A Weekly Commentary on articles in The Washington Post

The Washington Post

Real Estate Section, March 2, 2013

Postsez…good article on getting your house ready for sale but what caught my eye was a quick remark on marketing by agents with “Coming Soon” sign riders.

Richardsez…At my company, McEnearney Associates, Inc. we have strict policies on putting up those sign riders, or also known as teasers.

Let’s explore the three parties in this transaction, potential buyers, the listing agent, and the seller.

The Buyers

There are a lot of buyers who cruise neighborhoods, personally I think they are savvy buyers. Houses that have the “Coming Soon” rider aren’t in the MLS (in the DC Metro area, it is called MRIS), so if something is coming on the market in a neighborhood you like and you spot the sign, you have an advantage.

What to do with this info? The buyer has two choices; they can call their buyer agent or the listing agent. Typically, the buyer’s agent sees that the listing isn’t active and calls the listing agent for information. Now the listing agent may not even have a listing price agreed to yet with the seller, or some of the repairs and improvements may not be completed, or the sign company put the sign up early. The upshot is that buyer’s agent must wait until it goes active.

Now, what if a buyer isn’t represented (not suggested by this agent) and calls the listing agent directly? This scenario is filled with ethical problems for the listing agent. The ethical agent will advise the caller that he/she can’t disclose any information yet other than when it’s going active, and because it isn’t active in MRIS, he/she can’t allow any “private showings.” Now once the agent has activated the listing, he/she can immediately call back buyers and show the listing to those who called from the “coming soon” sign. But that probably leads to dual agency, and that has its own ethical challenges for the listing agent.

The Listing Agent

When I was 20 and got my license in Kentucky (many years ago), the only party represented in the transaction was the seller. Even the agent who had the buyers and wrote the contract was representing the seller, known as a sub-agent. Some politician got a good idea and said buyers should have representation, so as an agent, you could represent both buyer and seller, or just one side, you just had to disclose your relationship. Last July, it got a bit more complicated in Virginia and now dual agency means you can’t really represent anybody in the transaction, you’re just more of a facilitator and you still have to disclose your relationships with the buyer and seller. (That law is worthy of its own discussion at a future date.)

So what’s in it for the listing agent? If he/she is ethical and following the law, you can’t reveal any information (price, etc.), allow a private showing or market the house for sale. Now some agents want to get both sides of the transaction and have a quick sale. There isn’t much advantage for the seller here, and the primary job of the listing agent is to represent the seller’s best interests.

I’m not saying that an agent shouldn’t ever use the “Coming Soon” rider. One, many sellers want to create a buzz about their house and instruct us to put one up believing this is how to do it, and surely, it can develop initial interest if done on a timely basis. One strategic situation may be a case where we want to launch the house on Thursday so we can have an open house on Sunday and get that information populated to the websites so people are aware of the listing. So on Tuesday or Wednesday, the sign goes up but it isn’t on the market yet, in that case, we must put up the “Coming Soon” rider because it isn’t active and we must properly display its status.

There is a listing in my neighborhood, it is listed with one of those limited service agency listings, and the sign went up in October 2012 with a “Coming Soon” rider on it. As of March, it still isn’t active and the rider is still up there, whom is that helping?

The Seller

 Buyers want the minimum price for a house, and sellers want the maximum price. If I represent the seller as the listing agent, I want that seller to get the best price the market, not one buyer, will offer. It’s called market dynamics and that can’t happen with just one buyer. Everybody can agree that no seller wants hoards of people marching through their house day after day. Sellers would prefer that it be on the market for no more than a day, and who can blame them! Nobody wants to keep the house spotless for weeks at a time and always having to leave when buyers show up; and the rejection—who wants it?

Yet, the best course of action is for the seller’s house to be exposed to the entire market and that dynamic will create the best offer for the seller. It may be only one offer that comes 45 days after the initial listing, or there could be a bidding war break out on the day of the open house. Regardless, when an offer is presented after it has been fully made available to all potential buyers, this is the best check that the seller got market value, or the most likely sales price for their home.

It still possible that the savvy buyer was the one who purchased the home and the seller received the maximum price that the market would pay, and all agents in the transaction performed their ethical duties while receiving a commission for their efforts. That’s a winning formula for everybody involved.

How to find a good real estate agent.

Washington Post, March 2, 2013

Link to How To Find a Good Agent

Housing Counsel, by Benny L. Kass

The Washington Post, Saturday, February 16, 2013

Postsez… The IRS Revenue Code, Section 1031 is a rule covering investment property you currently own and would like to swap and defer taxes that would have to typically be paid upon sale of an investment property. This rule is also known as a Starker Exchange.

