If you’ve tried searching for homes for sale in Howard County Maryland by school district you’ve probably been frustrated – finding homes from the wrong district as well as missing out on homes from the right district.  Why?

Most agents (and all online sites) search for school district by searching for matching words in the “school district” data field. The problem?  Agents are notorious for either putting in the wrong school name or skipping the data field entirely (seeing “Unknown School” in the school data field is almost as frustrating as seeing “No Photo Available” in the house photo field).   Searching Bad Data = Bad Search Results.

Our Accu-Search(TM) method

takes a completely different approach.  Let’s suppose you want to find a home in either the Centennial High School or River Hill High School district.   We don’t search for words that match “Centennial High School” or “River Hill High School” – because word-based searches are the ones prone to error.

Instead we create a search map, drawn to the exact boundaries given by the Howard County Public School System, for the school(s) you want.  Since property address is one data field agents always input correctly, our Accu-Search(TM) system gives you exactly the homes you want, and none you don’t.  Searching Good Data = Good Search Results.

At present the software that allows the creation of custom-map-based searches is not available on any consumer accessible websites – it can only by done by a Realtor(R) member of Metropolitan Regional Information Systems (”"MRIS”).  However, if YOU would like to have accurate home searches by school district, we can prepare these searches for you, free, and email all matching homes to you automatically.  Just call our office, 410-772-5400, or click here and fill out the information you want included in your home search.      Blessings, John

Buyer’s Agents: Giving Howard County Home Buyers A Fair Deal And Honest Advice

I confess I’ve been asleep at the wheel on my own blog.  Over the past few months I’ve written about topics I thought Howard county home buyers were most interested in these days – foreclosures in Ellicott City, short sales in Columbia, Maryland, and current home price trends in Howard County.  (See prior blog entries, or click here for a list of current foreclosures and short sales in Howard County). But I’ve forgotten to speak about using a “buyer’s agent” despite the fact that for over 20 years I’ve been a pioneer of buyer’s agency in Howard County. 

Forgive me.  I’ll do my best to succinctly address key issues concerning buyer’s agents in Howard County and in Maryland in general in this and the next few posts.

Definitions: Buyer’s Agents, Seller’s Agents, And Dual Agents

Traditionally all real estate agents worked for the seller’s best interests, either as “listing agent” (with a written listing agreement between agent and seller) or as a “sub-agent” (working with buyers but as a “sub-agent” of the listing agent of the home the buyer purchased and thus a seller’s agent).  Crazy, huh? Your agent emotionally bonds with you as home buyer, shows you tons of homes owned by sellers she’s never met, yet she owes 100% loyalty to them, 0% to you.  Wikipedia.org partly explains this system here.

It’s unclear exactly how this agents-always-work-for-sellers system came about. At least, no one has offered an explanation which I find fully satisfying. But it must have been due in part to the fact that, generally, the agent’s best interests are more naturally aligned  with sellers than with buyers.  Both seller and agent want the highest price – the seller to receive more money, and the agent to receive a higher commission.  Both seller and agent want few, if any, “escape clauses” in a purchase contract – because, once a deal has been agreed to, they both want it to go through despite any buyer concerns.

Regardless of how it came about, the fact remains that the basic legal framework in U.S. real estate for nearly a century has been that all agents worked for the seller.  This was certainly true for Howard County Maryland real estate sales.

Then in the late 1970’s and 1980’s some upstart real estate brokers introduced the concept of “buyer’s agency”, where the agent would actually commit in writing to break with the traditional, sellers-only, system and work for the buyer’s best interests. 

This was risky at the time, because “dual agency” – the act of representing both buyer and seller on the same transaction – was completely illegal in all 50 states. If Agent-A with ACME Realty represented the buyer and Agent-B of ACME Realty represented the seller in the same deal this was considered dual agency – representing conflicting interests in the same transaction – and was completely illegal in all 50 states.  Both agents and the broker could lose their licenses for committing just one act of dual agency.

The biggest brokerages, then, never offered buyer’s agency. If the firm had, say, a 25% share of the home listings in an area, there would be a 25% chance of dual agency if that firm represented buyers also.  Since dual agency was blatantly illegal, big firms never offered it to buyers.

