Thursday, January 12, 2006

Top Mistakes of Home Buyers and Sellers in 2005

This is a good article I found in Broker Agent News

By Mark Nash

The 2005 residential real estate market was filled with anticipation of the over- hyped real estate bubble. Though we'll only see a correction, home buyers and sellers made some mistakes that those looking to buy or sell in 2006 can put to good use in their transactions.


Bought properties to flip at top-of-market prices. Thinking the bubble headlines were wrong or didn't apply to them, newbie real estate investors wanted to become week-end millionaires. What they didn't know is they were buying the experienced investors portfolios as they exited markets at the top.

Utilized Interest-Only Mortgages. Many home-hungry buyers discovered the only way you can pay top-of-market prices is to get an interest-only mortgage. With declining prices and no monthly principal payments, these homebuyers could fuel a foreclosure market in 2006. Fixed-rate mortgages will become the majority in 2006 as mortgage underwriters and educated consumers are reunited.

Overlooked Resale Characteristics. New construction was the rage in 2005, everyone wanted to select finishes, floor coverings and kitchen cabinets. 2005 buyers should beware when this years homebuyers become sellers, buyers could bypass their resale that was new in 2005 for the chance to design their own new home. Look to future before signing on the line.

Skipped Performing a Home Inspection. Before some markets shifted away from sellers markets, many homebuyers waived their right to a property inspection. Never, skip or waive the right to a inspection, the benefits far out weigh the costs and could save you numerous headaches and expenses later. Hire a professional, not Uncle Bert.

Misinterpreted developers give-away's. Two years free condominium assessments, stainless appliances and plasma tv's were thrown in to induce buyers to write contracts to purchase. What many buyers thought were a freebie were actually a signal that markets were softening and that projects were slow to sell from increased competition and a lack of buyers. Incentives are a band-aid for a languishing development.

Were represented by the same agent representing the sellers. Thinking they might get a better deal or out of ignorance used the listing agent to represent them as well. Most states require written acceptance of this situation known as dual-agency by both parties under agent license laws. All buyers should be represented by an agent who has a fiduciary responsibility to them. Hire an Exclusive Buyers Agent.

Didn't Read Homeowners Association Documents. Getting rid of Fido because you didn't know you were moving into a no-dog building is an example why every buyer should request and read home owner association declarations, rules and regulations, association meeting minutes and budgets. Ask if there are any special assessments (typically for capital improvements; new roofs, windows, elevators) or planned ones. Special assessments can run into the thousands.

Neglected to request rates of state, county or local transfer taxes paid by buyers at closing. Some buyers learn too late that they might need large amounts of extra money to pay transfer taxes in the state, county and city where they are purchasing property. Transfer taxes which typically can't be financed can kill a transaction. Inquire when you start your search how much transfer taxes are and who pays them.


Over-priced home. Thinking back to bragging sellers at the water cooler or at the neighborhood cocktail party as little as a year ago, home sellers in 2005 over-priced properties in record numbers. After chewing up market time, the realization set in that it wasn't the same market as '02.'03 or 2004. Realistic pricing based on sold comparable's in the last six months illustrates to buyers that you understand today's market.

No Internet property marketing. According to The National Association of Realtors® over 70% of all home buyers start their search on the Internet before contacting a real estate agent. Require any agent you list your home with to post a virtual (360 digital) tour and a minimum of eight indoor and outdoor photos on the Internet. CD's of your home are a great take-away for open houses.

Stop showings to early after contract. With a shift towards buyers for the first time in years, buyers remorse was on the upside in 2005. Many sellers lost valuable market time when taking their home off market too early after signing a purchase contract. Continue to show your home until you feel very comfortable that your buyers intend to go to the closing table with you.

Refused to pay buyers closing costs. For the first time in many years, buyers based on their strength in the market, asked for and received give-backs from sellers. Closing costs and points on mortgages were the most popular. Decide before offers come in, what your strategy is for dealing with give-back requests. In 2006 expect owner-financing to be the next buyer perk.