Ø  Richardsez…This long-time contributor to the Post and local attorney, provides a good history and basis for Section 1031. As with many names on IRS rulings, this one comes from a private citizen, T.J. Starker who did an exchange and cited Section 1031 as his reason for not paying capital gains taxes. IRS said he waited too long to use that rule, however, the Appeals Court over turned the IRS and agreed with Starker. So the IRS implemented some rules and this article does a good job explaining the details.

Postsez…The IRS just issued proposed regulations on the new Medicare surtax, which one sentence says…”To the extent that gain from a like-kind exchange is not recognized for income tax purposes under Section 1031, it is not recognized for purpose of determining net investment income under Section 1211.”

Ø  Richardsez…What??

Postsez…In other words, if you do a 1031 exchange, you will NOT have to pay the 3.8 percent Medicare surtax. And while the regulations aren’t final, you have the right to rely on that language.

Ø  Richardsez…The language of Section 1031 talks about like-kind exchanges. Just because you have a townhouse, doesn’t mean you couldn’t exchange if for a commercial building or some other investment property. What you can’t do is sell your Parkfairfax condo you have owned since you got married and have rented it for nearly 20 years and exchange if for a place in Rehoboth Beach, that you would intend to use as a rental and second home.

Postsez…There are time restrictions on this exchange. You have to note in your listing to buyers that this is part of an 1031 exchange and once you sell, you have 45 days from the date you sell the relinquished property to identify the replacement property or properties. Then, within 180 days from the date of sale, you must take title to the replacement property.

Ø  Richardsez…The other qualifier to make all of this work is that you must not ever hold the proceeds from you investment property that you sold with the intention of exchanging. In order to that I have some advice.

·         Get with an agent who understands the process. You’ll want to ensure that your listing to buyers is correctly disclosed and an agent can assist you in quickly finding another property—45 days isn’t a lot of time.

·         Next, there are specialists who handle these transactions. I can provide a good experienced real estate attorney for this and there is a company in Virginia that only handles 1031 exchanges. Having these professionals in the loop prior to making this exchange will help in this complicated transaction.

If you decide to do an exchange and you need more information, just contact me at rmcguire@mcenearney.com.

The Buzz is my weekly review on either real estate happenings in Alexandria or a review of an article (maybe two) in the Washington Post, which will most often be found in the Saturday real estate section. (Of course I find this part of the paper very interesting and informative) Sometimes I agree and sometimes I disagree. I want my readers to be aware of vital information whether they are buying or selling. I hope that you’ll find this information useful and come back from time to time to see updates. I’ll couch my opinions as “Richardsez…” a (mis)use of the English language that would not impress my seventh grade English teacher, Mrs. Kelly.

“Seeing Through a Buyer’s Eyes”

The Washington Post, Real Estate, Saturday, February 9, 2013

Postsez…The spring market is coming and a smart seller will prepare their home to visually attract buyers for both the interior and exterior. One way offered to enhance the interior is through the use of a professional stager.

Ø  Richardsez… If it’s empty, will buyers’ imaginations fill in the blanks and visualize how to personalize it? I find that buyers don’t have a lot of perception on how their furniture will fit and how a room that is less than ideal in size, shape, or utility, will work for them. I find that decorating the living room, den, and the master bedroom with some nice touches in the kitchen and bathrooms make an inviting listing and provide enough detail for buyers to compare their furniture to the staged items and better recognize possibilities that work for them.

Postsez…Five suggestions to prepare your home for the spring market.

1.       Gather paperwork and do the math. Regarding repairs and NOT doing them, the article suggests getting estimates for the work [for the purpose of providing to buyers] or providing photos or illustrations of how it would look.

Ø  Richardsez…If possible, DO the work. Buyers want a turnkey property and they are willing to pay for it. Buyers constantly overprice the cost of repairs and improvements, by a factor of at least two times, and often more. Buyers don’t want to take the risk that it may cost more and they don’t have ready resources (e.g., contractors) that they can rely on to do the work. In addition to the perceived costs, they deduct a burden tax from their offer for having to take on the work.

2.       De-clutter. The article noted that buyers want to see themselves in the house and over personalization reminds them it isn’t their home, but rather someone else’s.

Ø  Richardsez…There are two types of clutter, possessions and personal items. Both need attention to by the seller. The house needs to appear that it has space for storage and furniture. If every closet is full and rooms are overstuffed with furniture, get a temporary storage locker (not a POD in your driveway) and keep it there until you move. Regarding personal items like walls full of family memories, try to minimize them (you can put them up again after you move to your new home). And sometimes de-cluttering means painting over the holes and scars of years of living in the home. Yes, you need to paint those walls.

3.       Make repairs. Quick and inexpensive updates such as some new appliances, bathroom vanities, grouting, painting, and increased lighting.

