Taxes, Zillow, and Me -or- What is my house really worth?

We’re all curious what our homes would be worth on the market, even if we have no intention of selling.  If you recently bought, you’re curious if the value has already gone up.  If you have owned for a while, you may be thinking of selling someday soon and want to know if you can even afford to.  And if you just got your tax statement, you might be shocked at how little value the county says you have…or how much they want from you in taxes!

Here are the three most common ways people obtain an outside opinion of their home’s value:

1.  Zillow.  Go on Zillow or another website that offers instant valuation. I mean, it’s 2am and you’re in front of your computer anyway.  Aren’t you at least a bit curious?  Nothing wrong with surfing online, but don’t trust those numbers.  They are based on algorithms, not on expertise.  Zillow certainly hasn’t seen the insides of any of those homes or your home, and much of the time the statistics they are basing value on aren’t even accurate.  Easy and quick, but not worth the pixels it’s written on.  Also expect a follow up from an agent you don’t know.  They will sell your contact info to a local agent.

2.  Taxes.  Even if you aren’t curious what your home is worth, the county or city sends you a letter telling you anyway. There was a time these tax assessed values were all uniformly way too low.  Then the economy collapsed and suddenly they were all uniformly too high.  Now days, they are most commonly a little low to considerably low.  But again, the city has not seen the insides of any of these homes.  So if your property is in disrepair, the tax value might be high.

3.  Me.  That’s right, me!  I’m just as free as the other options, plus I’m actually a living, breathing, thinking Realtor with Edina Realty.  I will happily provide you with a new market analysis.  Did I just do one for you last year?  Okay, then I’ll update that one.  You’re my past, current, and future clients.  I want you to have the best information from a professional that actually has seen all these houses.  And has certainly seen yours!  I’ve been doing this for over 10 years, and it turns out I need clients every year.  So it doesn’t matter to me if you are planning to sell now, later, or maybe never.  Just let me know if you are actually thinking of selling soon so that we can schedule you more urgently.

Do Renters Have It Better?

Several years ago, a successful agent who had “temporarily” moved into his in-laws’ old house said to me, “I’m never owning again.”  It struck me as odd.  Here was  a successful agent working in an industry that depends on buyers and sellers buying and selling saying that his temporary rental was going to become permanent.

His reasons?  It wasn’t mowing.  He still had to do that.  The expense? In many cases, including his, a mortgage payment is cheaper than rent. flexibility? He has kids in school and a good job, so he wasn’t planning on an escape to sunny California at some point.

The reason was responsibility.  As a renter, he was no longer responsible for the house he was living in.  If something needed maintenance, or broke, or started leaking, he just called the landlord.  Or even…ignored it!  Oh that does sound sweet!  To put the expensive and overdue needed maintenance to my chimney out of mind, go to bed, and let someone else worry about it…even if that other person is your mother-in-law.

But alas, I enjoy the rewards of home ownership too much.  I just can’t give up these benefits:

1.  I love my neighborhood! Only one house on my block has come up for rent in the last 5 years.  If I wanted to rent, I’d have to give up living on this block.

2.  I love my house! I could never have found this house if limited to rentals. Purchasing opens up way more options.

3.  You have to pay to live somewhere. Eventually, I will own my home free and clear.  As a renter, I would just be helping my landlord say the same about the house I continue to pay her to live in.

4.  Speaker cables.  I can drill into the basement and run my cables under the floor.  I can’t go back to hiding cables along moldings and under rugs.

5.  Control! Sure my old windows are drafty and leaky and expensive to replace, but at least I can replace them if I choose. Those old windows in your rental?  Ha!  Fat chance of your landlord ever replacing those.  Need permission to paint?  Nope!  Hate that brass light fixture from the 90’s? It’s gone!  Wish there was a pass-through from the kitchen to the dining room? Break on through to the other side!

Tax Credit is Gone…Now What?

The tax credit for first time home buyers has expired.  Is the market going to retract?  Are we in store for another bubble burst?  Or has the economy recovered enough that things can now return to "normal?"

Well…I am not an economist (not that economists seem to know anything the rest of us don't) and I am not about to make predictions for the overall economy.  But if you'd like to hear an unsubstantiated but not totally groundless prediction of the housing market…I am happy to provide one.  Let me gaze into my crystal ball…

Escher-crystal-ball

 

1.  The Spring is not over.  Houses are still listing and houses are still selling.  We saw a couple weeks of frantic last minute shopping that will appear as a spike in activity, but activity has not dropped off completely in the absence of government incentives.  I am still getting showings and even sold a listing two days after the credit expired.

2.  Things will slow down this summer…like they do every summer.  The activity level might be lower than in an alternative universe where there had been no tax credit.  In other words, some people that might have shopped this summer accelerated their plans in order to take advantage of the credit and have already purchased.  But the market won't be dead.  Some people just weren't ready to buy this Spring.  Believe it or not, but there are other factors in people's lives other than a tax credit.

3.  Same thing goes for the Fall.  A seasonal up-tick in activity, but less than if the tax credit hadn't seduced people into buying this Spring.

4.  Next year:  It's the economy, stupid!  If the economy is in full recovery mode, the market is going to be active and healthy.