This meant that, initially, buyer’s agency was only offered through small, innovative brokerages. Some were “Exclusive Buyer’s Agents”, or EBA’s, where the firm only represented home buyers with a 0% chance of dual agency.  Other small firms practiced “Single Agency”, where they would represent a handful of buyers and sellers, but never both on the same deal. If such a Single Agency firm represented, say, three home sellers out of 1,500 homes for sale in the area, there’d be a 0.2% chance of dual agency.

(If you can’t tell already, yes, I was one of those “innovative”, upity brokers that practiced buyer’s agency in Howard County Maryland as far back as 1989).

However, these small firms offering buyer’s agency apparently posed a threat to the big firms. Over a matter of a few years, from 1991 to 1997, all 50 states made major changes to their dual agency laws and most repealed them. Why? Well, it wasn’t because consumers demanded the “right” to work with “dual agents.”  Rather, it was because the big firms felt threatened by “buyer’s agency” and they wanted to be able to offer something they called buyer’s agency, even if it was simply a repackaged version of the old dual agency that had been illegal for a century.

Locally us ‘little guys’ lobbied against such big boys as Long & Foster, ReMax and O’Conner, Piper & Flynn (now Coldwell Banker). We didn’t want dual agency legalized, as it seemed a blatant ripoff of the consumer.  Alas I found it’s true: you can’t fight city hall (or, in this case, the Maryland Legislature and big brokerage houses at the Maryland Association of Realtors®).

Result Today?  Virtually every agent in Howard County claims to be a “buyer’s agent.”  But precious few will GUARANTEE in writing to give you 100% loyalty.  We do.

For 12 years we practiced Exclusive Buyer’s Agency in Howard County Maryland and for the past eight years we’ve practiced Single Agency for our Howard County home buyer and seller clients.  For reasons I’ll state in a future post, I find Single Agency more beneficial to our clients than even Exclusive Buyer’s Agency.

If you’d like copies of any of our buyer’s agency forms, including a copy of our written loyalty guarantee, click here and we’ll be glad to send it to you.

You can check my OLD website for more info on Buyer’s Agency In Howard County Maryland here (with apologies, it needs a bit of updating), or request our “Home Buyer’s Guide To Maryland Real Estate” here.

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Metropolitan Regional Information Services (“MRIS”) just released home sale statistics for Howard County in December 2008. What did we learn?

First and foremost, the “death knell” to home sales we saw in October and November was, indeed, short lived. The stock market crash in late September and October, and a nightly new barrage of terms like “economic meltdown” hammered car sales, Starbucks® sales and – yes, Virginia – home sales.

For most of 2008 we saw a monthly sales rate of 1-out-of-9: of 9 homes for sale each month, one sold and 8 didn’t. It would vary a bit (low of 7.2, high of 10.9), but in November the sales rate sank to 1-out-of-14.2!

In December, the rate of sales returned to a “normal” range (for 2008). Of the 1,622 homes for sale in the county 171 actually sold. While not a record setting pace, it yields a rate of 1-out-of-9.5 – pretty darned close to the yearly average. [For complete details of December's sales and/or a pdf file of prior months' Howard County home sales click here].

Where to next?

I am still awaiting the year-end results for 2008, which MRIS has yet to release (as of 1/26/2009). Figures will likely show that prices county-wide fell by about 9.4% and that, on average, each month only one home sold for every 9.2 “for sale” that month. I’ll publish those as soon as MRIS releases them, or click here to have these stats automatically emailed to you when they are released.

The coming year may be a transition year for local real estate. On the negative side, many of the factors that have driven prices down will still be in play this year. But on the positive side, the Housing Affordability Index is now close to an all-time high.(See National Housing Affordability Index and/or Maryland Housing Affordability Index).

This is due in part to recently falling prices and also to historically low interest rates (some as low as

4.875% fixed). (Check mortgage rates on WellsFargo.com here).

My predictions aren’t always accurate – though they were for November and December. I think this coming year may see prices decline a bit more for the first half, with a “bottom” in the second half and/or a possible slight rise in prices late in the year. For more info on Howard County homes for sale, including a list of the top 10 best priced homes currently, go to JohnAndAngela.com.

Metropolitan Regional Information Services (“MRIS”) just released home sale statistics for Howard County in October 2008, and home sales took their biggest hit of 2008.

