Rent or own on Bainbridge Island? The $640,000 real estate question~

A fascinating New York Times article yesterday called up the age old question: is it better to rent or buy? Typically the people who ask that are first-time home buyers, but it may be that folks sitting on big mortgages are starting to ask that question, too.

Conventional real estate wisdom was always that it would take two to five years to break even if you bought and had to sell again. Until the 1970's, people bought for a number of reasons not tied to economics and with the hope of someday owning their home free and clear.

But then we started to see steady and sometimes huge appreciation, and for many people, their home's growing equity exceeded their income. Putting it another way, a lot of people's disposable "income" has been coming from spending the wealth their homes were generating. Now, not.

Hence the question, is it better to own or should we give renting another look? The Time's article mentions cities and regions that have had a huge real estate drop after a huge bubble--some as much as 50% decrease from the top in 2007. Where that has happened, or where housing prices have been relatively stable, and using a clever formula,  it shows that now is the time to buy, buy buy.

Seattle is listed as one of the areas where it doesn’t make sense to own. I applied the formula to my own home to get a sense of how it would work, and clearly someone would do better financially to rent it than to buy it. On the other hand, my son in Houston is in contract to buy a home there. The formula says he’s really smart to buy. (Divide the price of the home by the annual cost of rent and use the rule of 20. If the number you get is below 20, it may be better to buy.)

Why does Bainbridge Island score poorly in this equation? I think two factors are at work here: our rents have stayed low for years—seems like they've always been about a buck a square foot. That could change if an increased demand by renters drives up rents. Time will tell. Furthermore, we have a very stable population with values that would lead to home ownership, and those values are intangibles, not measurable in a formula, but important nonetheless.

But, consider someone in a 3,000 sqft home paying a $5,000 a month on their mortgage, taxes, insurance, repairs, upkeep, etc. Assume they've watched their equity disappear as the market value has dropped. Unfortunately, this isn't a rare situation on our Island. In this circumstance, it's probably tempting for a homeowner to want to sell, get out from under the debt, rent a similar home for $3,000 and pocket $2,000 a month in the process.

The Broker/Owner of my office, Jim Laws had this to say on the subject:

"There is the whole physiological side of renting vs. owning. For some (many?), having a base of their own is important. A home represents different things to different people, and for some it is more than simple dollars and cents or potential returns. Indeed, I have always felt the potential return was a side benefit to home ownership, not the only reason to own. I would venture to say that even if renting was a better short term financial decision, most would prefer to own their own home. It is a crazy world and having a place you feel is yours (even though the bank is your ever-present partner) brings a feeling that transcends purely financial considerations."

I'd love to hear others' thoughts on this subject.

Bainbridge Island condominium market showing signs of life, too!~

I had a friend and former client ask me how the condominium market looks on Bainbridge these days. There's lots of good news there. Most significantly, we currently have only 65 condos currently listed--that's down from 117 listed last summer. They range from $130,000 to $1.350 million on Shannon Drive. (There's also a boat slip listed for $76,000 which counts in the numbers as a condo.)
 
Even better news, as of this morning, we have eleven condos in contract with buyers. That's about double what we've been seeing in the last couple of years, and is welcome, to say the least. It's not surprising that the list prices are dropping in order to find the price buyers will respond to. I like to track original list prices and compare them to where the properties are listed when they get an offer. Condos currently in a Pending Status started with an average price of $516,000, but their average list price when the offers came in is $408,000. Days on market is consistently several months. For a condominium to sell quickly, it will have to be priced realistically at the time of listing, perhaps priced a bit below market, be in great condition, and listed in top showing condition.
 
We've sold 58 condos in the last year. With 65 currently listed, that means we have over a twelve-month supply, which is still solidly a Buyer's Market. The condo properties that have sold are averaging a selling price around 95% of the last list price, which is consistent with the residential/house market. It's unrealistic in this market to expect a full-price offer.
 
I think the best news for condominium owners who are thinking of selling is that residential properties--houses--are also selling now. Since most condominiums on Bainbridge Islandare sell to folks downsizing from houses with yards or large lots, it's great news that those properties are selling. We're starting to see a pool of ready buyers who have equity, good credit, but who know the market values and who will negotiate hard.

To stage or not to stage--the answer is yes for real estate listings to sell~

I just looked at the new listing for my young friend's home in West Seattle and saw immediately the value of good staging. It had been listed for a few months with no results. I was happy to refer her to a great Windermere agent who has done a beautiful job getting her place ready to be seen, loved and sold.

Since I hadn't been to the house, I had to compare the before and after photos. The first agent simply pulled out his camera and shot the rooms the way they were, clean, tidy and lived in. When I looked at his photos, my eye was distracted, the rooms looked unbalanced and unappealing. What a difference with the new listing. The Windermere agent staged the house with the furnishings already there, moving things around and adding color. All of a sudden I can see how warm and beautiful the rooms are with designer paint and great woodwork (amazing--those things were there before but I hadn't noticed.) The kitchen looks sparkling and inviting with tall pots of forsythia and artfully placed accessories. The master bedroom looks serene and stylish, with a bedspread I hadn't even noticed in the "before" shots.

