Jay Agoado’s Homefront

I just read an interesting article ( http://www.realtor.org/library/library/fg703 )and subsequent postings on selling stigmatized properties, and specifically a property where a murder has taken place. This brings back memories of when I listed and sold a home in Bellevue approximately 10 years ago where father, mother, and sister were killed in their home and the other sister was killed in the neighborhood park.  It was a brutal scene and I was unfortunate to view the day it was released as a crime scene.  The estate and I discussed whether to disclose the situation to potential buyers since the State of Washington does not require disclosure for this issue.  We opted to be upfront with people in hopes of not losing the deal at the 12th hour.

The eventual buyer was an investor who was going to use the property as a rental home, so he wasn’t concerned at all about the stigma.  He was also smart enough to realize that the stigma would pass and this would be a good deal.  Boy was he right!  He tells me to this day that it has been his best real estate investment!  He was able to acquire the home for approximately 10% below market value, acquire tenants at will due to location, and the neighbors were all happy that someone was finally occupying the home.  A win-win for all!   

The year started off in its typical slow fashion but started to pick up toward the end of the month.  I noticed some homes, that were taken off the market for the holiday season, relist and sell at the beginning of the year.  What we are seeing is a great buying opportunity but many buyers are sitting on the fence, unsure if prices are going to drop.  Certain price ranges are still selling relatively well and other price ranges are requiring price reductions.  But, our market certainly is a lot better than most.

January Activity

‘07 total active listings:  74

‘08 total active listings:  119

‘07 median listing price:  $1,797,000

‘08 median listing price:  $1,499,000

‘07 days on market for listings:  130

‘08 days on market for listings:  106

‘07 closed sales:  19

‘08 closed sales:  16

‘07 median sale price:  $1,089,000

‘08 median sale price:  $912,500

‘07 days on market for sold properties:  94

‘08 days on market for sold properties:  86

What a year 2007 turned out to be.  We started the year off very strong and, by the end of Summer, we were wondering what had happened?  The earlier multiple offers turned into longer marketing times and lots of money being spent on “staging” of homes.  Don’t get me wrong.  Homes were still selling but it seemed as though the homes that were selling were the ones that were perceived as a value.  This was most prevalent in homes over $1M.  You could have a beautiful home in a desirable section of the island yet it would sit on the market until Buyers perceived a value (price reduction).  The homes under $1M needed to be priced correctly and/or in very good condition to sell in a reasonable amount of time.  See below for statistics:

Closed Sales in 2006:  297        Closed Sales in 2007:  329

Median Sale Price 2006:  $949,000            Median Sale Price 2007:  $1,080,000           Percentage Increase:  13.8%

Average Market Time 2006:  75 days           Average Market Time 2007:  63 days

Buyers, there is no better time than now to purchase a home!  Interest rates have fallen and are at or near where they were before the subprime crisis.  With inventory up, you have a great opportunity to negotiate on a home versus what you’ve gone through the past five years.  During that time, you were paying at or above the listing price, possibly having to purchase a home without an inspection and/or financing contingency, and basically giving in to the Seller.  Even if the interest rates are slightly above where you want, you should be able to make up for it in a lower negotiated sales price and/or in Seller concessions.  Our company, John L. Scott, put out some great statistics that you should view.  ( http://www.johnlscott.com/includeX/pdfs/whynowisasmarttimetobuy.pdf )  Why wait??? 

Wednesdays are Broker’s Open House days on Mercer Island and I decided to tour 10 homes today.  Many interesting homes out there, and surprisingly a number of them were under $1.5M.  I’m finally starting to see opportunities for buyers to find an “affordable” home on the Island as long as they’re willing to invest some money into it over time.  A few of the homes I saw actually have nice flat lots, which is great for resale value.  You can always remodel a home but you can’t change the street it’s on or the topography of the lot.  But, I’m still having a difficult time finding that “perfect” home, where it’s priced right, on the right street, has the right topography, updated/remodeled, and is under $1.5M.  It will happen as Summer tends to bring out more inventory.  Maybe something good will hit the market tomorrow for my birthday?  

Mercer Island Real Estate Statistics  I’ve been selling for real estate for 12 years, and have sold various homes on Mercer Island over the years, but am now trying to focus more on the island since I am living here and have changed offices to the local John L. Scott office.  It just amazes every week, when I go on our office tour and the broker’s open houses, and see how different this location is compared to other areas across town.  We currently have 19 homes (excluding condos) under $1,000,000!  If you saw those homes, you would say that at least 1/4 are tear downs!  Can you imagine an $800,000 tear down???  If you look between $1,000,000-$1,500,000 you pick up an additional 22 homes for sale.  Most of those homes are in dire need of updating or are in some type of an adverse location (busy street, etc.).  I just happen to be working with various buyers in these price ranges so it’s been a bit frustrating to say the least.  Luckily, inventory tends to pick up toward the summertime and my buyers should be able to get into something soon. 

What a market we have going on Mercer Island, WA.  Everyone keeps talking about the real estate “bubble” but you would never know if you were trying to buy a home here.  Multiple offers is the norm for anything under $1,000,000 if it isn’t on a busy street or doesn’t have other adverse conditions.  Anything between $1,000,000-$2,000,000 is still selling quickly if the home is in good condition.  According to the Northwest Multiple Listing Service, monthly inventory levels are at one month for homes on Mercer Island under $1,000,000!  In layman’s terms, anything less than two month’s worth of inventory is considered a Seller’s market.  See below for Mercer Island, WA statistics per the NWMLS:

 <$1,000,000:  1 month of inventory

$1,000,000-$2,000,000:  3.2 months of inventory

$2,000,000-$3,000,000:  23 months of inventory

$3,000,000-$5,000,000:  11 months of inventory

$5,000,000-$10,000,000:  6 months of inventory

$10,000,000+:  5 months of inventory

Until inventory levels pick up, which is usually middle of summer, I expect the trend to continue.