Of 1,759 homes for sale last month only 124 sold – or 1 out of 14.2 – meaning we had a 14.2 month “inventory” level (it would take 14.2 months to sell all current homes on the market at last month’s sales level assuming no new homes came on the market).

That is a significant fall from October’s figure of 9.1 months.  For the homes that did sell last month the average time-on-market was 120.  The average sales price was 9.9% below the seller’s asking price.  [For complete details of November's sales and/or a pdf file of prior months' Howard County home sales click here].

What happened?

Although real estate trends tend to be complex with a variety of factors influencing the market, I think last month’s fall is pretty easy to understand.  The evening news, with a nightly drone of “economic meltdown” and “Great Depression II”, scared the living cr*p out of people! (MSNBC.com even has a new speciality section “The Economy In Turmoil”).

In October and November consumer spending on everything fell, and the bigger the price tag (big screen TV’s, cars) the harder sales fell. So, why wouldn’t home sales – the largest investment most people ever make – fall too?  So, while I don’t believe Howard County home sales will bounce back immediately to ’05 levels, neither do I believe last month is a true measure of the market.  Rather, I believe it was an over-reaction to the media’s over-reaction to some legitimate, but limited, economic bad news.

Where to from here?

Because of the strong employment corridor between Baltimore and DC, home sales in Howard County Maryland are not influenced much by seasons of the year. Rather, our home sales are influenced mostly by “economic mood”. 

And, there is a decent chance for an up-tic in economic mood. Partly it will be in public perception – the public is already getting “media fatigue” with the economy, and the media will soon shift it’s attention to Obama’s new administration and his first 100 days in office.

Also, there are substantive changes that will improve economic mood, at least in housing.  Interest rates had been climbing for most of 2008, but over the past 60 days rates have fallen a full percent. You can get a 30 year fixed rate loan for just 5.25%, and there is new the feds may push for even lower rates.  (Check mortgage rates on WellsFargo.com here).

True, go-go days of loose credit are gone forever – today people actually have to qualify in order to get a mortgage!  But, when rates fall the cost of buying falls and, with it, (usually) comes increased demand.

The stock market seems to be stabilizing, the public is tiring of the media’s negative drone on the economy, and the fundamentals for buying real estate are improving.

I’m not predicting a return to 2005’s peak performance – but I am saying November’s huge fall in Howard County home sales is not an indicator of things to come.  The market may well level off and find “balance” in ’09 for the first time in three years. 

For more info on Howard County homes for sale, including a list of the top 10 best priced homes currently, go to JohnAndAngela.com.

Summary. 

October’s sales stats for Howard County real estate sales, released by MRIS, show a “blending” of trends. Locally there had been signs that our market may have been approaching a “bottom”, but October saw sales of all big-ticket items falter, which lead to slower home sales locally. (Get a full print out of last 6 months home sale stats for Howard County here). 

Howard County Home Sales October 2008: The Numbers At-A-Glance

Total sales: 191

Total homes on market (unsold): 1896

“Inventory” level¹: 9.9 months (1896 divided by 191).  The trend is increasing, as it was 7.0 months in August and 8.0 months in September.

List-2-Sale Ratio²:    91.89% (about the same as prior month, 91.92%)

Days On Market: 110 days (about the same as prior month, 108).

Price Change: -8.71% over same month last year.

John’s Opinion

Leading up to October it looked like the declining real estate market was headed for a “soft landing.” In fact, in September the average price of homes sold in Howard County actually rose 3.25% from the same month in the prior year. But October saw the stock market get hammered, a giant $700 Billion bailout of the financial sector and – no surprise – huge unease about the economy everywhere.  All sales slowed: cars (including Toyota and Honda), Starbucks’ coffee (quarterly profits fell 97%) and – no surprise – housing sales fell during the month.   Was October a momentary blip or an omen of things to come? Probably neither.  Housing likely will remain “soft” through the cold weather months (typically slow anyway), but I don’t believe October’s financial sector blues are an indicator of a long-term trend in housing.  (Search active homes for sale in Howard County HERE) (Request monthly print out of Howard County Home Sales HERE)  

 _________

 1) INVENTORY: Total number of homes “for sale” divided by current rate of sale (or, how long it would take  to sell all homes currently on the market, at today’s sale rate, if no new homes came on the market.).  A six month inventory level = a “balanced” market, over six months = a “buyer’s market.”