5.  I reserve the right to be wrong about any or all of the above.

Market is Back Up and Running

First,  sorry Blog.  I moved this summer into a wonderful large home that needs lots of work.  So I've been distracted with all that work.  Plus I was crazy busy until the first weeks of November.

Yes last fall was crazy.  Buyers were motivated to take advantage of the first time home buyer tax credit, and I was involved in multiple offers on a weekly basis.  This all stopped when the government passed an extension for the credit.  The sense of urgency went away and everyone seemed to take a breather for the holidays.

Second, the holidays are over and the market is back up and running.  New listings are coming on at a fast pace and showings are up too.  My buyer clients had no choice but to take the holidays off as there were no new homes to see.  But now they are eager and ready to see all the new listings as they hit the market.

If you are considering selling in the near future, you might want to make that near future nearer.  Buyers are motivated to find a place before April 30th to claim their tax credit.  And if you've owned for more than 5 years, you can get your own tax credit if you sell and buy and new place.  $6500!  Not too shabby!  If you are asking, "Should I sell now or later?" The answer is:  NOW!

$8000 Tax Credit Helps Sellers Too!

Hurry!  Your time is almost up.  The $8000 tax credit is only for first-time home buyers who close before December 1st.  Do the math…  If it takes 45 days to close after finalizing negotiations on a purchase agreement, that means you need to be in a contract by October 16th.  That's just fine if you are actively looking, but if you are still procrastinating meeting with a lender…uh…hurry? 

Should everyone run out and do this?  Well, probably not.  Don't make long term decisions like buying a home just to get your $8000.  Don't buy a home that you will out grow in two years.  Don't buy a home that you can't afford.  Don't buy a home if you might be moving to Washington D.C.

However, if it makes sense for you to buy a home in the next year, then I'm talking to you.  HURRY UP!  You might not find a home.  You might decide not to buy after meeting with a lender or real estate agent (I know a good one by the way).  But if you want to have the option, ACT NOW, or the decision will be made for you.

And if you're a seller, the time-line is even tighter.  Do you want the buyers rushing to find a home before the deadline to have your home to choose from?  Or do you want to miss the boat? 

Not sure what your home is worth (who is anymore?)?  Not sure if your home is in the price range first time buyers are looking in?  Not sure if you should replace that shag carpet and flocked wallpaper?  It's time to figure it out.  Call your agent this week.  Did I mention I know a good one?

I’ll List Your Home For Free!

Let's save money  Will_work_for_food 

There have always been choices when it comes to hiring a real estate agent.  From do it yourself brokers that put your home on the MLS with pictures you provide for an upfront fee, to full service companies that charge up to 7% of the sale’s price.  Then within each company there are many different agents with different styles, experiences, talents, and ethics.

It’s a lot for the consumer to sift through.

I want to discuss one of the options:  Free.

There are several companies and agents who are trying out a plan where they charge no commission to list your home.  In turn you must agree to work with them on the purchase of your next home, where they will be paid a cooperating commission from the listing broker of that home.

And they do everything a full service agent does, except for open houses.  But you are free to hold your own.

Yeah, right.

Trust me.  Don’t expect them to do anything other than put your home on the MLS and put a sign in your yard.  And they may charge a fee for that much.

Here’s why I don’t like it:

1)        It’s not free.  You still have to pay the cooperating broker that represents the buyer.  That’s typically 2.7%.

2)       You’ve now entrusted what’s most likely your most valuable asset to someone who has told you that what they do is of no value.  If it was of value, they would charge you for it.  I’m willing to cut your hair for free.  Any takers?

3)       Saving $6,000 in commission and then selling your home for $10,000 less than a good full service agent could negotiate for you is hardly a deal.

4)       You have a no-value, limited-service agent on your side.  The buyer may have a full-service, full-value agent on theirs.  Good luck.

5)       The financial incentive of your agent is not connected to the price of your house.  It’s only connected to the price of the next home you buy.  Their best case is to under price your home and sell it quickly at minimal expense to them. 

And remember, I’ll LIST your home for free too.  But I will charge a commission when I SELL it.

Stock Market vs. Real Estate Market

Heard any news about the real estate market lately?  It’s for real. Prices are lower. Homes are being foreclosed on. The bad mortgages are affecting everything in the financial markets. But are houses really the worst investment you could have made?

Since 2001, the average price of a single-family home in Nokomis has gone from $170,066 to $222,542. In Longfellow, the average price was $155,226 in 2001 and $192,772 today. And that number doesn’t consider that many foreclosed homes in rotten condition are skewing the numbers lower. In the same time, the Dow ended up right where it started. Simply, your investment did better in the housing market than it did in the stock market.

But that’s not the whole picture. How many memories have you made in your home? How many have you made in the stock market? Remember that time that you had your entire family over to your stock portfolio for Thanksgiving? Remember your first Christmas tree in your stock portfolio? Remember watching the snow fall out the window of your stock portfolio? No matter how cold it got, your stock portfolio always kept you warm at night.

You don’t have to invest in the stock market. But you do have to live somewhere. And in the long run, it’s better to own that home than to rent it. That doesn’t mean you should buy a home you can’t afford, or buy any home before you can afford it. But the dream of owning your own home is still a valid one. But if you treat it like the stock market and think that you can buy and sell at will as you try to build your fortune, your dream will return the favor just as reliably as the stock market. But put your dream of family and love into that home, and it rarely disappoints.