DISINTERMEDIATION & Your Friendly Real Estate Agent

What Does a Good Agent Do For You?

You've probably never heard of "disintermediation" unless (1) You're an economist, (2) A complete nerd or (3) You attended the big Inman real estate agent convention in San Francisco earlier this year. We learned about it through option 3 with maybe a dash of option 2 thrown in.
Disintermediation is when intermediaries are cut out of a supply chain. More simply, it's when you "cut out the middleman".

The Internet has created a lot of disintermediation. The travel agent business is a good example. People can go to any number of websites to get much of the info they use to get from a travel agent. So there aren't as many travel agents these days.

The discussion at the Inman conference was whether this same thing would happen to the real estate brokerage business. Do websites like Zillow and Trulia create a situation where buyers and sellers just get together directly, eliminating the need for an agent? Is the agent a middleman, providing little value?

The most definitive answer is "NO" and it comes from a surprising source - from Spencer Rascoff, the CEO of Zillow - the 800-pound gorilla of real estate websites. He also created Hotwire, the popular travel-booking site. He was asked earlier this year why Zillow partners with real estate agents instead of trying to replace them like he did to travel agents.

Rascoff, insightfully and accurately explained the differences between booking an airline flight and buying or selling real estate when he said:

"There will always be a real estate agent in the transaction because, for most consumers, it's just too important and too expensive and too infrequent and complex to screw up, so they need an agent."
We agree. Rascoff's conclusion is supported by the most recent survey of homebuyers and sellers nationwide. Over the 12-month period studied, 89% of buyers reported using the Internet to search for homes, but this did not eliminate their need for an agent - 89% of those buyers also used a real estate agent. For sellers, 90% used a real estate agent.
Rascoff went on to say he believes the Internet is changing the role of the agent from information gatekeeper to skilled transactional guide with expertise in marketing, negotiating and local market knowledge. We disagree.

In our opinion, the role of a good agent has always been to be much more than an information gatekeeper. Rascoff forgot to mention skilled pricing analyst, exceptional stager, financing guru and savvy legal-beagle when it comes to contract preparation.

An agent we heard recently tell a compelling story of his first home buying experience before he was an agent and long before the Internet existed. This agent was buying his first home and wanted a ranch style, single-family property with 2 bedrooms and a basement in a certain area. He explained all this to the lady he selected to be his agent.

His agent showed him what he wanted to see but also showed him a duplex in an area he had never considered. It had everything he wanted plus hardwood floors that complimented his furniture and a renter next door that paid the lion's share of the mortgage. She negotiated a great deal on it and skillfully guided him through the whole process. He says it is the best real estate he ever owned and the best real estate experience he had as a consumer.

As an agent with CHR, we share this vision for the role of a real estate agent. At CHR, we are skilled advocates that bring our expertise in pricing, staging, marketing, financing, negotiation and contract preparation to bear in helping home buyers and sellers.

And for agents in this industry that aren't passionate about this expansive role, we are happy for them to be disintermediated.

Courtesy of Mike Cooke at Colorado Home Realty (c)

A Buyer's market in the Denver Luxury Home Market

"Inman Connect" is a semi-annual, national conference for real estate agents. At the most recent gathering in June of this year, held in the beautiful city by the bay (San Francisco), we heard a lot of discussion of the luxury home market.

What is a luxury home? Are different strategies required when you are buying and selling in this market segment?

A common definition of "luxury" is that it is the top 10% of any market. It got us wondering about what that looks like in Denver. What is your guess - what is the home price that puts you in the top 10% of the market?

You'll find the answer below, but make your guess first.

Really.

Guess.

Stop.

Don't peak!

Do you have your answer?

The answer for metro Denver is $525,000. Ten percent of the residential properties in metro Denver that sold over the last 12 months had an asking price that was above $525,000.

Does that surprise you? It surprised us. We thought the number would be higher.

Here are some additional facts. The cutoff for the top 5% is only $600,000. Move up to $1,001,000 and you are in the top 2%. If the digs you come home to every night has a price tag of $1.5 million, then 99% of the properties in the metro area are less expensive than yours.

