Who cares about your clocks?

This week, if you're on the email lists of any other real estate agents, you've likely already begun receiving canned messages reminding you to adjust your clocks for Daylight Savings Time on Sunday. You'll never get a message like that from us. Why not?

We're about providing real value to our friends, families, communities, clients, and referral sources. While "real value" can come in many different forms, one form it certainly does NOT come in is auto-generated email campaigns from the same providers that every other real estate agent uses.

We take care to custom-craft everything we send you, so that you actually stand to gain from receiving it. So far this year, some of the messages we've sent to our client community include...
- Help with staying accountable to your goals, plus a free book
- Energy-saving tips (beyond no-brainers like using CFL bulbs) and temporary tax credits
- Creative and tax-advantaged college savings ideas
- An offer to help calculate interest savings on any type of loan
- Guidance on equity-building home improvements
- Complimentary access to our custom real estate mobile app
- Invitations to three parties for which we picked up the tab
- An offer to place referrals with trusted real estate professionals worldwide
- Pre-negotiated seasonal discounts from local businesses

We could go on, but you get the point. So get onto our email and mailing lists if you're not already on them, and if you get the same canned email from multiple agents, there's always that Unsubscribe button at the bottom. Oh, and don't forget to change your clocks!

Are most homes STILL underwater?

Despite all the positive news we've been hearing about real estate and despite the definite rebound that has happened over the past three to four years, I still find myself sitting at a lot of kitchen tables delivering disappointing news to our clients about their home's value.

The Chicagoland real estate market overall hit bottom sometime in 2012 and bounced up after that - but the bounce has been in s-l-o-w m-o-t-i-o-n. While other markets across the country saw an enthusiastic rebound, with inventory levels dipping to as little as one or two months of housing supply and holding there for years, our market has simply returned to a sustainable, balanced state, without ever seeing supply levels significantly lower than normal. As such, our recovery has been a barbecue compared to other metro areas' sear - and by that I mean low and slow.

The Case-Shiller Home Price Index, the most reliable macro-level housing data available, gives us the sobering statistics:
- While many other metro areas have seen prices skyrocket to double-digit percentage gains OVER their pre-recession levels, single family home prices in Chicagoland are still about 14% UNDER their pre-recession peak. Only 19 of 163 ZIP codes tracked in Chicagoland are above their pre-recession peak, and most of them are on the near North side of the city.
- Zero ZIP codes in the South and Southwest suburbs have reached their pre-recession peak. None. That means if you bought a home around the peak of the market or during the downfall, anytime from approximately 2005 through 2010, your home value is likely equal to or less than what you paid unless you've made value-add improvements to the home.

Take a look at the graph below, and click on this tool courtesy of Crain's Chicago Business to look up the graph for your ZIP code:



I tend to focus on the positive in most of what I write and talk about with our clients, and the news isn't ALL bad. We do have sustainable inventory levels, modest price appreciation, rejuvenated new construction activity, and the benefit of mortgage interest rates that are still unbelievably low. I just know there are so many people in our market area who are out there thinking, "Why does it seem like all the good real estate news doesn't apply to me?" and I want to assure you that you're not alone, and it's not you, it's the market.

To Improve, or Not to Improve?

To improve, or not to improve? That is the question many home sellers ask themselves when they’re getting their home ready for the market, and rightfully so: The right improvements can pay off big-time, while many others are a total waste. How do you know which is which?

Of course there’s no easy answer, otherwise people wouldn’t have been puzzling over this question since cave men contemplated slapping a new coat of whale oil on the walls. However, I can propose a rule of thumb (with plenty of exceptions, as all good rules of thumb have) that should help guide your decisions.

Repairs pay off; upgrades don’t; updates might.