So you’ve found the ‘perfect home’, but how do you negotiate the best deal? Let’s begin with making your initial offer.  You can also request our 92-page guide on How To Buy And Sell Homes Like A Pro here.

What Sellers Want

In my 20 years of selling Howard County real estate I have found that sellers basically want two things: (a) the most money possible; and (b) a “sure deal.”  In other words, a bird in the hand is worth two in the bush.  If your offer looks shaky, the seller will be less likely to lower his price. But, to the extent you can convince the seller that you are a strong buyer and that your offer has a very low risk of failure, he will be more likely to give you a bit more of what you want – a lower price.

A couple of keys to showing the seller yours is a strong offer are: Making a Complete Contract Offer; Showing Strong Financial Qualification; and Presenting a Professional Package

Full Written Contract

Never make “verbal” offers. If you want the seller to take you seriously, you need to take your own offer seriously by completely a full purchase contract for any offer.

Verbal communication is 10% words, 30% tone of voice, and 60% body language.  In my experience, this principle applies to written communication too – and especially to real estate offers.

Some buyers want to make verbal offers.  “Just ask the seller if he’ll take $30,000 less.”  Bad idea.  Not only would such an “offer” be unenforceable if “accepted” (legally real estate contracts must be in writing), but the “body language” of a verbal offer communicates all the wrong things to the seller.

The “body language” of a verbal offer says “I may or may not be a reliable person” or “I don’t take the process of buying your home seriously.”  This does not encourage a seller to deal with you, nor to give you the best price.  For this reason most Howard County home sellers and/or Howard County real estate agents would reject, out of hand, any “verbal” offers.

When I write offers for buyers I insist on a complete contract offer, including primary contract (MAR ver 10/08) and all necessary addenda (inspection(s), county notices, disclosure/disclaimer, etc.), and all forms are computer-printed to be legible and neat-looking. Uusally the seller has previsously created some of these forms (MD Disclosure/Disclaimer for example) and it is a good idea to ask for copies of these forms from the seller and to include them in your offer.

When your offer is complete, with no forms missing, and everything typewritten and neat, your paperwork’s body language communicates to the seller “I am reliable” and “I will pay attention to the details through out this transaction.”  When you communicate that, you give the seller “warm fuzzies” about the strength of your offer, which may help him adjust to the fact that he’s not getting the price he wants.

When forms are missing, it communicates to the other side that you don’t pay attention to details and may prove to be unreliable during the transaction.

By the way, we provide a full copy of all such contract forms to every home buyer at our first meeting, so that you can review them well in advance of making a purchase offer. You can request sample copies of all these forms here.

Showing Strong Financial Qualification

It used to be that giving the seller a lender pre-approval letter was optional. Today it is mandatory.  Without one, your offer will be heavily discounted if not rejected outright.

There are three “levels” of lender letter: pre-qualification, pre-approval, and commitment letter.  A commitment letter is the strongest possible lender letter which is great if you can get one. But you will probably want at least a pre-approval letter.

Also, Howard County realtors and Howard County home sellers will tend to want to see a letter from a local lender, and not an Internet-based company like Lending Tree.  Internet-based lenders have a horrible reputation in Howard County for making promises that they cannot keep, causing problems both for sellers (financing fails despite lender’s written promises) and for buyers too (hidden fees and undisclosed loan points jack their prices up beyond those of any local lender).  If you insist on using an Internet-based lender despite the risks, at a minimum you should also have a pre-approval letter from a local lender as a backup.

How “local” does your lender need to be? Here’s a rough rule of thumb. If they are close enough so that I can drive to their office and slash their tires when they lie about your loan – and/or close enough so that I can reward them by referring future buyers if they do a good job – then that’s close enough.

Seriously, any good Realtor or lender should get over 50% of their business by referral. Distant Internet-based lenders don’t have to worry about their local reputation and/or screwing up a loan, but local lenders do.  Get a list of top-ranked local lenders here.

Cover Letter

In my experience we negotiate a better price with the seller, not by denegrating the quality of his property, but by “selling” on your qualities and the high quality of your offer.  And, we do this in a professional cover letter.

