Tag Archives: comparative market analysis

What is Dual Agency?

Whether you are looking to buy property or looking to sell your property, if you are working with a Realtor, one of the first things you will learn about is agency and the different types of agency. During your first meeting with a Realtor, you will have to sign a Mandatory Agency Disclosure Form stating in what capacity the Realtor is speaking about property. The agent will disclose if she is speaking to you as either a seller’s agent or buyer’s agent. Whether working as the buyer’s agent or seller’s agent, Realtors owe buyers and sellers undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality, and accountability provided the agent disclose known material defects in the real estate. The Realtor must put her client’s interests first and negotiate for the best terms and price for their client.

As all Realtors know, you cannot thrive in this business only being a seller’s agent or a buyer’s agent, so most Realtors work as either or at any time (depending on local laws and office policy). It gets interesting when a Realtor is both at the same time for the same deal. This is called acting in dual agency.

Dueling Agents

Dueling Agents…Get it?

Dual agency is when the Realtor is both the seller’s agent and the buyer’s agent. This can only happen with expressed and written consent from both the buyer and the seller. This written consent has to be given by both parties before executing an offer to purchase a specific property. Once both parties agree to allow the Realtor to represent them, the Realtor enters dual agency and becomes a neutral party. At this point, think of your Realtor as Switzerland! The Realtor can pass along factual information between buyer and seller but cannot interpret the information for either party. Nor can the Realtor offer analysis or advice to either the buyer or the seller. For example, the Realtor can give a comparative market analysis (CMA) or comps for the property to the buyer that were previously provided to the seller when determining a listing price, but she cannot analyze it with the buyer nor can she advise what price the buyer should offer. However, if new properties show up in the comps given to the buyer, the Realtor has to provide the same updated information to the seller.

By nature, a dual agent cannot fulfill the same duties of a seller’s agent or buyer’s agent. A Realtor in dual agency still owes both the buyer and seller confidentiality of material information and accounting for funds. However, while in dual agency the Realtor cannot negotiate the best terms or price for either party.

For seasoned and educated buyers and sellers, working in dual agency can be a good thing, since they only need to communicate with one Realtor, thus cutting down on delays caused by passing information back and forth between parties. However, for first time home buyers who are nervous and do not fully understand the buying process, this is not ideal. No one is ever taken advantage of, but with the experience of making such a major purchase, having a Realtor exclusively in your corner, helping you understand the market, and getting you the terms you want can be a relief to the emotional stress that comes with buying your first home. That being said, if you are working with a Realtor you trust and they have the property you have been looking for, you have no reason not to go for it.

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Pricing a House: The Difference Between Sold Listings and Old Listings

This is a great time to sell with limited inventory on the current sales market and the mortgage rates at all-time lows. In fact, every news outlet is saying how the housing crisis is in remission, so why hasn’t your home sold yet?

Let me give you a frame of reference: if you have had a property on the market for longer than 2 months with no serious interest, your property can be considered stale and will be harder to sell. Keep in mind this is not true for all properties. Certain properties that fit into a niche market (multi-million dollar mansions, horse farms, etc.) or have problems (in areas with lots of construction, awkward layouts, etc.) will take longer to sell than turn-key properties. If your property doesn’t need improvements and is in a sought after location, why didn’t your house sell when it first came on the sales market?

Our society is becoming increasingly visual and tech-savy and people want to see high-quality photographs. Do your listings feature plenty of pictures of the property? Are the pictures high-quality and shot by a professional photographer? Is your listing mobile friendly so buyers look up your listing on their smartphone or tablet? If you answered “yes” to these, then more than likely it’s because the price is too high.

Pricing a house to sell in the current sales marketThere are many reasons a property doesn’t sell but more often than not, not pricing a house to sell in the current market is the factor for a listing to go stale. If you feel this is wrong, let me ask you, did you come up with a price based on the formula: I paid X so many years ago and put in Y so the price should at least be (X+Y)+Z with for inflation and appreciation? It’s an easy formula but it is the wrong way to go about pricing a home. One reason is that your ROI is never equal to 100%. There are several home renovation projects to increase its value, but none of them will give you back exactly what you put in. Another reason this formula is inaccurate is that the market works much differently and a property should be priced to sell for the current market. Worst case scenario is that your area took a hit in the housing crisis and it hasn’t recovered. If you bought it for X at the peak of the market, chances are you are not going to get it all back when you want to sell. Best case scenario, you bought low and held onto the property for years and now you can get much more than what you paid and put in.

“Is my property priced too high?”

