Does the Seller Really Want to Sell

While the metro Denver market continues to hum along and there are a few “blockbuster” sales on the upper-end, anecdotally I am seeing signs of stress especially on the upper-end of the market. Some listings are coming on at inflated/fantasy prices and within 1-2 weeks a price reduction. Granted some reductions are more symbolic i.e. still priced above market and I never fault anyone for holding out hope of that blockbuster sale. However as an experienced broker I look for various signs showing that a seller is serious and motivated.

Yet first some signs advising the seller may not be so serious:

Will Not Close until Replacement Property Secured: In such a situation the seller is driving the transaction. You as buyer are in a holding pattern literally beholden to the seller and their timing and wish-list concerning finding a replacement property which in a hot market may not be so easy. In commercial transactions this can be a common occurrence and is a tactic used in 1031 Exchanges. Concerning traditional residential I would be more cautious. Not to dissimilar from a reverse contingency i.e. usually buyer will purchase contingent on the sale of their existing property. Instead here the seller will sell and close once their replacement residence is secured.

Holdover or Leaseback in Excess of 30 days: Holdover i.e. occupancy once the house is sold and closed is not so uncommon. I usually suggest 30 days or less; there is even a pre-printed Colorado Real Estate Commission Form known as the Post Closing Occupancy Agreement for such an event. For longer periods (and again if you are an investor the criteria may be different) I would be more cautious. Basically the seller is looking to cash out and lease their house back. I have been involved with situations concerning relocation when this is quite accepted. However barring a relocation situation my immediate concern is for the buyer. The seller is desiring to cash out and lease back. Again in commercial real-estate not uncommon, in residential may indicate seller may believe market is adjusting downward and desires to cash out at prevailing market conditions and assumes paying rent is safer than a mortgage associated with a downward trending asset. Yes the seller may need the cash out of the house; there are additional options from HELOC’s to Reserve Mortgages, thus a sale is more drastic.

Again the above are basic guidelines, not the gospel and each situation is truly unique.

The signs seller is truly serious:

Buy Me: Even in a hot market a property may go through multiple price reductions. Granted this could be an indicator the listing was over-priced to begin with. However when coupled with other indicators i.e. priced well-below market value, being offered “as-is” or desiring a cash transaction can possibly construe the seller is very serious.

Of note, be forewarned as some brokers will purposely list a property at below-market to instill excitement of prospective buyers and more importantly bids and offers. In a hot market such a tactic can be a benefit to the seller. However in a market trending downward such a strategy may place the seller in a losing situation i.e. full price offer at the below-market price and by not accepting barring contingencies the broker may demand a commission if seller does not sell.

Curb Appeal or Lack Thereof: Anyone who has owned a home knows landscaping takes time and money (even DIY’s i.e. materials, water, maintenance). While brokers usually advise an investment in curb appeal, a seller who may not have the time or capital to attend to the landscaping may be showing signs of motivation by their inaction and lack of investment. Such signs I look for include:

  • Overgrown or dead lawn/shrubs/flower beds.
  • Weeds and other decay i.e. trash, dead leaves, and overgrowth.
  • Newspapers that have not been picked up and/or fliers in the door.

Such signs could also point to an absentee owner, landlord or similar situation. I have used such visual cues to procure listings by researching public records and other databases.

Interior is Half Lived In: Hey I am all for staging and a staged house usually suggests a motivated seller i.e. the investment in staging. However dig deeper especially if you believe the house continues to be owner/seller occupied. Are the closets ½ empty? Is the furniture mismatched or haphazardly placed? Are walls showing signs of art having been removed and not replaced? Such indicators may indicate divorce, destitution, already moved out or similar. Usually when a home is in such condition, the seller is motivated. Please note there is a difference between purging and having moved on.

Of note, in Japan in the 1980’s some listings were not only staged but also included a live multi-generational family pursuing their daily routine during open-houses to show how the home functions and meets the needs of a multigenerational family as buyer. Trust me somewhat disturbing seeing children doing their homework during an open house yet also true early adopters of the precursor to virtual reality.

Family Dynamics have Changed: I see this quite often; the signs may include a child’s crib in one of the social rooms i.e. living, dining, home office or similar. Or on other side of the spectrum oxygen tank or other medically oriented items. Such indicators may suggest a new addition(s) to the family from a child to an aging parent or illness. This may be a situation where the owners desire to move for more space to accommodate and thus at present a not optimum living situation.

Estate Sale: Usually estate sales are when the owner passes and/or the present sellers are by descent. Such sellers may be more motivated to unload the property for various motivations from estate tax liability to not desiring the upkeep and maintenance. In the Denver Multilist there is a check box for type of seller and one option is Estate. If your locale does not indicate such type of seller and it is a deed of trust state, investigate what type of deed is being offered. Is it a Personal Representative Deed or similar? May be an estate. Of course some experienced brokers review obituaries and similar to look for listings; an old pastime in New York City which is practiced to this day (not to mention treating estate lawyers to lunch).

Providing Too Much Unrequested Information: In Colorado we have what is known as the Seller Property Disclosure, a 7+ pages form executed by sellers to provide information to the best of their knowledge concerning the residences condition and state of repair. Of note I advise seller clients to be truthful and honest as its both a legal and ethical course of action not to mention most buyers will engage the services of a home inspector prior to closing.

