Flagstaff Top Producers Real Estate Update: August 2010

From an article from SmartMoney.com on July 20th, 2010......

Earlier this year 27 students at Old Dominion University pressed their foreheads into a padded frame and peered ahead, much like patients at an eye doctor. They scrolled through pictures of 10 on-the-market homes on a computer screen as an ocular tracking program recorded their eye movements. In some of the homes, for some of the students, the living rooms were painted pink.

The question: Would a pink room - a problem you could fix for the price of a few can of paint - make the students less likely to purchase the homes? The answer, based on preliminary results, is yes.

The study is a part of a growing body of research that is putting real estate under the microscope. Scientists are finding that psychology - everything from how a buyer perceives his agent to how a seller prices her home - plays an unexpectedly large role. "When the market was going up, these questions were mildly interesting," says Michael Seiler,a professor of real estate at Old Dominion University and the coauthor of numerous studies in the field (including the one about the pink room). Today, with the market wobbly, "they're much more relevant," and the results of such research, he and other academics say, can offer useful insights to buyers and sellers alike.

Here's a roundup of some pertinent findings.

Choose Your Words Carefully

For a seller, advertising that you've recently painted your house seems like a no-brainer. But in a study that looked at nearly 60,000 residential real estate transactions in Texas, listings that mentioned new paint, new carpet and/or roof work sold, on average, for slightly less that those that did not.

Thomas A. Thomson, the study's coauthor and the director of the Real Estate Finance and Development Program at the University of Texas at San Antonio, says that buyers aren't going to be fooled by a problem house simply because it has a fresh coat of paint. But even if there is nothing wrong with the house, an advertisement that touts new features could set off alarm bells. If a seller says everything is new, a buyer might wonder why everything needed to be replaced - and whether there are other defects lurking.

Thomson recommends sellers take the simpler route: Let potential buyers be surprised by the quality of the home instead of disappointed by how average it is compared with its description.

The Downside of Upbeat

A big part of any decision to sell a house is where a homeowner thinks prices are heading. so how do owners feel after the brutal market of the past few years? A recent survey of 479 homeowners in 20 U.S. metropolitan areas found that people were about five times more likely to say their own homes would see their prices increase in the next 12 months than they were to say their neighbors' homes would do better.

Robert Shiller, a professor at Yale University, and Karl Case, a professor at Wellesley College, survey homeowners every year to gauge how confident they are that their homes will increase in value. Only once, when the housing market was at its worst in the recent crash, did the poll results slide into the negative. In general, the average respondent figured his home was bound to jump in value in the near future. "people don't change their opinions that quickly," says Shiller.

Whether sellers will regret those opinions later, only time will tell. If his expectations are out of whack with reality, an overoptimistic seller could wind up waiting for a higher price that will never arrive. But pessimists should tread just as carefully: An overly downbeat seller could wind up dumping a house at a price far below what it could fetch a year or two later.

Let the knowledgeable real estate professionals at Flagstaff Top Producer Real Estate assist you in all your real estate needs.

Foreclosures Have Impact!

Sellers are discovering the cold reality of post-housing-bust prices. No matter what the seller thinks their house is worth, what matters is what buyers are willing to pay. That can be a lot less in areas where the supply of houses for sale is swollen by foreclosures and short sales, often priced 20% to 30% below the ones being sold by financially healthy owners. Nationally, such properties account for a third of all sales three years after a historic chill blew over an overheated housing market.

Nationally, 30% of the houses for sale were reduced in price in June, according to Zillow.com, an online real estate site. Plenty of sellers have trouble pricing their homes against the foreclosed houses that lenders are trying to unload.

Pricing their home is one of the hardest things for sellers to do. They have an emotional attachment to their house, and for sellers to understand how they should price, they should deeply understand their market and competition -- what's on the market now, not just what's sold. Those sellers who do that successfully don't have a problem.

People who price their homes to the market are selling them in a reasonable amount of time, but people who cling to 2004 or 2005 prices are not. If you take into account bank-owned property pressures, you will sell pretty quickly.

Not all offers go smoothly. Even when owners find willing buyers, getting their price isn't a sure thing. Lenders generally require appraisals before giving a mortgage, and appraisers often take into account what foreclosed properties in the area sell for when determining how much a home is worth. If a home is being sold at too high a price, the sale can fall apart. Smart sellers get appraisals done before they sell the home.

Nationally, the average property takes eight to nine weeks to sell, down from 10 to 11 weeks a year ago, according to the National Association of Realtors. When homes are priced well they can and will sell - even in an anemic real estate market.

Contact the knowledgeable professionals at Flagstaff Top Producers Real Estate for all your home buying or selling needs.

Article courtesy of USA Today