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How will your Berkshire property value fare in 2015 and beyond?

Paul Harsch
iBerkshires Columnist

Berkshire property valuation is a daily task of Berkshire real estate agents.  The Berkshire home seller first wants to know "how much is my property worth"?  And that brings me to one of the most common laws of physics.

Newton's law of motion states that a body in motion tends to remain in motion unless acted upon by another force e.g. gravity, friction, etc.

This same rule applies to the value of Berkshire real estate. Rising values, a state most sellers had come to more or less "accept" as a given in real estate through 2007, sometimes rising faster and sometimes slower, gave way suddenly to massive systemic reversal.

My own real estate career began in 1975 and from that time until the early 2000s we could pretty much count on an average rate of appreciation here in the Berkshires over the years of around 5 percent.  What accounted for this reliable pace?  Inflation, the general rise in prices of goods and services in the nation's economy.

Following the horrific events of 9/11 the economy took a nosedive and the FED stepped in with historically low interest rates which naturally are favorable to borrowing money which is what feeds in large measure the real estate markets as the vast majority of buyers take out mortgages.  The very low rates as well as very low down payment loans and lenient lending standards helped build momentum for a recovering economy and the dramatic rise in real estate prices that peaked in '07 in what was a classic bubble.

This happy scenario was inevitably followed by the downside of foreclosures and tumbling prices to where we are today, at roughly 35 percent off the peak in this region.

We read in the media of the real estate recovery and to be sure, parts of the country have definitely experienced some notable reversals of fortune such as San Francisco, Seattle, Portland, Manhattan, Miami, and even Boston in the Northeast.

In the Berkshires we have some forces at play that act as headwinds to a stronger recovery and which have been slowing the momentum of prices.  Not only has inflation been muted as in energy for example but we still face the headwinds of falling population and declining employment, more acute in central and northern Berkshire County but the southern sector has by no means been immune.

Besides the economic and demographic headwinds which have added inventory (supply) and reduced demand there is one other really crucial element to value that is often overlooked by many sellers namely depreciation.

When demand was high, anything could and did sell simply because there were more buyers than homes.  Today the opposite is true; inventory far exceeds the demand for housing so unless a property stands above the competition its chances of selling are far less favorable.

How does a property excel?  Obviously location is vital however even that can be hindered if the seller has lived in the home any length of time without maintaining and updating the property. Dated properties are much less attractive to young buyers. 

Buyers today have so many choices and will naturally choose an updated home when all else is equal.  Updates desired include kitchens, baths, updated heating systems, energy saving appliances and construction, homes in "move in now" condition. 

Tired, outdated, and out of style homes have significantly lower market appeal and as such will inevitably remain longer on the market without some counterbalancing steps being taken.  These would include either correcting the defects or lowering the price to be more competitive.

Unlike antique cars for example which derive their increasing value with time and scarcity, the older a home becomes the more it depreciates in value.  With renovations and updating some of the impact of natural depreciation can be offset but of course that also involves an investment of more time and expense to the seller.

Sellers of anything but new homes need to heed the advice of their real estate agents who are qualified to price a "used home". These sellers may have loved and enjoyed the home for years and have difficulty separating themselves emotionally when it comes to pricing.  Buyers don't have the emotional attachment.  Just like pricing cars on a used car lot, it is essential that the home be priced relative to other homes that have recently sold and which offered similar age, qualities and features.

For 2015 and the foreseeable future it does not appear likely that inflation will return, that demand will outpace supply or that employment will return to the area in significant numbers.  As such any home that is 4,7,15, 30+  years old cannot by the law of economics increase in value without offsetting repairs and substantial updating.

If you want to fly, there is no sense in ignoring the law of gravity and if you want to buy or sell real estate, best to keep the law of real estate market value equally in mind.

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For Sale By Owner: Homes for sale in the Berkshires

Paul Harsch
iBerkshires Columnist

WHY do I need a Berkshire real estate agent to sell my Berkshire County home? 

How often have you heard these next statements.  Real estate agents don't do anything that I cannot do myself. Real estate agents don't do anything but get you to sign a listing form and then forget about you.  You never hear from them after you sign the paper.  I can save myself loads of money buy selling my Berkshires home myself.

How many times have you heard friends and family say this when they are considering selling a Berkshires property? I am betting more times than you can count on one hand. 

Selling your property online on Craig's list or through an assist to sell "for sale by owner agency" or a FSBO website for a small fee that covers putting the property in the local MLS sounds like a great bargain doesn't it? 

How hard can it be? So you have made the decision now to sell it your self.  Now comes the serious part.   Keeping your Pittsfield Real Estate FSBO house spotless (ongoing), fielding inquiry calls, separating the "nosy lookers" from the actual "qualified buyers", arranging your schedule to show your home between picking up the kids, going work and dropping off the dog at the vet. 

And if that doesn't put a damper on your enthusiasm for selling your Williamstown property yourself consider this, how good are you are negotiating, when was the last time you had your home appraised by a professional home appraiser, how many bank loan officers do you know, how much should you allow for the roof that is 11 years old and the basement that floods once a year in the spring.  Can you prepare a professional counter offer when you get the initial offer. 

