People love to ask me, "How's the market?" and usually throw in a comment such as, "I've heard it's a total buyer's market". That was definitely the case in 2007 and most of 2008. But, sorry to burst your bubble, that's not necessarily the case anymore.
Just look at this example – this town house in Ashburn was priced correctly and sold around Thanksgiving of last year (a major holiday when real estate is "slow") for 98.6% of the list price (including seller closing cost assistance) within 19 days of being on the market. (And no, they didn't "give it away")
I don't blame you if you think I'm crazy. But I'm not pulling this out of my ___ so please keep reading…
"Buyer's", "Seller's" and "Balanced" Markets
There's a universally-accepted and used formula for determining whether it's a "buyer's", "seller's" or "balanced" market…
- more than 6 month's supply = buyer's market
- 5 to 6 month's supply = balanced market
- less than 5 month's supply = seller's market
The "month's supply" is determined by comparing the overall supply (active inventory) to the demand (homes going under contract/selling). So let's look at the supply and demand in Loudoun County.
- The real estate inventory in Loudoun County has been steadily declining since the beginning/middle of 2008. It currently stands at 1773 (including new construction)
- This is its lowest level since well before the market turned and tumbled
- 450 properties went under contract in January
- 316 have gone under contract so far this month (through 2/18)
- That's a current average of 15.6 properties that go under contract per day in Loudoun (aka 468 per month)
Month's Supply/Absorption Rate
- 1773 divided by 468 = 3.8 months
As you can see, according to the age-old, tried and tested supply-and-demand model, Loudoun County is technically a "seller's" market (and you thought I was crazy, didn't you?).
Now I know that there are a lot of other factors that play into what type of market it is such as availability of financing, interest rates, overall economic conditions, etc. But, the supply-and-demand formula has worked for years and in all the good and bad markets since these statistics started being tracked decades ago. The current economic conditions already weigh in to the amount of demand and the supply so this formula is still relevant and accurate today.
Does this mean that you can't negotiate as a buyer?
Not at all. It just means that you can't go into buying a home thinking that you're going to get a Ferrari for the price of a Honda because you won't. If you're going after the best deals around (like most buyers), be prepared to act quickly, compete against other offers and put your best foot forward or walk away.
Traditional sellers and banks and their listing agents/brokers look at statistics and numbers like this too - they know the current local market conditions are becoming more favorable for them. This is one reason why sellers/banks are getting tougher on price negotiations, as well as the type of financing they will and won't allow.
What about sellers?
Know your market value and competition well and price and market your property correctly. If you do these and other basic (though important) things, you'll sell for the most amount possible in a short period of time.
This may not seem right to you nor make sense when you look at the grand scheme of things or turn on the news. But it is what it is and we all have to play the cards we're dealt (and this isn't Spades or Blackjack so there's no cheating or card-counting).
So you're thinking about moving and you're considering buying a brand new home directly from the builder. You go out one weekend and visit a few builder's sales offices and tour their model homes.
While at the model home, the salesperson asks you to register. They may say something like "fill out this card for a chance to win _____" or, "Fill out this card in order to get information about future sales specials and promotions" or they may ask you a few questions about your situation and for your contact information.
Seems harmless enough, right?
On the registration card is a spot where you put in your agent's contact information (name, brokerage, phone number). You should be filling out that spot on the registration card or if, the salesperson is filling out a card for you based on your answers to their questions, they should ask you if you're using an agent and fill out that part of the card as well. Funny thing is that they hardly ever ask, "Are you working with an agent?"…
Why is this point/question so important?
If you don't register your agent and/or they're not with you on your first visit to the builder's sales office/community, the builder will not honor your agent, nor any agent you try to bring into the mix at any point in the future. That means that you are on your own with no one to look out for your interests.
In addition, the builder has already priced in up to 3 percent in commission to pay for the buyer's agent/broker. If you have an agent representing you, the builder doesn't lose any money. But if you don't have an agent, the builder actually makes money because they take that commission amount and just put it back into their profit margin.
And in case you're wondering…
- No, they won't refund you the commission amount if you don't have an agent
- No, they won't lower the price more or give you more options for free if you don't have an agent
Here are some more reasons why builders love it when you don't have an agent…
- The builder's sales rep doesn't have to worry about someone who knows what they're doing looking out for the buyer and getting in their way
- Many builders give their salespeople bonuses if there's no agent involved so the salesperson is making more money
- The builder makes more money because they don't have to pay commission to an agent/broker
Why do you need an agent anyway?
Perhaps you've bought a new construction home in the past or do contracts for a living. But, no offense, you've got nothing on a builder's sales rep/manager who's been doing this full time for years and knows the ins and outs of their contract and how to get the most out of a new home buyer while putting the most into their own pockets. They use their experience against your inexperience to increase the profits of the builder and their own paychecks – just check out what happened to this new home buyer who went at it alone.