Making a repair is correcting part of the home that is deficient, defective, nonoperational, or hazardous. A broken window, missing flooring, a dented garage door, a dishwasher that doesn’t turn on, from something as small as burned out light bulbs to something a large as structural problems or a 3-layer roof. Repairs pay off for two reasons. First, these are items that virtually every buyer who sees the home will see the need to correct as soon as they buy the property. This means the demand for the repair is pretty much universal, and any time you can please your entire target market it’s going to pay off. Second, these are items that are likely to come up as repair requests resulting from the buyer’s home inspection. You might as well make these repairs before you list the home so you can maximize the sale price, rather than settle for a lower price because the property needs repairs and then risk having to fix them anyway.

Making an upgrade is replacing anything in the home that serves its intended purpose and doesn’t noticeably detract from the home’s appeal, simply because you think buyers will enjoy a higher level of finish. Upgrades generally do NOT pay off because of two primary reasons.

First, there is a pretty low likelihood that the new thing you put in happens to be the exact new thing the future buyer would have chosen – let’s call this “taste mismatching.” The buyer had no choice in the matter, so the upgrade is unlikely to be worth to them what it would be worth had they chosen it.

The second reason most improvements don’t pay off is that they generally cost more than they’re worth. Just like a car, the moment you take a home improvement item out of the store it converts to garage sale value. Think about it: Take home a $5,000 kitchen appliance package, leave all the pieces in the original packaging, even keep the receipt, then sell them on Craigslist. Are you getting $5,000 for them? Not a chance, not even close. The same goes for windows, flooring, and many other upgrades assuming the existing components were not in disrepair.

Updates are the middle ground where the money is made or lost. Making an update is refinishing or replacing something that serves its intended function but noticeably and negatively detracts from the home’s appeal, either visibly or functionally, generally due to its age. Updates might include replacing Formica counter tops or the early-90’s baby blue bath fixtures, swapping out brass for brushed nickel light fixtures and door hardware, painting old cabinets and replacing the hinges and pulls, and so on. Updates may or may not give you a positive return. Increase your chances of reaping a positive return by selecting projects which meet the following guidelines:

-         -  Low in cost. In general, the higher the cost, the lower likelihood it will pay back. That’s why cleaning and painting are so effective.

-          - Likely to be desired by most buyers in your area. Go neutral in taste, and aim to match the level of finish you see in competing properties. 

      - Improve curb appeal. Curb appeal projects rank consistently at the top of return on investment.

-          - Have a dramatic visual impact – the uglier the “before,” the better the “after” looks. A perfectly functioning furnace shouldn’t be replaced just because it’s old, unless it’s a converted oil furnace circa 1962 that takes up half of your basement. Then, it just might be worth it to chunk in $2,000 for a new one. Same goes for covering up outlandish paint colors or undoing taste-specific improvements.

-          - Able to be completed using labor and/or materials you can get for below-market prices. For instance, your brother is a carpenter, or you scored a bunch of nice light fixtures from a builder’s surplus and can install them yourself.

In fact, here's an easy-to-use flow chart that will resolve all your home improvement quandaries:

In the end, the best way to answer the question of whether to make improvements will depend greatly on your specific home, your resources, and what’s typical and in-demand for your market area. Your best bet, and an investment that is sure to pay off, is to engage your favorite real estate professional and a home stager for their professional opinion.

The Hairy, Scary, Winter Market (A Myth)

Every winter I do my best to combat the stale advice we’ve been hearing for decades – “wait until spring to sell your home.” This year, the evidence to the contrary is as compelling as ever.

Take a look at the chart below as an example, then read on...

It is undeniably true that the number of buyers in the winter market is only fraction of the number of buyers during the summer. However, that’s only half the story. What matters most is not simply how many buyers there are but how many buyers there are compared to the number of sellers. Judgments shouldn’t be based solely on demand but on the relationship between demand and supply.