What are the laws concerning real estate transactions in your state.  What fees are you responsible for and what fees is the buyer responsible for.  What disclosures are you legally responsible for providing a buyer with?How many websites will you be able to put your for sale by owner property on?  How often will you be able to monitor the hits and field the inquiries from buyers on those websites?  How will you attract the attention of local Real Estate Brokers, and professional Real Estate Agents so they know your home is on the market. 

How much of a commission will you offer these professionals to bring buyers to your home?  And if you don't offer a commission, why should they bring you a buyer?

Do you know what kinds of legal protections you need related to contracts in Masssachusetts with purchase/sale clauses.  How will you know a good offer from a great one?  These questions are one of the reason that more people are choosing professional real estate brokers and agents to handle their real estate needs.

In fact the number of people selling their home without the help of a real estate professional plummeted in 2009. Today's challenging marketplace favors the buyers.  Buyers are taking their time and exercising extreme caution when investing in home ownership. Buyers often come with a representative who is a professional Realtor. 

 This professional protects the interest of the buyer and is aware of all the rules we listed above and you can bet the farm that they will cover all bases before they advise their client to make an offer.  What professional is protecting your best interests?

"Selling a home is a full-time job," said National Association of Realtors® (NAR) president Vicki Cox Golder in 2010. "Unrepresented sellers often don't understand the complexity, range and timing of tasks they'll have to perform. In this competitive market, sellers need every advantage they can get."

According to the National Association of Realtor's  2009 Profile of Home Buyers and Sellers, "for-sale-by-owner" transactions dropped to a record low 11 percent, and almost half of those sellers sold their home to someone they already knew, such as a relative, friend or neighbor.  These are the facts: For every 100 homes sold only 11 are sold by owner and half of those are sold to a relative. 

Do you have a relative who wants to buy your home?  Read no further. Sell the house to the relative who offers the best price and is bank qualified to buy.

Realtors sold 89 of the 100 homes described above because Realtors have the buyers.  On the open market, today's sellers have to compete with bargain priced short sales and foreclosures as well as other homeowners who may be trying to sell their homes through professional real estate state agencies.

In addition, managing the appraisal process, inspections and buyer qualifications in a tougher credit market has become more complicated in this environment, adding to the already intricate transaction process.

Without professional assistance, sellers are faced with a marketing disadvantage. The survey revealed that more than half of unrepresented sellers did not actively market their homes to potential buyers. Those who did used yard signs, Internet listings and print newspaper ads.

Unfortunately, many unrepresented sellers don't have access to fundamental marketing services, such as a multiple listing services, and can't list their homes on these sites to reach a broader audience. 

Professional insights into preparing, pricing and positioning a home for sale pay off. In 2012, a typical property without professional assistance sold for $162,000 compared with $205,000 for the typical agent-assisted property.  The decline in "for-sale-by-owner" properties available indicates a growing awareness of how complicated today's real estate market is.

A Berkshires Realtor® has specific knowledge of the Berkshires market and can save consumers time and money. They can help a seller set a realistic price and ensure that the proper paperwork and various disclosures and inspections are handled correctly. Sellers will get broader market exposure and are more likely to generate competitive bids by working with a real estate professional.  Sellers should always interview several real estate agents and ask as many questions as needed to ensure comfort with the agent they choose.

Best Wishes,

Paul

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Do You Want to List Your property or Sell it?

By Paul Harsch
iBerkshires Columnist

If a seller places their property for sale on the market they absolutely want to sell.

Right?

Maybe.

Hiring a realtor, putting out the "for sale" sign, placing a "multiple listing service" entry, requesting that the agent do serious advertising and expecting the agent to schedule open houses all are part of placing a home on the market.   

Right?

Absolutely.

All of the above activities indicate the owner wants to sell the property. Now comes the Catch 22.  The seller "must" have a certain price for their property. The individual reasons for selling a property are as diverse as the number of fish in the sea. A few of the more common reasons properties come to the market are downsizing, rightsizing, upgrading, moving to a new location, job transfer, inheriting an estate property, death of a spouse, birth of children, new job, retirement and moving a parent to assisted living.

A leading national real estate site also has a "make me move" section of properties where the owner can place any value on the property and wait to see if a buyer will pay that price.  Needless to say this section of properties remains the same year in and year out as the owner waits to win the lottery of real estate.  

Motivation to sell a property can range from the "lottery" example above to the urgent need to decrease the cost of living related to loss of a job. The most important factor that isn't represented in any of the information above is the buyer.

A buyer is interested in paying a fair price in a market where the choices are many. Buyers also are looking for value. Value is both objective and subjective at the same time. A good comparative market analysis can give the seller the objective value of a property. A realtor is not needed to obtain the subjective value of a property. A friend or family member can give the seller their opinion of the subjective value of the property (of course the friend or family member will not be buying the property).

Bankers who provide loans to buyers do so based solely on objective value. Apart from flippers and investors, approximately 90 percent of home buyers will obtain a mortgage and the property they make an offer on will be subject to an appraisal by a licensed appraiser. So a buyer may feel that the property is worth the price they offer (subjective) while the bank could still decline the loan based on appraised value (objective).