Exclusion confusion. As prices dropped, sellers began to strip fixtures and amenities in contract negotiations. Forget "if the price is right" and take down and replace Grandma's chandelier and remove the mid-century refrigerator for sodas before you place your home on the market . Some simple ratios of home list price versus chandelier cost will convince you to not get distracted by personal property or must-keep fixtures.

Knowing your market and competition. Buyers in 2005 were very savvy with market times and available inventory. Home sellers who were out-of-touch failed to spend the time to visit competing properties at public open houses, study the competitions marketing and "listening" to the market. No or few showings, no second showings or purchase offers and unfavorable feedback indicate market issues with your home. Don't be the obstacle to selling your home.

Paid document fees on top of full-service commissions. American business is in love with extra fees that they charge if you don't ask to have them waived. In 2005 documentation fees became standard in listing agreements. No matter what your told, they are just another revenue source for brokerages. It's excessive for brokerages to ask for another $300.00 on top of 5-7 percent commissions from home sellers. Either ask to have them waived or have the listing agent pay them.

Most Overvalued Housing Markets

Hare is some interesting data from….

Link to original article

Most Overvalued Housing Markets
Latest analysis of 299 markets: See how your hometown ranks.
By Les Christie, staff writer
January 3, 2006: 2:33 AM EST

NEW YORK ( - Sixty-five of the nation’s 299 biggest real estate markets are severely overpriced and subject to possible price corrections.

That’s according to the latest (third quarter) Housing Market Analysis conducted by National City Corp, a financial holding company, in conjunction with Global Insight, a financial information provider.

The report named Naples, Florida as the most overvalued of all housing markets in the United States. A single-family, median-priced home there sells for $329,970, 84 percent more than what it should cost — $180,956 — according to the analysis.
National City arrives at its estimates of what the typical house in these markets should cost by examining the town’s population densities, local interest rates, and income levels. It also factors in historical premiums and discounts for each area.

Other markets deemed wildly overpriced included Merced, California (by 77 percent), Salinas, California (75 percent), and Port St. Lucie, Florida (72 percent).

Undervalued markets were College Station (-23 percent), El Paso (-18 percent), and Killeen (-16 percent), all in Texas. That state dominated the discounted markets list with nine of the 10 most undervalued housing markets. Montgomery, Alabama was No. 8 among the undervalued markets.

The data did produce some evidence of prices moderating, according to National City’s chief economist, Richard DeKaser.

In Massachusetts, for example, one of the hottest of housing markets over the past few years, each of the seven housing markets analyzed was still overvalued. Prices, however, had fallen in all seven. That would indicate the state is trending back toward normal valuations.

The same could not be said of Florida. The Sunshine State had 15 different markets on the list of extremely overpriced metro areas and all 15 had grown more overpriced during the quarter.

Amidst all these hot and cold markets there were a few judged, like Goldilock’s porridge, “just right.” They included Albuquerque New Mexico, Dayton Ohio, and Omaha Nebraska. In all those towns actually selling prices closely tracked the expected values.

