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Why Atlanta is one of the top markets for the iBuyer home sale model

By Martin Sinderman  – Contributing Writer

Jan 31, 2020, 6:50am EST

Atlanta is one of the top four markets for sellers utilizing the iBuyer model, which offers a guaranteed sale price in exchange for a “no-hassle,” rapid transaction.

Traditional agents say the rise of the iBuyer model, which is largely driven by investors, is causing an ongoing shift in the residential real estate market, whose effects remain to be seen.

Companies like Opendoor, Offerpad, Zillow and Redfin, which arrived on the scene around 2014, pay sellers cash for homes, based upon internal models, in transactions that frequently close in a matter of days. The iBuyer companies then fix up the purchased homes and resell them on the open market. They make money from service fees charged to sellers, plus the difference between what they paid for a house and what they sell it for.

In Atlanta, iBuyers accounted for 4.4% of the homes sold during the third quarter of 2019, ranking third among 18 U.S. markets where iBuyers were most active, after Raleigh (6.8%) and Phoenix (5.1%), according to a Redfin analysis of the public data on home purchases and sales made by Opendoor, Zillow, Offerpad, and RedfinNow.

The markets where iBuyers were doing the most business in Q3 2019 were those where the typical home was priced at or below the national median ($313,200 in October), Redin found. Focusing on this price segment allowed iBuyers to purchase more homes with the same amount of money, it said. And because affordable homes tend to sell more quickly than more expensive homes, iBuyers can move their housing inventory and buy additional homes more quickly, according to the analysis.

“iBuyers are concentrating their efforts in southern markets where both home sales and prices are poised for strong growth,” Daryl Fairweather, Redfin chief economist, said in the analysis results announcement. “We think that iBuyers are likely to accelerate home sales in these markets.”

Nearly 10% of Opendoor and Offerpad sales came from institutional investors in 2018, according to ATTOM Data Solutions. These institutional investors may be turning to iBuyers as a source of inventory as other sources of inventory such as foreclosures have largely dried up in recent years, the property data company said. Institutional investor purchases represented just 2.3% of all U.S. home sales as of Nov. 29, 2018, down from 2.9% in 2017 and down from a peak of 7.4% in 2012, according to the ATTOM analysis.

HIRING IN OPERATIONS MANAGEMENT

Opendoor launched in metro Atlanta in June 2017 and has already served over 7,500 buyers and sellers, said Jay Cherry, Opendoor Atlanta General Manager.

“Atlanta has the growth potential, economic fundamentals, demographics and housing stock that make it an extremely strong market for iBuying,” Cherry said.

“Atlanta is an attractive market for iBuyers because homes are relatively affordable, and many neighborhoods were developed over the past few decades,” he said. “The iBuyer business model relies on accurate home value estimates. A few percentage points off means the difference between making and losing money on a home. It’s much easier for an algorithm to assess a home in a neighborhood that has many homes of the same age and model, rather than an older home with distinct features.”

Atlanta homeowners have responded to the iBuyer concept, Cherry said. “What Opendoor, and iBuying as a category, are able to offer is a vastly more convenient experience that gives the customer control of their timeline, which is why it’s taken off in Atlanta,” he said.

Kelly Rosen, a Realtor with Solid Source Realty Inc., a residential real estate organization based in Roswell, said she runs into iBuyers quite frequently and that “iBuying has probably impacted sellers in a positive way.”

“Because inventory in our market is so tight, with not enough affordable houses out there, iBuyers serve a purpose — they allow people who want to downsize or upsize the ability to quickly sell their house without listing it, bypassing the market,” said Rosen.

“These companies snap up the houses, and then relist and generally sell them pretty quickly, because they are typically the more affordable homes,” she notes.

Providing a vehicle by which a seller can unload a home quickly, and then be able to respond promptly to buying opportunities is good business for iBuyers in today’s market, according to Rosen. “Data shows that a seller, at least most of the time, winds up giving up some equity to these buyers,” she notes.

Convenience comes with a price, said Torrence Ford, broker/owner of Atlanta’s RE/MAX Premier Real Estate Brokerage.

“Statistics show that sellers get as much as 16 or 17% more on their houses in the open market” than they get from iBuyers, Ford said.

“Even though they [i.e., the iBuyers] will guarantee you an offer, their offer price is usually a number that, when they inspect your home, will get lowered by as much as $15,000,” Ford said. Customers dissatisfied with this can switch to a more traditional listing contract with one of the agents of the iBuyer, he notes. “So what the program is doing is almost a bait-and-switch to get sellers to give an iBuyer agent a listing.”