Properties can become "holding listings" when this happens. The seller ends up "holding" the property because the reality of appraised value does not match the need for obtaining the subjective value the seller desires. No amount of subjective need for a "price" will overcome the objective market value of a property.

When the seller's genuine goal is to sell the property the key is knowing what the objective value is.  Your realtor should always provide you with a printed Competitive Market Analysis showing all homes listed, sold, cancelled or expired unsold in your local area. Pay particular attention to the "sold" homes to find a range that will sell your property in a reasonable amount of time.

If your desire is to list your property and you don't care what the objective market value is or whether or not your property actually sells then you owe it to your realtor to share this fact. Your realtor will spend their time, their money and effort on the marketing your property. Enter into the relationship with your realtor trusting that if you price your home based on a subjective value the realtor, even with a valiant effort, cannot overcome the objective market value and your property will probably not sell if the difference between objective and subjective value is too great.

Ask yourself "do I want to list this property or do I want to SELL it?"

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

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Selling or Buying Real Estate Is Just Like Buying a Loaf of Bread

By Paul Harsch
iBerkshires Columnist

Did I get your attention? I hope so because nothing could be further from the truth. Unfortunately some people make their decisions on who to list with or which real estate licensee to use to assist them in purchasing with about as much thought and care as buying a loaf of bread.

The purchase of a home for example, we are often reminded, is the single largest purchase in most people's lives ranging anywhere from tens of thousands of dollars to hundreds or even occasionally millions of dollars.

Why is it then that some people give about as much thought into which real estate licensee to use as they do which brand of milk to purchase?  After all, they may reason, milk is milk and one real estate licensee is the same as the next.  Right?  Not so.

As with any skill set, there can be enormous differences in the level of training, years of experience, people skills, technique, style, success, dedication, commitment, and knowledge all of which go into making some far better than others at achieving the best outcomes for their clients.

It is frequently cited that 80 percent of all transactions are handled by just 20 percent of the licensees. In other words there really is a top 20 percent. Would you be better off, on average, working through one of the 20 percent? On average most definitely and in fact in 80 percent of the cases, the answer is a resounding YES.

Experienced, trustworthy, hard working, skillful licensees help their clients attain their results faster, with fewer difficulties or "surprises," and generally better outcomes than the other 80 percent. After all, how is it possible for someone relatively new in the business to achieve the same level of outcome as someone with 10 years, 20 years, longer in the business? It just isn't possible.

It's not just years or numbers of transactions however but people skills, negotiating skills that can and usually do make a big difference in outcomes. Does anyone doubt the guilt of OJ Simpson? I don't think so but he still was acquitted because of the superior skill of his defense team. Or what about Capt. C.B. Sullenberger, who successfully landed his crippled jet in the Hudson River without loss of life? I'll bet that every passenger on that flight was exceedingly glad they had someone of his skill and experience at the controls that day.

Next time you decide to list your property for sale or are in the market to purchase, take the time to do your research and think through the most important decision which is who you're going to place your purchase or sale in the hands of.

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

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Who Will Be Showing Your House or Property?

By Paul Harsch
iBerkshires Columnist

You listed with someone for a particular reason but then you discover that individual may frequently not even show your property and sometimes never. Hmmmmm. Make a difference? You bet it can.

If you chose your real estate sales person for a reason such as you trust them implicitly or you know they have a great many years of experience, or you learned from a trusted friend or business associate that the real estate person demonstrated unusual dedication, skill or problem-solving ability, then wouldn't it make sense that you'd want to know if they were going to be personally engaged in the process of selling your property, too?

How do you feel when you have planned on dealing with one individual, say your doctor, only to be shunted to someone else because your doctor was too busy that day? Or how about that lawn person who has done your lawn for years and knows all the quirks of the yard and how you like it done and then one day someone totally new shows up saying they replaced your regular person?

Anytime you place your trust and confidence — whether it's your health, property or car — in someone's hands you will feel uncertain if someone else steps in. And so you should, but in real estate it happens all the time.

Take for example a firm that hires new people. You listed with one person because of a strong preference but the company's policy is to allow anyone in the firm to show your property. Now you may have a perfectly good buyer looking at your property with someone brand new to the business, or someone who doesn't like your house for some reason, or someone who is unavailable much of the time dues to other interests. The point is that your property is now being "represented" by people you don't know or who don't have the skills or dedication you expected when you signed with the listing salesperson.

There are skills, dos and don'ts in showing, there is skill and sophistication when it comes to negotiating, there are levels of dedication and commitment that vary considerably among licensees. Make sure you understand what you're getting when you commit to an individual.

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

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Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years. He has achieved personal career sales exceeding $131 million and company sales from 1979 will top $500 million in 2014. Harsch is a member of the Berkshire, Massachusetts, Southwestern Vermont and National associations of realtors, is a licensed Massachusetts real estate instructor and earned the CRB, CRS, GRI and CBI designations. Harsch is a 1969 graduate of Williams College.

To submit comments, questions or requests for future blog topics write him at paul@harschrealestate.com.



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