The supply and demand pattern is different also. While houses with a price at $525,000 or above make up only 10% of the sales over the last 12 months, they currently represent 37% of the available inventory.

In other words, almost four out of every ten houses on the market right now has an asking price over $525k. This represents 7.8 months of supply - it would take 7.8 months to sell all these homes if no more came on the market. In contrast, there is only 1.5 months of supply for homes under that price point.

Traditional wisdom says that inventory of less than three months is a seller's market while inventory greater than 6 months is a buyer's market.

We see the effect of this large inventory in the time it takes to sell upper end homes. Half of the homes under $525,000 that come on the market will find a buyer within 11 days. Above $525,000, it is taking 80 days on average to find a buyer.

What does it all mean if you are in that "luxury" market of $525,000 and above? If you are a seller, you are in a bit of a buyer's market. You have to be more accurate with pricing and your are very unlikely to have that multiple offer feeding frenzy that you hear so much about these days.

If you are a buyer, ditto. It is a bit of a buyer's market. It is an excellent time to make a move up into this range, especially if the house you have to sell is in that heart of the market at $350,000 and below. You get to sell in a seller's market and buy in a buyer's market. In other words - it is pretty much real estate heaven.

Courtesy of Mike Cooke at Colorado Home Realty (c)

- See more at: http://juliereddingtonrealestate.com/a-buyers-market-for-luxury-homes/#sthash.tziA2fJQ.dpuf

Home in The Backcountry, Highlands Ranch

A fantastic upgraded and immaculately finished home in the prestigious community of the BackCountry, in Highlands Ranch

Hardwood floors.

Gorgeous kitchen with beautiful granite countertops, pantry, large gas cook top and stainless steel appliances.  

4 upstairs bedrooms with upper laundry and views, views, views!  

Low maintenance yard fire pit, with sand pit, practice sport court, area for trampoline.  

Surround sound system, mud room.

Check out the community of Backcountry featuring the Sundial House, miles of open space and trails, parks, resort style outdoor swimming pool, Peaks Pub, fitness and movement rooms and an outdoor amphitheater. Check out website for more information  http://backcountryco3.reachlocal.net/community-of-the-year/

The Current Supply/Demand for Denver Home Inventory

You are hearing everywhere that the available home inventory is low. It has also been reported that there have been fewer homes sales so far this year. This makes it look like both supply and demand are down for the year.

In reality, neither is true. It can all be confusing so here is a blog post to unravel the mystery.

In short, the decrease in home sales is a bit of a mirage. Due to lags in reporting, the true number of sales for January through June of 2014 will not be known for a few more weeks. When all is said and done, we'll be with a percent or two of last year's numbers.

  Thus, while inventory is historically low, this is not because there are fewer sellers. For all practical purposes, we've had the same number of sellers this year as last year. Supply is steady even though inventory is low.

At the same time, buyer demand is through the roof and much higher than the sale numbers show. This is because of the "multiple offer" situation. A high percentage of homes that come on the market have multiple offers. For every one that sells, two or three other buyers are left to continue their search. If there was more inventory, we'd have 20% or 30 % or more sales so far this year.

Bottom Line: Supply is steady, not down. Demand is up, big time. Read more about the whole market situation HERE.

Remember:I have detailed statistics on what the market is doing in each zip code in metro Denver for both single-family and multi-family homes. Call me if you'd like a report for your type of house in your specific zip code.

Source : Colorado Home Realty

Seller Strategies for Finding A Replacement Home

Right now, sellers can sell quickly and for more than their home has ever been worth in many cases and still have options to implement strategies to protect themselves in case they cannot find an appropriate, exciting or acceptable replacement home. Here are some of those strategies:

• Have home totally prepared, ready to go to market, then find replacement home.  Working with a great agent means the sellers home is staged, pictures taken, brochures done, price determined and an effective CMA ready to present to the listing agent on the purchase of another home (this requires trust and partnership between home owner and agent as agent will have already invested a significant amount in preparation for marketing of the home and seller must be committed to the process).  The moment a seller finds the right replacement home, they get it under contract and immediately place their home on the market. PROS: lower risk of not finding replacement home.  CONS: must be more aggressive in asking price on current home, reduced negotiating power on the purchase of new home, requires lots of explanation and education of agent and seller on other and of transaction.