An iBuyer acquiring a house and turning into a seller “changes the entire process for homebuyers,” Rosen said.

“Normally, when you work with a buyer and a traditional seller, there is a negotiating process,” Rosen said. “But when you have a buyer that wants to buy a house from an iBuyer like OpenDoor or Zillow, for example, it becomes a pure numbers game.”

The rise of the iBuyer has caused some agents to put more emphasis on client education, services, and providing a personal touch.

“The iBuyers are telling the general public that they can save sellers a lot of time and stress that comes with putting a house on the open market,” said Ford, “but the truth of the matter is that they are going to take that house, buy it at a discount, do their own renovation and then resell it.”

With the rise of the iBuyer in today’s market, “We are in a little bit of a shift,” adds Rosen, “and time will tell if someone like me who prides themselves on relationships and providing superior services gets cut out because of iBuyers.”

Rosen said that as home resellers, iBuyers “often, when they put a house on the market, they will not negotiate at all — you either pay their price, or they will keep it on the market, depending on how long it has already been there.”

“Their agent’s attitude is typically ‘take it or leave it,’” according to Rosen. “They don’t understand the personal investment and emotions involved in the homebuying process, which makes our jobs [working with a buyer] much more difficult.”

Ford agrees, noting that once the homeowner understands the pluses and minuses of the iBuyer transaction, “then is where you show them that you understand that this has been their family home for 30 years — and how you can help them to renovate their home.”

Ford has worked with Potomac, Md.-based Curbio Inc., which has been active in Atlanta for about nine months. “They will partner with a seller and renovate to today’s standards for no money up front, and will get paid when the house sells,” Ford said. “Companies like that are one of the things that have enabled me to stay competitive with the iBuyer.”

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Make Your Bedroom an Oasis and Go the “F” to Sleep

According to literally every doctor and just common sense, getting enough sleep is one of the most important things you can to for your health. The NIH says that inadequate sleep can lead to obesity, diabetes, high blood pressure, cardio vascular disease, and depression.  It’s also important for safety, which is why there is a significant uptick in accidents and heart attacks on the Monday after daylight savings. So what does that have to do with houses? Turns out, your bedroom has a major impact on how well you sleep. Here is how you can optimize it.

  1. Get rid of the TV. Save everything but sleeping/sex for the bedroom so that your body knows exactly what it is doing when you go to bed. Turns out that mindless tv isn’t actually that mindless. Same thing goes for scrolling through social media when you get into bed.
  2. Get blackout blinds.  Scientists say  that light pollution from our environment has a seriously negative affect on our health, and that just turning off the lights in the house isn’t enough to tell our bodies that it is truly night. Your body  knows to rest when it is dark, so it is no surprise that light in the bedroom or peeking in from outside has an impact on your sleep, suppressing the production of melatonin and making it harder to fall and stay asleep.
  3. Make your space ideal for sleeping. This means decorating with cool colors, decluttering as much as humanly possible, and making your bed everyday. We tend to think of making our beds as a routine morning chore, but it turns out the ritual may be more meaningful than that. The results of a recent Bedroom Poll by the National Sleep Foundation found that people who reported making their bed in the morning were 19 percent more likely to get a good night’s sleep every night. Many people believe clean, neat and comfortable elements of the bedroom environment are important to getting a good night’s sleep.
  4. Get a fancy sound machine. It’s crazy how white noise can help you turn off your brain. According to the National Sleep Foundation, while you sleep, your brain continues to register and process sounds on a basic level. Noise can jostle your slumber—causing you to wake, move, shift between stages of sleep, or experience a change in heart rate and blood pressure—so briefly that you don’t remember the next morning. White noise works by reducing the difference between background sounds and a “peak” sound, like a door slamming, giving you a better chance to sleep through it undisturbed. If you have difficulty falling asleep or staying asleep, creating a constant ambient sound could help mask activity from inside and outside the house.
  5. Make the bedroom cooler. Many sleep experts say that a cool room, somewhere around 65 degrees, makes for the best sleep, and research backs this notion. During the course of a normal day, your body temperature rises and falls slightly. This pattern is tied to your sleep cycle. As you become drowsy, your temperature goes down, reaches its lowest level around 5:00 a.m., and climbs slightly as morning begins. This is why the air in your room can affect the quality of your sleep: if it’s too hot, it may interfere with your body’s natural dip and make you more restless through the night. In fact, studies indicate that some forms of insomnia are associated with an improper regulation in body temperature. Of course each of us has a slightly different optimal temperature for sleep, so experiment with keeping your room cool and find what makes you most comfortable.

