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Pushing Back

May 9, 2013 By Rick Jarvis

iStock_000001117222SmallWhile every purchase or sale situation and deal is different, at some point in the offer/counter-offer process one of the three following statements is uttered:

  • “What should we offer?”
  • “Should we take it or should we push back?”
  • “Tell them to take it or leave it!”

When to Push Back

Having a sense for whether or not to push back one (or more) times in an attempt to maximize your yield is hard.  No matter what the scenario, having more information is better than having less.  Knowing where you stand relative to the market is critical in capturing that last several thousand dollars.

While there are many ways to analyze your place in the market, one of my favorite charts to help offer guidance is below.  The chart shows the percentage of the home’s asking price that a seller received (sometimes called the Ask/Bid Spread).  When inventory levels tighten or demand increases typically, the higher the percentage.  You will also see the ‘Days on Market’ statistic move in concert with the Ask/Bid as when demand increases, buyers will act more quickly and thus tend to pay prices closer to asking prices in order to secure the right to purchase the home.

You can toggle on or off the individual zip codes (click the dots below the chart) to compare how one is preforming relative to another.

Numbers Never Lie, Right?

“So we should follow the chart above, correct?”

Not necessarily.

All statistics contain some ‘noise’ which can skew results and/or give less than accurate guidance.  And while each individual MLS handles their statistical packages differently, all MLS’s should offer some sort of package to help both agents and the public make some sense of the data.

So when looking at the charts above, please keep in mind the following:

  • Most statistics packages use Zip Codes, not MLS Zones, so some zips may encompass radically different neighborhoods. This more typical in the urban zips.
  • New Homes are typically entered into MLS at 100% (or more) of asking price so zip codes with larger numbers of New Homes may have slightly higher percentages than the market is really dictating.  Conversely, resale homes in new home neighborhoods may be in weaker bargaining positions than the chart would indicate.
  • 23220/23221/23226 have a smaller data size so the percentages will bounce around more.  Smaller data sets are also more more skewed by an extreme individual sale.

Dig in, Move or Accept?

So should you dig in and fight for that last little bit when selling your home?  Simply put, it depends.

Remember, there is no magic formula as each purchase/sale event is unique.  We wrote a post about using COMPS exclusively in the analysis which discusses the issue of looking backwards to predict future events.  We also wrote a post about understanding the difference between the many different interpretations of value.  But just know that those who know how interpret data will always come out ahead.

Ask your agent about the stats and see what they say…

The Elevator Speech

May 6, 2013 By Rick Jarvis

Closed elevatorOK, we are on an elevator and you ask me what I do.

The following article is, more or less, a directory of the different 1 minute ‘elevator speeches’ for many of the common questions that I get asked.  The articles that you can click through go into more detail about the different topics that anyone thinking about buying or selling real estate in this market should understand.

  • Zillow and Trulia are the disruptive forces in our industry.  A buyer (and seller) absolutely NEEDS to understand how these sites operate.
  • The role of the BUYER’S AGENT is oft misunderstood and potential buyers lose valuable time and resources by not interviewing and involving a Buyer’s Agent earlier in the process.
  • Likewise, there is a lot more written about how to BUY a home than how to SELL one.  In these times of rapidly shifting prices and the unbalanced supply and demand relationship, pricing and negotiation strategies can vary widely within the Metro.  A good LISTING AGENT will understand how to interpret the information.
  • The CONDO folks also need to read this article.  If you are thinking of buying a condominium, you MUST (repeat – MUST) understand how the financing can both create and alleviate risk in the projects.
  • Despite a market that is returning to normal, we still get the FORECLOSURE question.  It may or may not be the right strategy but understanding more about how the ‘Foreclosure’ label affects the value goes a long way to helping buyers understand whether the potential reward is worth the risk.
  • Buying Luxury Housing in Richmond means knowing your history.

There are several other articles that are could serve as starting points such as ‘Spending $1MM‘ and ‘The Floors Tell the Story‘ and ‘Tell Me About Flipping Houses‘ but they are a bit more specific…would probably need to go from the Penthouse to Parking Level 8 and back again to really delve fully into those.

See you on the elevator.

Million Dollar Homes For Sale in Richmond VA

April 14, 2013 By Rick Jarvis

No matter where you go in the US, one million dollars is a measurement by which salaries and homes are compared.

[ listings in excess of $1MM are below ]

Each market in the US (and the world) has their own inputs that drive values and specifically, what drives values to $1,000,000.  For some it is proximity, for some it is history and for some it is space.

Regardless of the reason that a home can justify an asking price in excess of $1MM, in Richmond and surrounding areas, the $1MM threshold is not an easy one to crack.

