list-to-sales price ratios for Montgomery County. This provided a good overview for the County, but it left basic questions unanswered:

How does a home’s ‘days on market’ impact reductions?
Can a buyer get bigger reductions on more expensive homes?
Does the available inventory affect price reductions?

In this article, we’ll drill into the statistics and get some answers.

Overall Statistics for Montgomery County

Before we start digging into the numbers, let’s look at a break-down of sales-to-list reductions for Montgomery County for closed sales that went under contract after October 1st, 2008 through April 1st, 2009. To get a true picture of price reductions, sales prices were reduced by buyer credits (so if a home listed for $700,000 sold for $700,000 with a $10,000 credit, $690,000 would be used as the sales price). Here’s the breakdown:

2009-04-sales-by-price-reduction1

The average sales-to-list price for all closed properties was 95% or a 5% reduction. A summary of homes selling for:

Asking price or more – 14% of total
Up to 3% reduction – 22%
3% to 5% reduction – 21%
5% to 8% reduction – 22%
Over 8% – 21%

So based on these stats, is a $200,000 reduction (17%) on a $1.2M listing realistic? Only about 3% of these sales had reductions of 17% or more, so your odds are pretty slim. How about a $100,000 (8%) reduction? Your odds are much better. Over 26% of these homes sold with a reduction of 8% or more.

Price Reductions and Days on Market

The longer a home is on the market, the more motivated the seller, right? Seems logical. Let’s break down this data by the number of days on market:

2009-04-sales-by-price-reduction-and-days

The trend is clear: a buyer has better odds of larger reductions for homes that have been available for a longer period of time. For homes on the market more than 90 days, about 29% sold for reductions of 9% or more.

Price Reductions, Home Price and Inventory

I have to admit, there’s usually a point in processing stats like this when my eyes start to blur. The purpose of this type of analysis is to provide clarity on the market – not confusion – so I’ll spare you the sight of another graph.

For homes priced over $900,000, home reductions are greater. 37% of these homes sold with reductions of 9% more. But price alone isn’t the driver, but rather available inventory. Inventory is highest in the upper brackets with over two years’ available homes — significantly higher than for lower priced homes.

Conclusion: The higher the inventory, the greater the buyer’s leverage.

The Bottom Line

After all that, what do you do when making a purchase offer? Go really low? Offer close to asking price? Here’s some guidelines:

Look at recent comparable sales — similar homes that have *sold* in the surrounding area (not the *asking* price for similar homes). This is your baseline.
Understand available inventory. The higher the inventory, pressure will continue to push values downward. Even if the home is well-priced and there’s more than 12 months available inventory, then you need to go in lower.
If your home of interest has been on the market a while, your odds of negotiating a more aggressive reduction are greater.
If homes are moving and it’s price right, then you better act quick or you may miss out.

Above all – make sure you stay focused on finding a home that fits your needs and make a purchase that you can live with.

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Do you have questions about the Montgomery County real estate market? Call us at 301-527-9079 or send an email for more info about buying, selling and living in Montgomery County, Maryland.

Posted by Bruce Lemieux | Currently 2 Comments »

The lure of bargains in the upper brackets

April 1st, 2009 Categories: Bethesda, Buying, Potomac

Sometimes a bargain is just too seductive too ignore. Reduced prices for upper bracket homes in Montgomery County can be a strong lure inviting buyer interest based on price alone. Still, are these bargains really a great deal? As with most things in life, the answer is “it depends”.

Overall for Montgomery County, there are 357 homes priced over $1.3M available, and 51 in this price range have gone under contract from January 1st through March 31st. So for the county, we currently have about 22 months’ inventory. 90% of all home sale activity in this price range takes place in the Bethesda and Potomac areas:

Area	Available	Contracts
Bethesda, Chevy Chase, Kensington Clarksburg, Damascus Darnestown Gaithersburg, Derwood, Mont. Village Germantown, Boyds North Potomac Olney, Ashton, Brinklow, Sandy Spring Poolesville, Dickerson, Barnesville Potomac Rockville, North Bethesda Silver Spring, Burtsonsville, Takoma Park	185 1 12 7 0 3 6 6 131 11 5	29 0 0 1 0 0 1 0 17 2 1

So is that home really a great deal for you? Bargains are definitely out there, but with so many homes available, make sure you have an in-depth understanding of the market for your areas of interest. And, above all, make sure that a getting a “deal” doesn’t distract you from finding the right home for your needs.
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Do you have questions about upper bracket homes in Montgomery County? Call us at 301-527-9079 or send an email for more info about buying, selling and living in Montgomery County, Maryland.