I suspect the staging didn't cost a thing, but a good agent knows just what to put away and what to place on a shelf or counter to make a house "sing." Since close to 90% of buyers in the demographic likely to buy this home will see it first online, it's crucial that the pictures are beautiful, tell a story, and invite a visit! Seems like this is going to be a success story. I just heard from her agent that the broker's tour was a huge success and they had three showings yesterday.

PS~ The photo in this blog entry is not my friend's house, but from one of my listings after I had staged it to sell. I worked most of an afternoon rearranging their wonderful possessions, moving furniture, rehanging paintings, putting away toys and clutter and adding color to make the home's details pop. The living room seemed to double in size with some simple adjustments. We sold this one the first week.

Finding a good listing agent to sell your home~

I've been busy this week helping three families in three different states find a good agent to help them list, market and sell their homes. One of the services an agent can perform is to sift through all the agents out there and help make a referral to the best available, and I love doing it.

Each of these potential sellers were first-time home buyers, so this is their first time trying to sell a home, which they have quickly learned is a totally different from buying.

In the process of locating a good agent for them, I've written several emails answering their questions about what to look for in an agent they're hiring to sell their homes. I thought I'd share those tips here, because they are pertinent for any seller, however experienced they might be, especially in today's difficult market.

1. Most important, you need to feel a connection with your agent and trust s/he will communicate well and present your home well. Communication, trust and confidence. As in any close relationship (which is what you end up with with your listing agent,) those qualities need to be apparent right from the start--things rarely get better! Trust your instincts.

2. I think a clear marketing plan is the minimum. It doesn’t need to be elaborate, but this is the nuts and bolts: “When would be your ideal time to get an offer? Let’s aim for the month of April to capitalize on the rebate. Let’s spend the next week preparing your home inside and out. I can make a list of top professionals available –can I call any now? We’ll stage your home next because I like to have photos shot by x, newspaper ad copy to the city papers by y, listing complete in my office on z, ads out that weekend, the agent/broker’s open house on Thursday and the public open house on Sunday. Your listing will be carried in these five online web sites.”

That’s my spiel, or something like that. Some offices tour an agent’s listing prior to a full agent’s open. You just want to see a plan. When you can be confident that the agent has a clear plan, you can relax and take care of what's on your list to prepare for a great sale.

3. I like to look at an agent’s marketing materials, ad copy and photographs from prior listings to make sure they’re professional. The photos and copy online will be how 90% of your buyers see your home, and you want the best quality photos and sparkling, detailed and perfectly grammatical copy. Every listing will end up on the internet, and a listing with dark, cluttered photos and ungrammatical language is like trying to sell a dirty car on blocks.

I think staging is essential. Nobody lives in their house the way it needs to appear to sell well. Look at a few listings online and see which ones look inviting and which ones look cluttered--when do you see the house and when are you distracted by possessions? It takes skill and a gracious attitude to convince many Sellers that they have to start living in a home that's put together to sell, but an agent who skips this step isn't doing anyone any favors. Some agents have the abilities, training and tools to stage a house themselves, and some will refer it out. Either way, you need fresh eyes (and noses) to help you see your house as others see it.

An agent's web page—either corporate or individual--is important. You can ask how often listings sell within their own office and if the listing agent will also represent the seller, or how they handle that. I personally do NOT like it when the listing agent is a dual agent and also represents the buyer. I don’t think that can be done well. I will show my listings to as many buyers as possible, but I explain to them that I am representing the Seller, and that if they decide to write an offer, I would like to refer them to one of my colleagues so their interests are fully and separately represented. Then the Seller has a strong and uncompromised agent as well.

4.  I also would want to know if they recommend you have your house pre-inspected prior to listing and how they handle the contingencies in a Buyer’s offer. Pay attention to how well they negotiate on their own behalf. Are they able to deliver difficult information in a clear and positive way? Is this someone who comes with recommendations from satisfied clients, and what is their experience in both years of service, and in terms of being up-to-date on all the latest technology and real estate rules, regulations and laws?

5. Finally, how much positive energy can they bring to the effort? I often think my most important role--decidely true today--is to be a shock absorber for my clients. There's that car metaphor again. I don't withhold information, but I can absorb the emotional content of communication and make sure I have all the information needed to avoid creating worry or alarm. An experienced professional with a postive attitude can make for a smooth road and a successful trip. End of metaphors, I promise!  This is a long blog--thanks for sticking with me.

Have a great day! The sun is shining on Bainbridge Island, the flowering trees are in bloom and the daffodils are up. Time to sell some real estate!