What makes you worth 7 (or more) digits in Richmond?

The first and most important factor in getting to the $1MM mark is involvement with water….specifically, the James River.  The condos on the upper floors of the Vistas, Rocketts Landing and the homes in both the City and Henrico, Goochland and Chesterfield that have expansive River views, can command that price.  While I am sure that some of the properties that front smaller lakes or other smaller rivers or creeks (South Anna) can ask a premium, having property along the James drives a large portion of value.

History also plays a role.  Monument Avenue, Seminary Avenue and Cary Street Road all have enough historic currency to command the $1MM+ number.  Richmond’s powerful (and oft divisive) history is highly valued by many.  Additionally, those who own some of Richmond’s most iconic properties along these avenues feel a responsibility to steward these properties from one generation to the next.

While size matters, simply being big does not necessarily mean expensive.  While there are certainly homes whose scale (and thus, cost) generates a price over the $1MM mark, often times, size without another element (river, history, estate setting) will not necessarily mean ‘a mil’ (or more) is the value.

Lastly, there is a geographic component to value.  There are more areas in Henrico that can command the price than Chesterfield.  There are more areas in Goochland than in Hanover and Powhatan and so on.  Owning a million dollar home in Chesterfield is likely only in very specific  neighborhoods.  Henrico offers more spots where 7 digit home prices are justified.

Overall, Richmond is not really a $1MM city quite yet.

What does a million dollars buy you in (and around) Richmond?


Understanding Condo Dues

April 14, 2013 By Rick Jarvis

ginter-condo-256x144_optSomeone should write a condo app. The app wouldn’t sell anything or make sounds or track anything. It would simply be an app that brokers could point their clients to once the litany of questions about condo dues comes up.

And they will come up.

While some of the questions I get, pretty much on a daily basis, are quite astute and on point, many indicate a complete lack of understanding of what “dues” really are. And that isn’t an easy concept to explain. A sentence or two usually won’t do the job. It can take not one but two agents—the purchasing and sales agents—to get a buyer comfortable with the idea of dues.

Condos are still relatively new to Richmond. In Downtown Richmond seven years ago, condos didn’t really exist. The rapid rise and growth of condos in the city created a steep learning curve for both the Realtor community as well as the buyers. Many agents went out of their way to understand the intricacies of condo ownership. And they’re better for it. But more than a few agents punted, and this lack of knowledge has given rise to too many buying agents feeding their clients bad information.

newIMG_7643
The Marshall Street Bakery has a dues structure lower than the Emrick Flats despite a largely similar profile. What is the difference?

I’ve taken it upon myself to give back to our fine real estate community and once and for all explain condo dues.

For starters, this is not a true statement – SINGLE FAMILY HOMES DO NOT HAVE DUES. If you are a buyer and your agent tells you this, show them the door. They don’t understand dues.  Let me repeat, if your agent tells you that single family homes do not have dues, then fire them.

Single-family houses have dues….you just aren’t made aware of them in the same way as you would be with a condo.

Before we go any further, let’s apply some numbers so that we know what we are talking about.

The majority of the condos in Richmond have a dues structure of roughly $2.50 – 3.50 per square foot per year of dues expense.  Let’s use an example: a 1,000 square foot condo with a parking garage and an elevator will typically generate $200-300 per month in dues, or somewhere in the neighborhood of $3,000 a year.

Do you get a water or sewer bill at your home? Well, in a condo, water and sewer is typically a part of your dues ($200-300 per year is about right in most places).

How about hazard insurance? A group of condos must be insured by the association. Therefore, the vast majority of your insurance bill is included in your dues (about $500-700 per year).

So before you get worked up about high condo fees, think about what normal operating expenditures are included in them, and what you won’t be paying in the normal course of business.

The second (and most misunderstood) component of dues is the maintenance and reserve budget.

osrg_vcu_poster_final
The condo options within the ‘VCU Bubble’ all offer different dues structures. Make sure to compare services as part of your analysis of the overall cost of ownership.

Do you have a roof on your single-family home? I’m going to go out on a limb and say yes. What does that cost to replace? A lot. When will it happen? When you can least afford it. Are you putting any money away for that replacement? Probably not, right?

The condo people are.

How about those exterior walls you see every day? What does it cost to keep them painted or cleaned? What does it cost to replace the rotten siding or wood trim? Are you putting money away for this repair?

The condo people are.

Each month, the condo association stuffs some portion of the dues go into an account for future repairs and maintenance. In lieu of waiting for the repair to be needed and then asking for each person to put up their pro-rata share, the money is available. If the repair is not needed, then the money is not spent. It is sitting in an account, ready when needed.