However some clients can be more forthcoming and mention issues and potential remedies before being prompted. In general I usually caution sellers to be circumspect in what they mention i.e. “We were going to install an on-demand hot water heater but went with the conventional as it was cheaper and we did not want to invest any additional money into the house”. This tells a buyer the seller while preparing for sale went for near-term economics versus cost-savings over the long-term. I am guilty of this myself. In the sale of my house I advised the sellers concerning a secondary bathroom; if they ever plan to renovate to consider changing the dual knobs to a single-lever. Was I disclosing too much? Maybe; however I advised since we did not use that particular bathroom we never did the upgrade; something to consider for their larger household and lifestyle.

The House Is Empty: Rarely do homes show better when vacant (that is why we have staging as an image is worth 1,000 words). In reality an empty property may indicate the seller has moved on. Yet continuing to retain ownership the empty home does incur carrying costs even if there is no mortgage i.e. real estate taxes, upkeep, insurance and so forth. Thus the seller may be willing to be more flexible knowing their for-sale asset is depleting capital while on the market.

Granted some homes are staged and again this may be a sign the seller is serious as staging is not inexpensive. In some markets we are now witnessing virtual staging i.e. computer generated staging to the benefit of on-line marketing, again a picture is worth 1,000 words. One company has brought the cost of staging down with inflatable furniture; just don’t sit on the props. Of note, a broker trick to show the scale of a bedroom, set up four to six boxes for support, add a camping air mattress, cover with a bedspread and pillows. The result an instantly staged and scaled bedroom.

Happy House Hunting

Millennials Understand Opportunity Truly Knocks Beyond Central Denver

We seem to be in a unique environment concerning the national housing market as both buyers and sellers are excited. For sellers, record high prices are becoming the norm even in the rising interest rate environment. Buyers even though confronted with the challenging lack of inventory are strengthening the market due to confidence and the desire to lock in still historically attractive interest rates.

The above is based on the monthly Fannie Mae Home Purchase Sentiment Index® (HPSI)increased by 2 percentage points in January to 82.7, ending a five-month decline. Some of the highlights from the report include:

  • The net share of Americans who say it is a good time to buy a house fell by 3 percentage points to 29%, matching the survey low from May and September 2016.
  • The net percentage of those who say it is a good time to sell rose by 2 percentage points to 15%.
  • The net share of Americans who say that home prices will go up increased by 7 percentage points in January to 42%.
  • The net share of those who say mortgage rates will go down over the next 12 months remained constant this month at -55%.
  • The net share of Americans who say they are not concerned about losing their job rose 1 percentage point to 69%.
  • The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 5 percentage points to 15% in January, reversing the drop in December.

Now concerning millennials, according to Fannie Mae research, more are purchasing and starting new households. While the Great Recession may have delayed purchases; millennials are now more confident concerning job security translating to an increased in marriages and parenthood (common during stronger economic cycles, nothing new there).

Yet of interest due to the expensive reality of city-centric residences some millennials are exploring and purchasing in the suburbs where values are generally more affordable. I have witnessed this myself concerning millennial clients looking beyond central Denver. Neighborhoods of interest include:

Southmoor Park: Lots of home and land for the spend. Also close enough to Light Rail Station at Hampden and I-25 allowing easy access to downtown and easy drive to DTC. With Whole Foods and new restaurants options on the Hampden Corridor, becoming popular.

North Englewood: Just south of the Denver border clients are looking at Englewood (north of Hampden Avenue) as a substitute for Platte Park especially adjacent to S. Broadway which continues to diversity businesses now catering to clients within their immediate neighborhood versus the traditional commuter traffic. Also a few good options for fans of Mid Century Modern who may not wish to pay the prices associated with Krisana Park.

Arvada: With neighborhoods close to the light rail line and with a new urbanism orientation, millennials are finding Olde Town Arvada has urban qualities found in areas such as Old SouthPearl, Old South Gaylord and other urban enclaves. With the easy commute to Denver via rail or car and lower prices, demand will soon outstrip supply.

Westminster: As with Arvada, the new rail line is opening up opportunities for those who desire more affordable housing, an ongoing renovation/development of a town center and easy access to the Broomfield office parks.

Edgewater: For those who have been priced out of Sloans Lake, Edgewater offers a respite within a stone’s throw geographically. With a charming commercial street, small town feel yet within easy viewing distance of the downtown skyline and a nice diverse housing stock, do not be surprised if this hidden enclaves demographics see a dramatic shift in years to come skewing towards younger buyers and families.

With this millennial flight to the suburbs what is going to happen to the inner-city? In essence the millennials are basically skipping a step i.e. usually starting in the inner-city and then moving to the suburbs for access to additional square footage, suburban schools and so forth. While these areas were once car-dependent, the expansion of RTD’s rail lines are making these suburbs once considered commuter oriented into their own attractive and thriving towns.

Yet I am far from concerned about the City of Denver. While I have some personal issues with the desire to increase density in some neighborhoods; Denver will always remain in demand due to geography, diversity of housing stock and varied amenities from cultural to financial i.e. lower water bills, low-taxes, municipal services and so forth.

My one concern for Denver is this rush to increase density. Full disclosure I am a native New Yorker thus I understand density having been raised in within an apartment building on the 20th floor and taking the subway to and from school. I am also educated as an urban planner. I view the cranes on the skyline of Cherry Creek, west of the Denver Country Club and other areas and I have three questions:

1) Is there truly longer-term demand for all the new multi-family buildings?

2) If in fact there is demand and zoning is keeping up with this demand, will our infrastructure follow suit i.e. roads, mass-transit, pedestrian corridors, dedicated bike lanes?

3) Are we remaking the inner-city of Denver unaffordable akin to San Francisco, New York, Paris, London and other cities in which the income gap is severely pronounced. These were cities which used to have a true diversity of cultures, incomes and employment and now have become playgrounds of the wealthy or long-time owners.