Let’s say you’re a potential home seller in Anyville, IL, deciding when to sell. And let’s say that during any time of year, like clockwork, every month three people purchase homes in Anyville. In the summer, usually 10 homes are on the market at any given time. And in the winter, only four homes are on the market at a time. Yet month in and month out, regardless of how many homes are available, exactly three of them sell. So in summer, the three buyers choose from 10 homes; three homes sell, and seven don’t. In winter, three buyers choose from four homes; three homes sell, and only one doesn’t.

During which of those markets would YOU rather sell?

In reality, demand for real estate isn’t fixed throughout the year - it does decrease during winter. However, the SUPPLY of real estate decreases even more, which skews the market in favor of sellers. In fact, according to a National Association of Realtors survey done last winter, the single most common complaint from winter home buyers is that there is not enough inventory to choose from. What about the weather, wasn’t THAT a popular complaint? It barely made the list. Why? The NAR also found that 89% of home buyers use the Internet in their search, so when it’s 20 below and sleeting, you’d better believe buyers are looking at homes. They’re just doing it while curled up in front of the fireplace, rather than trudging through the snow.

And as for waiting until spring? Well, that might not be such a good idea. Demand increases gradually and steadily from around December through May or June. Supply, however, increases suddenly and drastically in March, FAR outpacing the increase in demand. The result is that March is actually the single worst month of the year to sell a home. In no other month is the supply-and-demand relationship skewed more in favor of buyers. 

So if you’re still thinking of “waiting until spring,” it would seem that what your momma told you about not “jumping off a bridge just because everyone else is doing it” might be the best advice you could hear.

Anyone, Anywhere

You know by now that we are your local real estate resource. What you might not know is that we can help just about anyone, anywhere with their real estate needs. Buyers of vacation homes in other states, those relocating into or out of our state, anyone buying or selling real estate across the country even if their move has nothing to do with our local area – we can help them all.

How? In addition to our proven Regional Partnership model which has empowered us to create satisfied clients from Vernon Hills to Manteno, we have also facilitated successful relationships in Indiana, Wisconsin, Arizona, Florida, Wyoming, and more. As a member of the largest real estate company in the country with over 100,000 agents nationwide, we will do the legwork to identify a top-quality agent wherever you or your loved ones need service.

So next time ANYONE you care about has real estate needs, whether near or far, please don’t allow them to fall into the hands of a weak or average professional. Contact us and we’ll make sure they get superior service. Remember our motto: Friends Don’t Let Friends Hire Bad Agents^SM. 

How to WIN in Multiple Offers

When more than one buyer submits an offer on the same listing at the same time, that is a multiple offer situation. Today's market is full of them - most buyers I work with encounter at least one, and many of my listings end up going that route as well. So how do you WIN in a multiple offer situation?

Well, if you're the seller and you've received multiple offers, congratulations: You've pretty much already won. It's still important to take care in negotiating the offers appropriately to get the best outcome, but the odds are in your favor.

As a buyer, multiple offer situations can be incredibly frustrating. Sometimes you know how many other offers are on the property. Sometimes you know whether they are cash or financed. In rare instances you might even know the price of one or more of the other offers. Usually, you know none of the above. All you know is that there are "multiple offers" and you need to submit your "highest and best" offer by a certain date and time. If you haven't been in that situation before, just imagine the house you want to live in is now hanging in the balance of what is essentially a blind auction in which the spectrum of truths runs from "you don't have a chance" to "the other offer(s) are junk and you're bidding the price up against yourself." Thoughts and emotions swirl, and making a decision can be difficult, especially when more than one person is involved.

Here's how to win. It has nothing directly to do with percentages, asking prices, comparable sales, or other objective concepts - at some point, all of that becomes too much noise, too many considerations, too many variables and assumptions. This may seem simple, and yet from being involved in countless transactions of this nature I can promise you it's the only way to come out of the situation feeling good about it: You have to choose a Magic Number. That's right, a Magic Number. That's the price (and terms, but mostly the price) at which...

- If you do get the property, you're happy and you don't feel you overpaid, AND
- If you don't get the property, you're ok letting the other offeror(s) have it.