Areas over-valued
Naples, FL +84%
Merced, CA +77%
Salinas, CA +75%
Port St. Lucie, FL +72%
Stockton, CA +72%
Madera, CA +70%
Santa Barbara, CA +70%
Modesto, CA +67%
Napa, CA +65%
Riverside, CA +65%
Medford, OR +64%
Sacramento, CA +61%
Atlantic City, NJ +59%
Chico, CA +59%
Fresno, CA +58%
West Palm Beach, FL +57%
Redding, CA +56%
Santa Rosa, CA +56%
Bend, OR +56%
Sarasota, FL +56%
Miami, FL +55%
Oxnard, CA +55%
Vero Beach, FL +54%
Los Angeles, CA +54%
Fort Lauderdale, FL +53%
Vallejo, CA +53%
San Luis Obispo, CA +53%
Cape Coral, FL +52%
Bakersfield, CA +51%
Palm Bay, FL +49%
Barnstable Town, MA +48%
Oakland, CA +47%
Ocean City, NJ +47%
Prescott, AZ +46%
Panama City, FL +46%
San Diego, CA +46%
Visalia, CA +45%
San Jose, CA +44%
Deltona, FL +44%
Santa Cruz, CA +44%
Santa Ana, CA +44%
Bellingham, WA +43%
Fort Walton Beach, FL +43%
Nassau-Suffolk, NY +43%
Poughkeepsie, NY +39%
Reno, NV +38%
Las Vegas, NV +38%
Kingston, NY +38%
Washington, DC-VA-MD-WV +37%
Bethesda, MD +36%
Providence, RI-MA +35%
San Francisco, CA +35%
St. George, UT +35%
Ocala, FL +35%
Phoenix, AZ +35%
Portland, OR-WA +35%
Eugene, OR +34%
Tampa, FL +34%
Pensacola, FL +33%
Orlando, FL +33%
Grand Junction, CO +31%
Honolulu, HI +31%
Edison, NJ +31%
Duluth, MN-WI +31%
Jacksonville, FL +31%
Virginia Beach, VA-NC +29%
Worcester, MA +29%
Portland, ME +29%
Flagstaff, AZ +29%
Essex County, MA +28%
Baltimore, MD +28%
Charlottesville, VA +28%
Charleston, WV +28%
Tucson, AZ +27%
Newark, NJ-PA +27%
New York, NY-NJ +27%
Monroe, MI +26%
Bay City, MI +26%
Flint, MI +26%
Olympia, WA +26%
Wilmington, NC +25%
Tacoma, WA +25%
Salem, OR +25%
Minneapolis, MN-WI +24%
Asheville, NC +24%
Seattle, WA +24%
Mount Vernon, WA +24%
Jackson, MI +24%
Longview, WA +24%
Lakeland, FL +23%
Brunswick, GA +23%
Gainesville, FL +23%
Manchester, NH +23%
Bremerton, WA +22%
Tallahassee, FL +22%
Holland, MI +22%
Niles, MI +21%
Savannah, GA +21%
Santa Fe, NM +21%
Chicago, IL +21%
Eau Claire, WI +20%
Vineland, NJ +20%
Trenton, NJ +20%
Rockingham, NH +20%
Anchorage, AK +20%
Casper, WY +20%
Racine, WI +20%
Battle Creek, MI +20%
Springfield, MA +19%
Detroit, MI +19%
Greeley, CO +19%
Burlington, VT +18%
Wilmington, DE-MD-NJ +18%
Camden, NJ +18%
Boston, MA +18%
Lansing, MI +18%
Boulder, CO +18%
Michigan City, IN +17%
Ann Arbor, MI +17%
York, PA +17%
Milwaukee, WI +16%
Madison, WI +16%
Philadelphia, PA +15%
Spokane, WA +15%
Warren, MI +15%
Norwich, CT +15%
Richmond, VA +15%
Corvallis, OR +14%
Grand Rapids, MI +14%
Muskegon, MI +14%
Lake-Kenosha, IL-WI +14%
Albany, NY +13%
Allentown, PA-NJ +13%
Saginaw, MI +13%
Harrisonburg, VA +13%
La Crosse, WI-MN +13%
Boise City, ID +13%
Pittsfield, MA +13%
Wenatchee, WA +13%
Rockford, IL +13%
Farmington, NM +13%
Cambridge, MA +12%
New Orleans, LA +12%
Janesville, WI +11%
New Haven, CT +11%
Gainesville, GA +11%
Kalamazoo, MI +11%
Roanoke, VA +11%
Fayetteville, AR-MO +11%
Canton, OH +11%
Lancaster, PA +10%
Colorado Springs, CO +10%
Denver, CO +10%
Peoria, IL +10%
Reading, PA +10%
Fort Collins, CO +10%
Waterloo, IA +9%
Gary, IN +9%
St. Louis, MO-IL +9%
Champaign, IL +9%
Yakima, WA +9%
Dalton, GA +9%
Sheboygan, WI +9%
Toledo, OH +9%
Green Bay, WI +8%
Springfield, OH +8%
Youngstown, OH-PA +8%
Lynchburg, VA +8%
Davenport, IA-IL +7%
St. Joseph, MO-KS +7%
Mansfield, OH +7%
Hickory, NC +6%
Fond du Lac, WI +6%
Cleveland, OH +6%
Bridgeport, CT +6%
Billings, MT +5%
Chattanooga, TN-GA +5%
Idaho Falls, ID +5%
Cheyenne, WY +5%
Pueblo, CO +5%
Dubuque, IA +4%
Topeka, KS +4%
Hartford, CT +4%
Kansas City, MO-KS +4%
Akron, OH +4%
Wausau, WI +4%
Salt Lake City, UT +4%
Scranton, PA +4%
Lexington, KY +4%
Bismarck, ND +4%
Athens, GA +3%
Fargo, ND-MN +3%
Sandusky, OH +3%
Knoxville, TN +3%
Bloomington, IN +3%
Anderson, IN +3%
Lafayette, LA +3%
Louisville, KY-IN +3%
Durham, NC +2%
Atlanta, GA +2%