If you and your Realtor are doing everything to market your property well, check the sales activity in the local market. Is there a lot of activity? If there is a lot of activity in your sales market but your property has not had any interest, this is a good indication the price is too high. Pricing a home is not a guessing game, have your Realtor provide a comparative market analysis and look at the data. This will show you what similar properties to yours have recently sold for and you will also be able to see how long they were on the market and compare the list price to the sold price.

If you are still saying to yourself that you know your home is worth the price you are asking, let me ask you this: do you really want to sell your home? If your answer is “only if I get the price I want,” you don’t really want to sell and chances are you won’t sell. If your answer is “yes,” then it needs to be priced to sell in the current market. If you want to get the best price, price the home to sell to begin with. This will bring a lot of traffic and interest right away, which is the most critical time for any house on the market. The properties that are getting close to asking or above asking are priced well at the start. If the property is priced too high to begin with, it will sit. To generate renewed interested, you will need to drop the price. Depending on how long you have it on the market and how many price reductions you make, you may end up selling for less than you would have if you had priced it well to begin with. In the meantime you have lost money because of the holding costs incurred through property taxes, maintenance, and mortgage payment.

Pricing a house too high for the current sales market

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Pricing a house to sell in the current sales marketIf this doesn’t move you to reconsider your strategy when pricing a house, see what your asking price gets you in the local market. Are there more bedrooms? New renovations? Landscaped outdoor space? These are what buyers are expecting at this price and if your property falls below their standard, buyers are not going to be interested.

If you are in the market to sell a home or would like to know what your property is worth in the current sales market, contact the Realtors of Matthew and Alisa Group.

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The Home Buying Process Simplified

Condo on Boston's Real Estate Sales MarketBuying a home can be the biggest purchase a person can make in their lifetime. For first-time home buyers this can be the most overwhelming and stressful experience they could go through. Here is a general breakdown of the steps you need to take to buy your home.

The first step is to figure out how much can you afford. The most common formula used to figure out how much to spend on your home purchase is equal 3x your annual income. Keep in mind, your mortgage payments together with your other monthly bills should not exceed more that 36% of you monthly income.

Next, you will want to save for a down payment. Depending on the loan you qualify for, you will need anywhere between 3%-30% for the down payment.

Once you have your price in mind and a down payment saved, get a pre-approval letter. This is incredibly important to have before you start your home search. You can get a pre-approval letter from any bank, but you are not locked into an agreement to get your mortgage from that bank. Having the letter can mean the difference between getting your dream home or getting lost in a pile of other offers.

Understand that not only will you need the down payment for your mortgage but closing costs and the other costs that come up in buying a home such as lawyer fees, inspection costs, etc.

Once you have the price and monies ready, begin a list of wants verses needs for you home. Do you really need walk-in closets? How important is a fireplace? Is size or location the top priority?

Now you will want to start talking to Realtors. Make it clear to your Realtor what your price range is and what you want and need in your new home. There are many different reasons to choose a Realtor: their experience, your past relationship with them, accessibility, etc. The most important factor is an understanding of what you want and for you to understand what your real estate agent will do for you.

Now that you have your priorities and a Realtor to help you navigate the real estate market, start seeing places in person that fit your criteria. Don’t feel discouraged if or when your lists of wants and needs change. You may go into this process with one idea of what you want and then you end up with something completely different.

Buying Property and signing PaperworkOnce you find the home for you, talk to your Realtor about making an offer. Your Realtor will explain what is the best price to offer based on a comparative market analysis. This will show you what comparable properties have recently sold for. Whether it is a buyer’s market or seller’s market, listen to your Realtor and make sure you understand the data they are presenting you. The comparative sales indicate market value for the given property which will dictate the best amount to offer. Your Realtor will help guide you through the contingency addendum. The contingency addendum protects the buyer’s interest and deposit money and allows the buyer to re-negotiate or withdrawal the offer based on the results of inspections preformed during the due diligence period. It’s important to do your due diligence about the house you are trying to buy but the more unnecessary contingencies you put in your offer, the less attractive your offer becomes to a seller. If you check off any contingency, you are not only costing yourself more money by having these tests done, but you are inadvertently telling the seller that you want as many ways out of buying the property as you can get. Many sellers would prefer to go with another buyer or even leave the property on the market instead of accepting an offer they think will fall through.

After your offer is accepted this is where the paperwork starts and lawyers become involved. This is when you actually preform your due diligence and have your potential home inspected and tested. If everything comes back to your satisfaction, time to sign the Purchase and Sale (P&S) agreement and to start choosing paint colors and furniture placement.

If you have any questions or are ready to start the process of buying a home, contact the Realtors of Matthew and Alisa Group Real Estate.

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