In every professional cover letter I will include (a) a summary of the offer terms (price, settlement date, request for cash credit); (b) a statement about your financial qualifications (large down payment, pre-approval letter, etc.); and (c) a paragraph reciting all (and I mean ALL) the benefits your offer brings to the seller.

For example, if you don’t have to sell another home in order to buy this one, I emphasize that in the cover letter.  Yes, it may be true that 90% of other home buyers are also in that position – but I emphasize every benefit possible that you bring to the seller, so that he will think you are, in fact, a “great” buyer.

(We call this the “no water in our gas” theory.  If a gas station charged 10¢ more per gallon and then advertized “no water in our gas”, it would kind of make you wonder about the other stations, wouldn’t it?  When you bring any benefit to the seller, we want to emphasize those benefits – even if 90% of all other buyers bring them too).

Also, if we know some unique “wants” the seller has and we can meet them, we mention those in the cover letter too. For example, if the seller wants to settle very quickly (or not), we mention that we can accomodate that need.

Putting together a professional cover letter is the final touch to the “body language” of your offer. It is easy to do, but it’s easier not to, and it stuns me how many agents and buyers fail to take this simple, powerful step to negotiating a better price.  You can request a sample professional cover letter here.

Today MSNBC reports “Home prices fall by sharpest annual rate ever”.   The report cites a 16.6% average price drop in home values nationwide as revealed by the Case-Shiller Home Price Index.   The numbers reflect an average home price of $164,570 in August 2008 versus an average price nationwide of $197,370 a year prior.

Bad news for would-be home sellers, good news for home buyers, but what do our local numbers say?

For the same period, August 2007 versus August 2008, average home values in Howard County fell 7.05% according to the Metropolitan Regional Information Service (”MRIS”). Not great news for local home sellers, but less than half the average drop in home prices that the nation experienced as a whole. (Click here to request a monthly update of Howard County home sales – including average prices # of homes sold, # of homes unsold each month).

Why is Howard County holding its own in the current housing market?  Partly it is due to our strong local economy, including the coming B.R.A.C. (Base Reallignment Commission) job transfers to Ft. Meade.  Probably also due in part to the very strong Howard County public school system.   I believe it is also a reflection of the fact that “what goes up (less) must also come down (less).”  During the boom of 2002-2005 other area county’s prices went up higher and faster than Howard County’s, so it is only natural to expect our prices to “deflate” at a calmer pace too.

One other factor is that home foreclosures in Howard County are at a lower rate than other counties, meaning foreclosures and short sales are having less of an influence on prices here.  However, home foreclosures and short sales can still be found in Howard County HERE.

I tell Howard County home buyers all the time that, sometimes all you need to do to get the “best deal” is simply to recognize a great deal, and act on it, when you find it.

Take the home below.  A 4 bedroom, 2 full bath contemporary with 2 car garage and tax assessed at $444,000.  It is in clean shape, a bit dated, but extremely well priced at just $400,000.  When most homes are selling at around 97% to 103% of their tax assessment value, this home is asking a mere 90.1% of its tax assessment value.

Is it a buyer’s market right now? Heck yeah.  But, even now about 25% of all homes that sell each month are sold within 30 days or less of being listed, and sell for darned near (if not even over) their asking price – yes in 2008!  My guess is, this home at 5414 Lightning View Road in Columbia will be one of them.

For an article on understanding and calculating a home’s Assessment Value Ratio click here.

Or, you can request a list of well-priced Howard County homes here.

Priced 10% under tax assessment? Such homes sell fast.

This is a (growing) series of short articles on Howard County Maryland’s real estate market from the buyer’s viewpoint. For other articles see: How to Value A Home (Recognizing Value); Finding Great Deals – Auctions & Foreclosures; Finding Great Deals – FSBO and Short Sales; Finding Great Deals – Realtor® MRIS; and How To Negotiate A Great Deal.

Howard County’s Best Home Deals – Realtor-Owned MRIS

My wife likes to do things the easy way, while I seem drawn to over-complicate things.  Take shopping. My wife will go to the location known to have quality products at the best prices, quickly find what she wants, buy it, and head home.  Me? I’ll run all over town looking for a “better deal” somewhere, waisting time and gas, and end up never finding a deal that is better than what my wife found in 15 minutes! 

Moral: When you’re buying a house – shop like my wife, not like me.