Areas under-valued Erie, PA +2%
Columbia, MO +2%
Columbus, OH +2%
Harrisburg, PA +2%
Kennewick, WA +2%
Provo, UT +2%
Lima, OH +1%
Utica, NY +1%
Bowling Green, KY +1%
Hattiesburg, MS +1%
Decatur, IL +1%
Columbia, SC +1%
Cincinnati, OH-KY-IN +1%
Rochester, MN 0%
Greenville, SC 0%
Oshkosh, WI 0%
Lawrence, KS 0%
Las Cruces, NM 0%
Omaha, NE-IA 0%
Appleton, WI 0%
Albuquerque, NM 0%
Burlington, NC 0%
Ogden, UT 0%
Baton Rouge, LA 0%
Dayton, OH 0%
Amarillo, TX 0%
Alexandria, LA 0%
Kokomo, IN -1%
Nashville, TN -1%
Winston-Salem, NC -1%
Spartanburg, SC -1%
Florence, SC -1%
Birmingham, AL -1%
Sherman, TX -1%
Jackson, MS -1%
Houma, LA -1%
Pittsburgh, PA -1%
Binghamton, NY -1%
Monroe, LA -2%
Columbus, GA-AL -2%
Sioux Falls, SD -2%
Des Moines, IA -2%
Columbus, IN -2%
Lincoln, NE -2%
Mobile, AL -2%
Greensboro, NC -2%
Albany, GA -2%
Augusta, GA-SC -2%
Raleigh, NC -3%
Owensboro, KY -3%
Evansville, IN-KY -3%
Bloomington, IL -3%
Shreveport, LA -3%
Cedar Rapids, IA -3%
Greenville, NC -4%
Syracuse, NY -4%
South Bend, IN-MI -4%
Indianapolis, IN -5%
Springfield, IL -5%
Rocky Mount, NC -5%
Oklahoma City, OK -5%
Jefferson City, MO -5%
Buffalo, NY -5%
Fort Wayne, IN -5%
Charlotte, NC-SC -6%
Warner Robins, GA -6%
Iowa City, IA -6%
Decatur, AL -6%
Wichita, KS -6%
Little Rock, AR -6%
Macon, GA -6%
Springfield, MO -6%
Elkhart, IN -6%
Waco, TX -7%
Charleston, SC -7%
Midland, TX -7%
Austin, TX -7%
Lubbock, TX -7%
Tyler, TX -7%
Corpus Christi, TX -8%
Fort Smith, AR-OK -8%
Tulsa, OK -9%
Memphis, TN-MS-AR -9%
Rochester, NY -9%
San Angelo, TX -10%
Lafayette, IN -10%
Abilene, TX -11%
San Antonio, TX -11%
Huntsville, AL -11%
Longview, TX -11%
Odessa, TX -12%
Montgomery, AL -12%
Houston, TX -14%
Fort Worth, TX -15%
Beaumont, TX -15%
Dallas, TX -16%
Killeen, TX -16%
El Paso, TX -18%
College Station, TX -23%