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The Grand Canyon can separate buyer and seller expectations

January 31st, 2009 Categories: Buying, Selling

Two very different perspectives

Buyer: The market hasn’t been this bad in 50 years – everything is totally overpriced

Seller: My house is special. My house is unique. My house has a high value. I’m not giving it away.

Right now in Montgomery County, the gap between buyers and sellers can be like the Grand Canyon. Who’s on the right side? The answer is somewhere in the middle.

Good News for Buyers – Our Market is Relatively Strong

How can a strong market be good for buyers? The lower the price the better, right?

Once you make a purchase, you’re no longer a buyer, but a homeowner. Paying more for a home that holds its value better is definitely a good thing. Still, I see many buyers who are uneducated about Montgomery County real estate and are overwhelmingly pessimistic about our market. They make low purchase offers based only on the home’s asking price without regard to recent sales activity. This isn’t a good strategy to be successful. Here’s what buyers should do in today’s market:

Markets are very different in Montgomery County; some are much stronger than others. Really get educated on your areas of interest.
See homes in person. Checking out virtual tours on the internet isn’t enough. You need to see, touch and experience homes in person. Even though there are many homes on the market, there’s only a few great ones. Know the great ones when you see them.
Know the sales prices of homes you’ve seen. Don’t just rely on sites like Zillow that attempt to estimate home values through computer algorithms.
Take your time and find the right home that meets your needs.

As you become a true market expert, you’ll be confident when moving forward with a purchase offer. If the seller’s list price is too high, you’ll have data to support a lower offer. If it’s too low, you’ll be ready to act quick.

Attention Sellers – It’s not 2005

It’s easy for sellers to assign a ‘mental value’ to their home and make plans for the proceeds based on this value. When it comes time to sell, their mental value rarely reconciles with a realistic market value. Most sellers we meet are fair and level-headed so we can have a rational discussion about home pricing. For others, their mental value is set in concrete which can’t be changed with any amount of data. No one wants to give their home away, but setting a realistic list price is essential to a successful sale. Here are a few good guidelines for Montgomery County home sellers:

Know that buyers will compare your home to others on the market. Your perceived value or plans for proceeds have absolutely nothing to do with a buyer’s perception of your home’s value.
Your list price should be based on recent sales of comparable homes. “Comparable” is the key word. These are homes of similar size, age, style, condition and area.
Price your home relative to your competition. Buyers will see your home with other similar homes in the area. For declining markets, you need to price below the competition. In stable and appreciating neighborhoods, you can price comparable or higher than other homes. Know they dynamics in your market and price accordingly.
Appraisals aren’t a cake walk. So even if you receive a higher offer, your home must appraise for the sales price or you’re renegotiating a lower price.

Bridge the Gap

Buyers and sellers come together by being educated about our market and setting realistic expectations. A great place to start is to setup Montgomery County email alerts for homes in your area and price range. Contact us anytime for a detailed analysis for your areas of interest.

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Got ghosts? One thing a home seller isn’t required to disclose in Montgomery County

January 13th, 2009 Categories: Buying, Selling

Home sellers in Montgomery County, Maryland have to disclose a lot. They have to tell prospective buyers about any roof issues, plumbing problems, presence of lead, current taxes, estimated taxes, easements located on the property, and more… much more. Starting in 2009, home sellers must also disclose their energy consumption. When energy costs soared and gas hit $4 a gallon (remember those days?), the Montgomery County Council conceived legislation that would require sellers to perform a complete energy audit before listing a home. Given the impracticability of implementing this legislation, the final bill only requires sellers to disclose past energy usage.

Disclosures are a good thing that protect the buyer and the seller. In Montgomery County, the disclosure package is a daunting stack of paperwork that attempts to cover every scenario. Is this new disclosure worthwhile? I believe a buyer should view this information with a critical eye. A home’s energy usage can be a better reflection of the homeowners’ lifestyle than its energy efficiency. The buyer’s home inspector’s assessment on the efficiency of key systems (furnace, A/C, windows, insulation, water heater and appliances) should also be considered when evaluating a home’s energy efficiency.