Perhaps the salesperson tells you that they'll get you a better price if you don't have an agent in an effort to cut out your agent… (this is where you go back up a few paragraphs and re-read numbers 1 thru 3). If you still think it's worth not having your own agent, negotiate the price down as far as you can and then ask them to slash an additional 3 percent off of that price – see what happens.
In reality, you may not know that you could get a better price and the builders know that. But a good and experienced Buyer's Agent knows what others have recently paid and what added incentives are available that may not have been available to the general public (builders have "insider mailing lists" plus knowing the sale staff well helps).
In addition, agents often talk amongst themselves about what deals they've been able to recently negotiate even though the settlement date and the "sold" information won't be made public until the home is delivered 3, 6, sometimes 9 months from now (if at all).
Remember, builders are in business to make money. Since the salesperson typically receives a bonus for writing a Purchase Agreement that doesn't include an agent, they are inherently trying to find ways to cut them out. And the builder loves adding 2 to 3 percent to their bottom line. Who wouldn't?
So be careful and hire an experienced Buyer's Agent to guide you and represent you throughout the entire new home search and buying process. If you'd like to chat with me about my new home purchase and negotiation experience as a Realtor here in the area, feel free to email or call me any time.
But wait! It gets better…
Thanks to Mike from UrbanRacer.com for the heads up.
After dropping over 1 point over the last few months, mortgage rates are back up hovering just over 5 percent. Mortgage rates took a little dip last Tuesday after Tim Geithner's less-than-detailed/non-specific speech about the government's financial rescue plan and overall concern surrounding the stimulus bill.
As far as whether it's getting easier or harder to get a loan, that hasn't changed much. Getting a loan still requires good credit (typically 720 or higher), money down (at least 3.5% percent if you go FHA/VA) and full documentation (you mean I have to prove that I make what I say I make?!). Here's a quote from an article on BankRate.com regarding lending guidelines:
"In short, lending standards are a lot tighter than they were in the go-go period of around 2002 to 2007. On Wednesday, the House Financial Services Committee held a hearing in which financial services CEOs were asked what they did with their federal bailout billions. The CEOs said their institutions have been lending lots of money. Their implicit message was: Please don't ask us to loosen lending standards.
Vikram Pandit, chief executive of Citigroup, told the committee that his company lent $75 billion in new loans to consumers and businesses in the last three months of 2008 and that it will continue to lend "in a responsible and disciplined manner." Later in his statement, he said lenders have tightened credit and that, "in this difficult environment, Citi will not — and cannot — take excessive risk with the capital the American public and other investors have entrusted to the company." (Citigroup has received $50 billion in TARP money, or $351.87 from every working American.)"
Money is still available to those who are in the financial position to buy a home - it's just more strict than before (which is a good thing overall). If you have good credit and money to put down, you're sitting pretty right now.
The new "aloft" hotel in Ashburn has raised the bar for hospitality in the area while bringing a much needed urban flavor to Loudoun County. "aloft" is owned by Starwood Hotels and Resorts and has the same high level of customer service and guest amenities you get at a Westin. But what sets "aloft" apart from Westin and the rest of Starwood's hotels is the very modern and funky feel it has, similar to that of a Kimpton boutique hotel.
Though "aloft" hotel in Ashburn has been open for some time now, their official grand opening event was last night. The place was packed, the DJ was spinning house and lounge music and the free drinks and food were being enjoyed by all. BMW of Sterling and VW/Audi were showing off their latest line of cars including the new M3 outside the hotel while "aloft" was showing off their rooms, gym, pool and guest amenities inside.
The list of attendees included residents, local business owners, execs from large corporations such as VW/Audi and AOL, a few Redskins and prominent Virginia and DC bar/club/restaurant owners, managers and promoters.
I took a tour of the hotel and here's what I thought… The hotel's lobby/lounge area is well designed, very inviting and has it all – modern couches and tables throughout, a bar that changes colors, fireplace, pool table, tv's, computer stations, local artists' work on the walls, a healthy snack bar and even a live streaming ticker with the latest US and international stock market info.
The rooms aren't huge, but they're definitely nothing like a NYC hotel room. All the rooms have a work desk, 42 inch plasma, comfortable beds (though that's only from sitting on one), good-sized bathrooms, the latest "cool" fixtures in the bathrooms and on the walls, two sets of windows so you can actually tell if it's raining before you get down to the lobby, safe, free coffee (24/7), etc.
Though "aloft" may seem more like a leisure-stay type of hotel at first glance, don't be mistaken – they know where their bread and butter is and they do a great job of catering to the needs of business travelers. The hotel has wi-fi, high-speed internet and multi-port hookups in all rooms and all the other stuff a business traveler would need. You can even go over your PowerPoint presentation the night before or morning of on the 42 inch plasma in your room while still laying in bed.
At first, you may wonder what a hotel like this is doing in Ashburn and in that specific location. After all, there's nothing much else immediately around the hotel except a gas station, a Hilton right next door and residential homes down the street.
