know when to reduce the price

downtown st. paul
Downtown St. Paul

Even in a hot seller’s market homes can be overpriced. 66% of the homes that sold last year had at least one price reduction while they were on the market. On average 2017 home sellers got 99.6% of their asking price.

Most of the homes that were sold without a price reduction sold quickly but there were some exceptions like the home that was on the market for a year before it sold.

Properly pricing a house is more of an art than a science. Ultimately it is the buyer who sets the price.

Knowing when to reduce the price if the home is priced too high is priceless.

Staging can be done wrong

Almost everyone has heard of “staging”. The idea is to go through the home and make it look like a place that we might see in a magazine. The right amount of furniture is put in the right places to make the home look inviting and livable.

It isn’t about cramming the place full of furniture, lamps, books, and rugs. Staging is more about cleaning, decluttering and making needed repairs or upgrades. Most of the houses I sell have too much furniture and furniture needs to be removed not added.

Effective home staging for an occupied home can include removing pieces of furniture and family photos from the walls. Clearing horizontal surfaces and re-arranging shelves and artwork. There is no need to over think it. Moving a chair from one place to another isn’t going to cause a home to sell for more or less.

I am not convinced that a vacant house always needs to have furniture put in it to help it sell. I love the look of clean empty rooms. To me, there isn’t any room that is more pleasing than one that is empty. I don’t have any problem seeing the possibilities or imagining it with my own stuff in it.

If furniture is used to stage a vacant home it should be kept to a minimum. Limit the number of rugs and huge ottomans and artfully draped throws. Small furniture should be used in small rooms.

Home sellers who have a home professionally staged should also have it professionally photographed. Chances are anyone who wants to see the home will see it on the internet first.

If the house needs a little work and a good cleaning filling it with a stagers furniture isn’t going to help. Bad staging can actually hurt as rooms may look smaller with too much stuff in them and decorations can become distractions.

Entertaining TV far from reality

empty room
empty room

Last Saturday when I went to visit my parents there was this show on TV featuring a young couple who were selling their house and buying another. There was a lot of drama and the couple was doing it all wrong.

They were renovating their house so that it would sell for more and at the same time they were looking at homes that they would need to renovate to live in.

I have a couple of problems with that scenario. Homeowners need to know that renovations cost money and for major remodels the return on the dollar is less than 100%, in fact, 60% is a more realistic expectation.

The couple in the story on TV “had to have” a certain amount for the home they were selling so that they could buy another home. They planned on getting that amount by renovating their home. That would work if the renovations were free. Maybe they are free on TV but in real life they cost money.

As for buying a home and renovating it that usually only makes sense if the home needs work and can be purchased for an amount that is below the value of the home plus the cost of rehabbing it.

The buyers on the TV show were looking at expensive homes that did not need any work but that the couple would need to add onto and re-arrange so that they could have the perfect floor plan.

That means that by the time they paid for the house and the renovations they would have more money in the house than they could get out of it. The best way to get more money for a house is by making smaller improvements and repairs.

The smarter thing to find a house that is close to perfect and doesn’t need renovations and to get used to the idea that there is no such thing as the perfect house. It is more cost effective to buy the home with enough space rather than adding to a smaller home.

Being able to sell a home for as much or more than was paid for it gives homeowners more flexibility and more choices.

The real estate agent in the show is a wealthy man. I can understand why.

Reality isn’t like reality TV. Real home buyers and sellers will need to adjust their expectations if their ideas are coming from TV shows where actors pretend to buy and sell real estate.

Proposed tax bills and real estate

I am going to limit my commentary to the part of the Federal tax bill that directly impacts real estate. For St. Paul homeowners the sky is probably not falling. Yes, the mortgage tax deduction is being limited to interest on the first 750K

The majority of mortgages are less than 750K and here in St. Paul where the median home value is around 200K most will not be affected by the changes in the MID.

The first 10,000 paid property and state taxes will also be deductible for those who qualify. Property taxes in St. Paul are 1.33% of the assessed value of the property. State income tax rates range from 5 to 10%. Most middle-income households are going to be in the 7 to 8%  range. [see the best run states]

With the standard deductions being raised fewer will qualify. Currently, there are many homeowners who do not get any tax benefit from owning a home because they do not itemize and the reason they do not itemize is that the standard deduction is higher than the total of all possible deductions added together.

The incentives for incurring more mortgage debt will be gone for some. It is even possible that owning lake homes in Minnesota will become less popular and the values will decline.

There are some advantages in having less mortgage debt. Money can be invested in other things. Maybe some will start a business rather than owning a lake home and take advantage of business tax cuts.

Most homeowners I know love owning a home but I think new tax laws will impact the housing market. Taxation has intended and unintended consequences. I think it is important to keep it all in perspective.

Home showings rise as inventory falls

graph of home showings

Homes that are on the market are getting a lot of private showings. I see this with our own listings. An above average number of showings but the feedback from the buyer will state that the house is too small or not what the buyer is looking for.

Normally buyers do not ask to see homes that only sort of match their criteria, but these days they do because there just isn’t much on the market to look at. Sellers need to be aware that in addition to more showings they may also be getting more negative feedback.

Buyers are more willing to see houses for sale that are not quite what they are looking for because there are so few homes on the market. The data on the chart below is coming from “ShowingTime” which is the system local real estate professionals use for setting up private tours of homes that are on the market.

The number of showings per home is higher in St. Paul than the average for the Twin Cities. I am not exactly sure why that is because the shortage of homes is acute in both of the Twin Cities.

 

graph of home showings
Showings per home

Is your home for sale during the holidays?

I answer this question several times each holiday season. If my home is on the market should I decorate it for the holidays? My answer is always the same. That depends.

I don’t have a problem with holiday decorations but the same rules apply to them that apply to any kind of decorations in homes that are for sale. The decorations should not detract from the home or distract people who are viewing it. Less is generally more and it is all pretty subjective. We don’t have any data on if homes with Christmas trees sell for more of less than homes without.

Some people decorate every square inch of their home for the holidays and display their beanie babies, snow babies and Santa Bears too. Not a good idea when your home is on the market.

Skipping the holiday decorations all together is alright too. It is better to have no decorations than too many decorations. Don’t worry about offending anyone.

The home should be photographed without any holiday decorations if at all possible.

There you have it my typical “it depends on” non- answer type answer to the holiday decoration question. Happy Holidays, and yes every year homes are sold between Thanksgiving and the new year.

pink