Your best bet for finding the best “deal” on a Howard County home also happens to be the “easy” way – working with a local Realtor® who has access to the the local Realtor® owned Multiple Listing Service (”MLS”). 

 Realtor® owned MLS services date back to 1907.  In a MLS service all area Realtors® “list” their homes for sale into a collective “pool”, sharing information (price, features) with one another and agreeing to split the sales commission when they sell one another’s home listings.

Originally MLS services were in printed form, updated monthly and circulated to different Realtor® offices.  In the 1980’s MLS services were computerized and accessed over a private network.  In the Maryland/DC/Virginia region about 60 Realtor® MLS services merged in the 1990’s to form the Metropolitan Regional Information Service (”MRIS”), and in 1998 consumer access to the MRIS was granted over the Internet on a limited basis. 

According to research by the National Association of Realtors, over 92% of all home sales take place via one more of the nation’s MLS services.  And, for buyers looking for a “good deal” on just the “right home”, the local MLS is easily the best place to find it.

Is every home listed with the Realtor® owned MRIS a great deal? Of course not.  Of the approximately 2,000 homes listed for sale in Howard County at any given time, plenty of them are overpriced. However, plenty more are listed at very attractive prices. Virtually all Howard County “short sale” homes and/or bank-owned foreclosure homes are listed on the MRIS.

When a bank owns a home and needs to get rid of it quickly, or when any other highly-motivated seller needs to sell, their #1 choice is to list with a Realtor® who has access to the MRIS.  The overwhelming majority of “bargain” homes for sale in Howard County can be found on the MRIS.

In fact, we have a recent software enchancement that allows you to do a targeted search just for ”bank-owned” properties! Contact us by phone or email about this exciting new tool!

So, How Do You “Spot” The Good Home Deals?

If the MRIS is a mixture of Howard County home bargains and over-priced homes (and it is), how do you “spot” the bargains?  That partly involves “Recognizing Value“, an earlier blog entry, and partly involves “Negotiating The Best Deal”, our next blog entry.

How Can YOU Access The MRIS? 

ONLINE (LIMITED) ACCESS.  As a consumer, since 2001,  you have been able to get partial access to the MLS over the Internet.   Not all consumer MLS sites are equal. Sites vary in terms of how much information is offered (e.g. some offer street addresses of homes, some don’t), how current the information is (some are updated instantly, others not for weeks), and whether or not the user is required to “register” in order to perform a search.

For maximum consumer access to Howard County homes online click here.

FULL (REALTOR) ACCESS. To gain full and complete access to the MLS, and to actually tour the inside of properties, you must work with a local Realtor®.  State law requires a real estate agent to disclose to you in writing whether or not they will work for you as a “buyer’s agent” (protecting your best interests), or “seller’s agent” (working for the seller’s best interests).  Typically the Realtor®’s fees are paid by the seller of the home you purchase, not by you. 

As a home buyer you should clarify, upfront, with your agent whether or not they will work as a “buyer’s agent” and whether or not you will be expected to pay the agent’s fee.  It would be wise to ask for references, as well as to inquire about the agent’s prior real estate experience.

This is the second in a series of short articles on Howard County Maryland’s real estate market from the buyer’s viewpoint. For other articles see: How to Value A Home (Recognizing Value); Finding Great Deals – Auctions & Foreclosures; Finding Great Deals – FSBO and Short Sales; Finding Great Deals – Realtor® MRIS; and How To Negotiate A Great Deal.

FINDING Great Deals – FSBO and ‘Short Sales’

Where is the best place to look for a great deal on a home in Howard County today? For sale by owner? Auction or foreclosure? “Short sale”? Word-of-mouth? The Realtor® owned multiple listing service, MRIS? Let’s review each.

Homes “For Sale By Owner”

The National Association of  Realtors® tracks homes sales all across the country. Of homes offered for sale “by owner”, fewer than 18% actually sell.

One reason is limited marketing – individual owners don’t have the experience or money to market their home as well as an army of local Realtors® can. And, unlike the Realtor® MRIS system, there is no single, reliable source for all ‘by owner’ listings.  Newspaper ads are hit-or-miss, and ‘by-owner’ websites are notoriously out-of-date, being both over- and under-inclusive (they continue to post ‘by owner’ homes that have gone off the market or have been listed with a Realtor®, and they fail to include a majority of ‘by owner’ homes that currently are for sale).