But there's a method to their madness. Their long-term vision including choice of location is excellent – the hotel is right off the Dulles Greenway, Verizon and AOL are just down the street and, most importantly, the future Moorefield Station development and Dulles Silver Line metrorail stop will be walking distance from the hotel. With the urban feel Moorefield Station will bring to the area, "aloft" will fit right in while reaping the benefits of the increased people count and business travelers.
"aloft" hotel is definitely a break from the hospitality and business norm in Loudoun, it raises the bar for other hotels in the area and brings a fresh, urban feel to the area. I'm glad to see it here!
P.S. If you want to keep up with what's going on at "aloft" hotel in Ashburn, check out their blog as well.
I've heard it from home buyers before, "I'm just going to deal directly with the listing agent because I'll get a better deal and I'll negotiate the commission down or get a rebate".
As a defendant in a lawsuit, would you go directly to the prosecuting attorney representing the person suing you for $500K and say, "Hey…I want you to represent me too. That way, you'll make money off of the plaintiff AND me. But make sure you I get off. Oh, and by the way, since you're making money off of both of us, I want you to charge me less than you normally do."?
Of course not – that's insane!
Well, that's exactly what you're doing by not having your own buyers' agent and dealing directly with the listing agent. In reality, and by law, the listing agent can only represent each party (buyer and seller) 50 percent (aka they have to represent each party equally). That means that they aren't really representing either party.
The practice of allowing a listing agent to
"represent" both the seller and buyer simply facilitate the transaction is called Dual Agency. And it's illegal in most states because the buyer and seller don't get their best interests looked after nor represented.
Here's an excerpt from a post about Dual Agency written by Jim Duncan over at RealCentralVA.com:
For the general public: in the Virginia Realtor world, Lem Marshall is the [Virginia Association of Realtors] staff attorney – and by “the staff attorney,” I mean THE attorney. When there is an issue, Lem has the answer. Why do we ignore the opinion of our esteemed Counsel when we defer to him in all other circumstances?
"If you’re an agent practicing Dual Agency and get sued, how long do you think it’ll take an attorney to pull up these documents and the large number of posts warning against Dual Agency? A jury is going to have a hard time understanding why agents still pursue this archaic practice, while everyone is warning against it.
Unfortunately, Virginia has not made Dual Agency illegal (yet). Equally unfortunate is that the lobbying efforts of heavy-hitting listing agents/brokers are probably to blame.
Why are they probably to blame? Because the only person that wins in Dual Agency is the listing agent/broker – they get paid on two "sides" of the transaction (buyer and seller) instead of just one. If they're the only ones that win, then who else would be lobbying to have Dual Agency not be ruled illegal?
So you see…
…by dealing directly with the listing agent, you are throwing away your right to have representation and your interests looked after while putting extra money into the pockets of agents who actually end up doing less work because they can't legally represent one side more than the other.
Don't sell yourself short – you're paying for representation either way so you might as well truly have it. And don't help those looking to keep Dual Agency around for their own self-interests by giving them more money to spend on lobbying for Dual Agency to stick around.
If the video doesn't appear below, click here.
Hat tip to Rob
Congratulations to The Brambleton Group, LLC, the developers of the Brambleton community in Loudoun County for receiving several national honors, adding to its long list of awards!
Brambleton received a silver award from the National Sales and Marketing Council's The Nationals 2009 competition. The Council is an affiliate of the National Association of Home Builders, the largest industry association for building and associated industry professionals.
Brambleton's silver award was based on winning the categories of Master-planned Community of the Year, Best Web Site for a Community (Suburban), and Best Landscape Design for a Detached Community.
"With our innovative use of FiOS for residents and merchants, vibrant town center, and highly attractive landscape design throughout the community, we feel Brambleton is at the top of builder standards, quality, and appeal to Loudoun's homebuyers," Kim Adams, director of marketing for Brambleton, said in a statement.
Brambleton was among a field of 800 entries reviewed during a three-day judging process by a seven-member panel of industry leaders.
You may have noticed that there are some issues with the Category section of the blog, as well as some of the widgets on the very right hand column. I am currently working with Typepad and the makers of the widgets to resolve the problem.
Sorry for any inconvenience this may have caused you and I hope to resolve the issues shortly.
On a related note…look for some changes coming to LoudounScene.com and LoudounForeclosures.com in the near future. The changes are being made in order to make your experience on the blogs more efficient, rewarding and pleasurable.
I just got word that Beazer Homes is running a special offer this weekend only (Feb 6-8). The special offer is that Beazer Homes will pre-pay up to 6 months worth of mortgage payments.
The catch is that it's only available to qualified buyers who use Countrywide Mortgage (Beazer's preferred lender) and it's only available on first trusts/liens.
Though you have to be careful when using a builder's "preferred lender", you can capitalize on the offer while having your own Buyers Agent (such as me) looking out for you and advising you so that you stay out of trouble.
If you're interested in seeing what's available in the various Beazer communties in Northern Virginia, including Loudoun County, email or call me – danilo.bogdanovic (at) gmail (dot) com – 703.582.6900.