So what’s this got to do with the presence of paranormal activity in a home? For exasperated home sellers who cry out loud “Could I possibly be required to fill out another form to sell my home?”, take heart. We don’t have a form that requires you to itemize the presence of dead clowns, unspeakable evil or other paranormal entities that reside in your home like in the following video. Still, if you hire us to sell your home, we would really appreciate a “heads-up” so we are adequately prepared to answer any questions from buyer agents who show your property.

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How low do you go when buying in Montgomery County?

January 11th, 2009 Categories: Buying

All purchase offers should be really low. This is the common sentiment with most buyers in Montgomery County. Sellers are discounting homes 10%, 20%, 30% or more, right? Banks are desperate to sell their homes, aren’t they? In such a bad market, sellers are happy to get any offer, so a buyer should always offer way less than asking price…. right?

Well, not necessarily.

Buyers should first understand that a home’s list price has no direct relationship to a home’s current market value. The best way to gauge a home’s value is to look at recent, comparable sales – not the list price. Most sales prices are reduced from asking price. However, you may be surprised that many sellers are getting close to asking price… or more.

Actual sales statistics

Let’s look at all 2008 sales in Montgomery County and compare final sales price to the seller’s asking price:

Twice as many homes sold at or above list price compared to those that were reduced 7% or more. But how can this be possible in such a rotten real estate market? Remember, this analysis doesn’t provide insight on our home values. It shows how buyers and sellers come to an agreement for a successful sale. Here’s a couple key take-aways:

There’s nothing wrong with paying close to list price if it’s at the right price already.
Few homes sell for reductions of 10% or more. Don’t get me wrong – a buyer shouldn’t overpay for a home. Just understand the odds of closing a deal at a highly reduced price are low.

What about seller credits to buyers?

This is an excellent question that needs to be incorporated in this analysis. As loan underwriting requirements have tightened, buyers need credits from sellers more often. About one half of all sales had a credit of more than $1,000 to buyers in 2008; and the median credit was 3% of the sales price. To the seller, the real sales price is the sales price less credits. Revising the chart taking buyer credits into account:

Without factoring in buyer credits, the median list-to-sales ratio was a reduction was 2.7%. Including subsidies, however, takes this goes to 4.3%. Looking beyond a home’s list price, Montgomery County buyers should become educated on actual sales for their price range and areas of interest. When it’s time to make an offer on a home priced at or below market value, don’t hesitate to present an offer that’s close to list price. For homes priced over market value, negotiate more aggressively knowing that success with reductions 7% and more are pretty rare. Work the deal, but keep realistic expectations.

Interested in the analysis of a specific area in Montgomery County? Just let us know.

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Top 5 things NOT to do when making a low offer

November 24th, 2008 Categories: Buying

Every purchase offer is a good offer — definitely better than the offer that was never made. “Low ball” offers have their special challenges. As a buyer, you increase your odds of success by following some basic guidelines.

Don’t talk-down the house. “We would offer more, but the wallpaper is horrible, the kitchen is a disaster and the lot is not very nice”. How do you think the seller will react to this message? The potential buyer just trashed the seller’s home, so the seller doesn’t like the buyer already. “If they hate house so much, why did they even bother with an offer?” Good question. You can still be very positive about a home even if it needs a lot of work. “We really love the house. The location and layout work-out really well. For our needs, we’ll need to make investments to change the decor and update the kitchens.” The seller will react much more positive to this message.

Don’t provide an offer without recent sales supporting your offer. The home could be overpriced in today’s market, and a low offer could actually be a very fair offer. By providing real data that supports a much lower price, you can start a productive dialog with the seller about resetting their expectations. You may be successful, or you may not. At least a dialog based on recent data helps keep emotion out of the negotiation.

Don’t tell the seller that the real estate market is really bad. We often get offers 10% – 20% below asking price because “the market is so bad and it’s getting worse every day”. The home seller knows what’s going on in the real estate market. Lecturing the seller isn’t a productive activity. “So what’s up with this buyer? Does he think I’m a knuckle-head?” Presenting broad generalizations about the market don’t help your case.

mocorealestate-4 Don’t be inflexible. If the homeowner is under pressure to sell, your flexibility on other contract terms — settlement date, rent-backs — etc. may be a way to give something back to the seller with very little inconvenience and actual cost to you. This can go a long way to help build good will with the home seller even though your price is much lower than the seller’s expectations.

mocorealestate-5 Don’t be mean! Or, said another way, Be Nice! You’re Mom was right on this one. Being professional, curteous and respectful is essential to making a deal come together.

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