Ø  Richardsez…I agree. While you might not get back dollar for dollar, you will get some return on your investment. Unless your house is paid for, most sellers don’t consider the cost of carrying a house. Holding on to the house for a couple of extra months could be equal to what you might have spent on repairs and improvements. Also, there is plenty of evidence that days on market are not a seller’s friend. A house on the market longer than 60 days will most often sell for much less than its original listing price. So you take a triple whammy: Buyers knock you on price for the repairs not done, you pay additional mortgage payments, taxes and insurance, and you’ll receive less for your house.

4.       Prepare for rain. Check gutters, downspouts, sump pumps and your roof.

Ø  Richardsez…Nobody likes a wet basement or even a smelly one. Most wet basements come from lack of maintenance of the grading around the house. Extend gutters away from the house, a simple but effective way to keep a dryer basement. Get a battery back-up for your sump pump. Think about it. We lose our electricity at a clap of thunder. With heavy rains, you’ll need that sump pump when the electricity goes out!

5.       Landscape. Very essential because buyers often make up their minds about a house before they go into it.

Ø  Richardsez…You need to get them at “hello.” Spend a little on clean up, mulch, and add some color. Don’t neglect your yard or the house’s exterior. You might not notice some of the aging of your home, but buyers will notice a tired and neglected exterior. You don’t want them to say “goodbye” as they do the weekend drive by.

Postsez… Here is a good check list for sellers to review before listing:

ü  Research and interview agents

ü  Hire a stager and other professionals as needed

ü  Pressure wash sidewalks and decks

ü  Clean gutters

ü  Remove Weeds

ü  Clear cobwebs, leaves, etc.

ü  Re-grout

ü  Paint

ü  Organize

ü  Clean carpets

ü  Ask a friend to give an honest assessment of smells, especially if you have pets or a basement.

Ø  Richardsez…check back next week!

New listing at 2920 Argyle Drive

Open house this Sunday, June 26 from 1 pm to 4 pm. Stop by and take a look. See the virtual tour on my website: RichardMcGuire.Net.

NAR Brief on Tax Credit as of 11-09

BREAKING NEWS!


The great news is that the First-time Buyer Credit has been extended to April 30, 2010. Also, the closing doesn't have to happen by that date, rather there must be a ratified contract by 4-30-10 and that it closes on or before July 1, 2010. All other conditions still apply on income limits and eligibility. (see previous blog)

NEW! One expansion of the legislation we didn't plan on now includes current home owners who may be eligible for a tax credit of up to $6,500 or $3,250 if married and filing separately. The buyers must have been owners of a principal residence for 5 consecutive years of the previous 8 years.

Income limits for existing home owners are higher than for first-time buyers, with a limit of $225,000 married, and $125,000 single. The cost of the new house being purchased, however, can't exceed $800,000, and you'll have to document your purchase with your tax return. The same condition applies on timing, there must be a ratified contract by 4-30-10 and that it closes on or before July 1, 2010.

Note: Don't wait until the end of June to close, you could be out of luck finding a title company or real estate lawyer who will have an opening the end of June.

Revised legislation of the American Recovery and Reinvestment Act regarding Purchases on or after January 1, 2009

Amount of credit: Lesser of 10 percent of cost of home or maximum of $8,000

Eligible Property: Any single-family residence (including condos, townhouses) that will be used as a principal residence.

Refundable: Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.

Income Limit: Yes. Full amount of credit available for individuals with adjusted gross income of no more that $75,000 ($150,000 on a joint return.) Phases out above those caps ($95,000 and $170,000).

First-time Homebuyers Only: Yes. Purchaser (and purchaser's spouse) may not have owned a principal residence in 3 years previous to purchase.

Revenue Bond Financing: Purchasers who utilize revenue bond financing can use credit. Recapture: If home sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination: December 1, 2009

Effective Date: All revisions are effective as of January 1, 2009.

Richard's Ramblings

Home prices in NOVA nearing bottom, DC has farther to fall.
By Thomas A. Lawler, edited from WSJ 2-13-09

The author, founder of a consulting firm, says, “…The stats suggest that home prices in NOVA, which have fallen considerably after peaking in late 2005/early 2006, may be nearing a bottom.” He noted that “residential home sales in January were up by almost 56% from last January, while active listings were down by over 25%....” He went on to say that, “The sales gain (mainly from “distressed sales) was led by the battered Prince William County area, where sales were up by almost 111%, while the median sales price was off by 41% from last January.

Tax valuations hit this week in the City of Alexandria, and the Beverley Hills list serve was dominated by this news. Some, no doubt will challenage the assessment as still being too high. Maybe. Base on my own research, prices for single family homes in the 22305 zip code for parts of North Ridge showed only a 5% decline in 2008. This once again shows that our neighborhood is a great value and sought after for its closeness to DC and other amenities that it offers.