• Purchase new home prior to selling current home.  If sellers lender will qualify them to own two homes, use equity in current home to purchase the replacement home.  The seller takes out an Equity line of credit against the current home to use as down payment against the purchase of a new home.  PROS: take time to find replacement home, not rushed to get out of current home, tremendous negotiating power in purchase of new home, assuming appreciation continues at similar pace, the seller actually achieves appreciation on the ownership of both properties.  CONS: must qualify for owning two homes, must carry note on two homes, risk of owning two homes longer than anticipated.  (given the appreciating market we are in, if a seller can afford to do so, this is the most financially beneficial strategy).  Alternative forms of this strategy might include borrowing against retirement and replacing those funds upon sale of current home, or other forms of accessing capital if a seller can afford to purchase prior to selling.

• Sell current home and take time.  While this is definitely a hassle, when sellers look at this strategy it actually makes a lot of sense.  Sellers sell their home, focus on getting top dollar for that home and put the vast majority of their belongings in a short term storage facility. Sellers then move into a short term rental (which has its own challenges right now, but there are options) and take their time to find the right replacement home.  If someone is looking at a 10-20 year move, is it worth 15 days to 3 months of short term rental and hassle to find the right home?  only the seller can decide the answer to that question.  PROS: most money for current home and appropriate time to find great replacement home.  CONS: hassle.

• (Most Applicable for Most Sellers) Sellers put their current home on the market and select the offer to purchase that allows the seller the greatest flexibility in finding a replacement home.  Sellers can write into a counter proposal to any prospective buyer for a longer closing time frame AND that seller has 2 or 3 weeks (or whatever seller chooses to ask for) to find a suitable replacement home.  In the event that seller does not notify the buyer that a suitable replacement home has been found and placed under contract by “X” date, the current contract terminates.  PROS: great confidence for the seller to place the home on  the market and know they have opportunity to find a great replacement home.  CONS: lose some negotiating ability with buyers.

Get excited about more inventory, low interest rates and the opportunity to save a tremendous amount of money over the ownership period of the next home.

This might be the seller’s perfect storm.

Relocating to Denver

Another Real Estate Bubble?

Is it deja-vu? Have we seen this movie before?

The metro Denver real estate market has made a dramatic turnaround — going from a buyer’s market to a seller’s market in short order. With prices rising dramatically, is this just another bubble that is going to come crashing down?

Not necessarily. Historical perspective shows this. The accompanying chart shows the average sale price of single family resale homes in metro Denver for the last 18 plus years. Notice two things:

(1) Prices rose $61k from January 2012 through April 2014. That is an increase of 21.8%. There was a similar price rise in a similar time period that added $60k to the average sale price of homes from January 1999 to April 2001 — a 32.2% price increase. Yet that dramatic rise was not followed by a crash. The market continued to appreciate at a healthy rate for another five years.

(2) Notice the straight line on the accompanying chart. It is the “best fit” line through the data. If you can remember back to high school algebra, the best fit line is the line that shows the real trend in a set of data. Prices were above the trend line from mid-2000 to mid-2008 and then below the trend line through mid-2013. Prices have just recently returned to the long-term trend line. It appears that the recent recovery has put us back where we would have been if the long term trend has persisted over the whole period from mid-2000 to today. That seems healthy.

As they say in the investment world, “past performance is no guarantee of future performance”. However, this historical look shows that big increases are not always followed by immediate setbacks.

By the way, we’ve seen info on home price trends in metro Denver going back into the 60s. As we recall, there is never a period of price decline lasting more than 5 years.

The bottom line: It is a great time to sell. If you’ve been wanting to move, it’s a great time to jump in and do so. It is always a great time to buy and especially when your next move will be a place you want to stay for a time frame of five years or greater.

Stay tuned for more insights on the Denver area real estate market. In the next installment, we’ll report on some economic fundamentals that bode well for real estate in the mile-high city.

- See more at: http://juliereddingtonrealestate.com/another-real-estate-bubble/#sthash.rM4w4KTz.dpuf