But there’s more. Who mows the lawn? Who cleans your pool? Who cleans your gutters? Ahh, you’re starting to understand condo fees, right?

When you think about it, putting $2,000 a year towards both current AND future repairs seems to make a lot of sense, right?  When you’re paying 100 percent of the repair and maintenance expense for your house, and you encounter some big-ticket items, your checkbook will feel that pain. Look at the last year. Better yet, look back five years at what you spent on maintenance. My bet is that living in a condo is actually cheaper than living in a single-family home when the entire cost of ownership it truly examined.

Here’s the takeaway—all improved properties (single-family, commercial, apartment, condominiums) have “dues” by one name or another. The question is whether or not they are paid collectively in advance (as they are in condos) or in a lump sum in arrears (as they are on a single-family home). To say that one property type has dues and one does not is foolish, especially if you’re using dues as a deciding factor in your purchase decision. You have to dig deep to make it an apples-to-apples equation.

Lay it all out on a spreadsheet and review the condo association’s budget (which by law you have the right to do) and then make your decision. There are a lot of factors you should consider when thinking about condo living. But don’t let condo dues have too much influence, at least without truly understanding exactly how they measure up to single-family living.

Is Your Realtor a ‘Cycle-ist’?

April 6, 2013 By Rick Jarvis

Cyclist riding a bike

A quick note –– the original date of this article is April 6, 2013.

In the years that followed the 2008 crash, no one really seemed to care about the fact that we had lived from the bottom to the top to the bottom again.

Well as we head into the 2020 market, impacted oh-so-angrily by a virus named for a beer, it is all happening again.

Being an agent when times are good isn’t really that hard –– you just call a lot of people and let the market do its work. Well now, that has all changed again.

We are at the precipice of another cycle, and we are now multiple-time cyclists.

Enjoy the original article –– the message rings true again.


From April of 2013 …

I am “cycle-ist.”

I don’t ride bikes nor motorcycles. I don’t wear yellow jerseys and I don’t wear those hats with the brims turned up –– and I don’t wear a lot of spandex (and that is a GOOD thing.)

But I am a “cycle-ist.”

Huh?

I am a “cycle-ist” because I have lived through an entire 20+ year real estate cycle and I have done it while in the real estate industry. 

Beginning in 1993 when I was first licensed, to 2008, when we opened One South, to today, at 40+ agents strong, we have survived from the heels of the 1987 crash to the beginning of the 2013 recovery.

cycle
The cycle that began on the heels of the 1987 crash ended when the market bottomed sometime in the later part of 2010-mid 2011. 2013 will turn out to be the year when most will look back and point to actual recovery.
Home Prices Continue Rising | Builder Magazine
NOTE: I added this chart to show how far the market rose from 2013 to 2020 in case you were wondering. Expect to see some impact in the latter half of 2020.

Why does this matter?

While predictive models will tell you what to expect based on a set of inputs, experience will tell you when the inputs to those models are incorrect. No one anticipated 30% decreases in value from 2008 to 2012, but it happened. Understanding why it did is the most important lesson to learn from it.

At the end of the day, having lived through a cycle means a far better understanding of the many levels of risk and how to mitigate them. While being in an ownership position always carries some form of risk, understanding the level of each (as well as the new forms that we discovered from 2008-11) is paramount.

When we look back at this period in American financial history, we will see more real estate fortunes made (or at least more equity gained) than at any time in our history.

  • Those that have chosen to see ONLY risk will have missed an opportunity. 
  • Those that seek to understand the risks that they take, will thrive. 
  • Those that seek others who can offer pointed observations about the risks that drove us into one of the worst financial periods in our history, will thrive to a higher level.

Seek out the cyclists. They have seen a thing or two.

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I am Kendall C. Kendall, Client Care Coordinator for the team. I am a licensed Realtor and it is my job to answer questions and schedule showings for the properties shown on our sites. Here's our call policy.

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Working With Buyers

I am Sarah Jarvis, Broker at One South and I work with our buyers. I bring 20+ years of experience to our Buyers Advocacy program and take great pride in helping our clients understand the RVA marketplace.

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From the Blog

Dollar Per Foot, a Critique

‘How much a foot?’ ‘What is the per foot on that home?’ 'Feels like a lot per foot!' 'Dollar per Foot' is probably the most used of the comparative statistics in the valuation of housing today. Every buyer references it at some point during the home buying process -- as do most sellers. And so …

[Read More...] about Dollar Per Foot, a Critique

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