If you do get it, you'll never know what the other offers were, and you never need to. If you don't get it, you'll eventually find out (when it closes) what the winning offer was, and if you were honest with yourself when you chose your Magic Number, you'll look at the closed price and feel satisfied because you know you wouldn't have paid that much.

The best way to make sure you've arrived at the real Magic Number? Fast forward a year, or five or 10 years, and look back on the decision to imagine how you'll feel about it in the future. Things that seem to matter a lot right now (for instance, $1,000) seem to pale in comparison to more important things in the long term, and those more important things are what buying a home is all about.

Tips for Selling Your Home Yourself

You might be a little surprised to see a real estate broker post a blog with that headline. It's not a trick, though: There is an article that ran in the Chicago Tribune on Sunday bearing that title, so of course I read it to see what the author had to say, and I can't say I really disagree with any of it.

In fact, by spelling out many of the costs (in time and money) of selling a home yourself, I think the author has inadvertently made a great case for why sellers SHOULD hire a real estate broker. As a FSBO (For Sale By Owner), the author explains that you'll need to:

- Price the home accurately by "visiting comparable homes, pulling public records on recent sales and doing research on the Internet."
- Hire a professional photographer.
- Design and print brochures that "look professional. Make sure all of your copy is clear, accurate, and lists all features of the house." She also references hiring a graphic artist to do some of this work.
- Post information about the house to Pinterest, Instagram, Facebook, and Twitter, including paid advertising on Facebook.
- List the house on major websites such as Zillow, Trulia, and Realtor.com.
- Set up "a simple website for about $500."
- Create and upload a video to YouTube, and/or hire a company to create a professional video tour, then link the video to social media and any other websites where you're advertising.

Take a second to go back over that list and add up the cost in time and the cost in money of researching, selecting, planning, designing, and advertising. Also consider whether you've done a professional-quality job at each of these tasks, and how quickly you've executed each of them. Let's assume that you did all of this quickly, accurately, and with ease, quality, and affordability. I know, it's a bold assumption, but just play along.

So all of the above is done, and now you're home free, right?? Wait, just a few more things:
- Since you've done a great job so far, your phone is now ringing for showings. In fact, it's a little obnoxious that you're a busy enough person and are now trying to manage, accommodate, and keep track of showings during weekdays, evenings, and weekends. A little piece of you wonders who all these people are that you're going to let into your home, whether any of them are thieves, creeps, psychopaths, or bonafide qualified buyers.
- Unless you want to eliminate 88% of potential buyers (that's the percentage of buyers who bought a home in 2013 who were represented by a real estate broker), you'll probably want to offer a commission to a buyer's agent, typically 2.5% of the sale price.
- Once you've received an offer, assuming it came from a buyer who is represented by an agent, you get to negotiate the terms of a 12-page contract against a professional negotiator who knows that contract inside and out. If the buyer DOESN'T have an agent, then you'll be deciding with the buyer on such terms as tax prorations, financing timelines, inspection contingencies, post-closing possession terms, closing cost credits, two pages of sale-of-home contingency terms, and maybe whether the FHA UMIP will be financed or not. All common knowledge, right?

Assuming the contract goes smoothly (don't you just love my assumptions!) - meaning the inspection goes fine, the buyer has no problem obtaining a mortgage in the specified time frame and no problem selling their home, and everybody's happy - you get to the closing table. You take a look at your net proceeds and start to add up the costs - what you paid the buyer's agent, all the advertising, marketing, photos, brochures, websites, etc. - and the time you put into researching every decision every step of the way, showing people the house, and learning about legal concepts you'll probably never use again. And you realize that for little to no extra money, you could have done absolutely ZERO of all of that, and instead just dumped all of it onto a competent pro with a single swipe of a pen.

If you're aware of all this and still believe you're best served by going it alone, then by all means, have at it. Otherwise, just uncap your pen and we'll take care of the rest.