A second reason most ‘by owner’ homes don’t sell is because they typically aren’t staged or priced well.  Most owners tend to have biased view of their own home, and often ask too high a price while at the same time taking too little care to ’spruce up’ or “stage” their home for the market.

Can you ever find a good deal on a “by owner” home? Sure. One reason is that, on the rare occasion when a home actually does sell “by owner”, 42% of the time it’s between family members and/or close friends, according to the National Association of Realtors.

Even if you don’t know the owner, you can sometimes negotiate a good price with a ‘by owner’ seller. But, if you are not experienced in negotiating purchases in the hundreds of thousands of dollars, you may wish to allow a Realtor® to act as your buyer’s agent. Not only can a buyer’s agent protect you in preparing contract papers correctly, they can also arrange to have expert professionals inspect the home for problems. And, more often than not a good buyer’s agent will be able to negotiate a better deal with the owner than you could yourself.

So – if you have a family member or close friend selling their home, “by owner” may be a good way to find a “good deal” on a home. Generally speaking, though, you are far, far more likely to find 10 good deals on the Realtor® MRIS system than to find just one good deal “by owner.”

(For the most complete Howard County home search – ‘by owner’ AND Realtor® listed homes – click here).

Howard County “Short Sales”

Short sale defined: a lender allows a property to be sold for less than the remaining balance on the mortgage loan, forgiving the unpaid remainder.

In the typical sale only two parties must agree on price and terms: buyer and seller. But, in a short sale a third party – the seller’s lender – must also agree to the terms of sale.  (Bankrate.com has a simple and clear article on the short sale process here).

Suppose a home is worth $375,000, the current owner owes $400,000 and costs of sale will be $28,000 – meaning the owner is “short” $53,000 from being able to sell ($375,000 value, less $28,000 sale costs, is $347,000 or $53,000 “short” of the $400,000 mortgage balance). If the owner is cash-flush he can sell the home for less than the mortgage amount, and pay the difference ($53,000) in cash.

However, in today’s market a lot of owners owe more than their homes are now worth and they don’t have any assets to pay the difference. In such cases, the homes can only be sold if the lender agrees to a “short sale”, agreeing to accept less than full payment on the mortgage.

Why Would A Lender Agree To A Short Sale?

When a home owner gets in financial trouble the lender has no good options. If they agree to a short sale the lender will “lose” thousands on the unpaid mortgage amount. However, foreclosing on the homeowner isn’t must better as the lender will likely lose the same amount on the unpaid mortgage amount and will also have to pay the legal costs of a foreclosure. And, a foreclosure can add months and months of delay, which a lender will want to avoid. Agreeing to a short sale is often the lesser of two evils.

How Do You Find Short Sales In Howard County?

Virtually all short sales can be find via the Realtor®-owned Metropolitan Regional Information System (“MRIS”). It’s simple. Lenders who agree to a short sale want the home sold as quickly as possible and they will always choose to market short sales through a Realtor® who can “list” the home on the MRIS.

What Are The Benefits, And Risks, Of Buying A Short Sale?

The benefit of buying a short sale home is that it can be offered at an attractive price. (However, this is not always true, and just as often a “normal” sale may be offered at an equally or even more attractive price than many short sales).

The downside of buying a short sale is long delays and complicated paperwork.

Suppose a home is offered for sale at $375,000 and you want to offer $360,000 with $5,000 back for closing costs. An individual seller will give you an answer typically within 24 hours. However, in a short sale you are dealing with a “committee” at a bank, often at a distance of thousand of miles. You easily may not get an answer back for literally weeks.

And, even when you do get an “answer”, it may be simple a request that you submit additional paperwork. In a short sale the paperwork is much more complicated and it is easy for an inexperienced agent to neglect an important detail. So, you can make an offer, wait 2-3 weeks for an answer, and be told “we need document X completed plus two info on two additional comparable sold homes.” You may not hear a real response for an additional 2-3 weeks.

Any Realtor® who has access to the MRIS can help you find short sale properties. However, the process of actually buying a short sale can be somewhat ugly unless your agent is experienced in such matters.

Questions/comments? Please email me.