Besides just being a place where you spend some time, your home and how you design it has a huge impact on your health. It’s up to you to decide whether that impact is going to be positive or negative.

Written by Kyle Barber @ Dart Homes.
Here’s the link to the original article.

 

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Which Offer Should You Choose When Selling Your House?

We came across this gem of an article, written by our friends at Trulia.

It breaks down some some things that Sellers should consider when determining which home offer to accept:

THE BEST OFFER ISN’T ALWAYS THE HIGHEST ONE
When you have a home for sale, you may receive multiple offers from prospective buyers. So the smart move is to pick the highest one, right? Not always. Price is just one of many considerations when deciding which offer is best for you and your home. Here are some of the other factors that matter when selling your home, and how each one could affect your choice.

THINGS TO CONSIDER IN A HOME OFFER

Contingencies
Most buyers include some contingencies with their offer. Contingencies are things that must happen in a set period of time in order for the deal to go through. For you, the fewer contingencies and the shorter the time period, the better. The most common contingencies are inspection, financing, and appraisal. With an inspection contingency, the buyer can back out if an inspector finds a major problem or too many issues with the home. A finance contingency lets the buyer out if they can’t secure a mortgage, and an appraisal contingency goes into effect if the house appraises for less than the offer amount.

All-Cash Buyer
You typically won’t get the highest offer when the buyer is offering all cash. But this is often the safest offer. “A cash offer is usually more appealing than a finance offer as the seller doesn’t need to worry about whether the bank will approve your loan,” says Sam Heskel, president of Nadlan Valuation, an appraisal management company in Brooklyn, New York.

Buyer Pre-approval. Not many people can pay for homes in cash. So a pre-approval letter is the next best thing. This letter comes from a lender and assures home sellers that the buyer can get the loan they need. “A pre-approval makes the offer stronger than one submitted without a pre-approval,” says Lucas Machado, president of House Heroes, a Florida real estate company. Don’t get this confused with pre-qualification, however. “There’s a substantial difference between being pre-qualified and pre-approved,” says Machado. “Being pre-qualified does not mean you will be approved, as very little vetting of the borrower is done in the pre-qualification process.”

Loan Type. There are many types of mortgages, and some are easier to deal with than others. A conventional loan is often the least complicated type, which makes it an appealing choice for sellers. An FHA loan or other types of government-backed loan can cause delays because they require certain repairs and approvals.

Closing Timeline. You might need to close as quickly as possible to move onto your next adventure. A buyer, perhaps an all-cash buyer who can close immediately, will be most attractive to you. Or you might need an extended closing timeline. If, for example, you’re having a house built and don’t know exactly when it will be ready, a buyer who doesn’t want to close for a month or two might save you from having to move twice.

Closing Costs. Sometimes the offer is high, but the buyer asks you to pay all or a percentage of their closing costs. Closing costs are usually between 2 and 5 percent of the purchase price. In some cases, by the time you pay closing costs, the highest offer won’t get you the most money in the end.

Buyer Letters. If you love your home and are concerned about its future, a “love letter” from a buyer could assure you that you’re selling to someone who will care for the home as much as you did. A love letter lets you know your home won’t go to a developer or other undesirable buyer.

Repair Requests. If the home needs some repairs, but you don’t have the time or money to do them, a buyer who will do them for you might be what you need. Expect buyers to get an inspection report. That’s standard. Some buyers will ask you to fix some things—or even everything—in the report, and some won’t.

Appliances and Fixtures. Do you plan to take your appliances and fixtures with you, such as the refrigerator, washer/dryer, favorite light fixtures, and living room furniture? Then a buyer who doesn’t ask or insist on those being part of the deal might put that offer on top.

Earnest Money. Earnest money is a deposit buyers put down to show they’re serious about buying the house. Typically, earnest money is between 1 and 3 percent of the purchase price—the higher, the better for you. Your real estate agent can tell you what the norm for your area is. You can keep the earnest money if the buyer changes their mind about buying in some cases, such as when there’s nothing wrong with the property, but they got cold feet. The larger the earnest deposit, the more confident you can be that the deal will go through.

Offer Price. Of course, price matters, too. It might outweigh the other variables mentioned above, or it might not. The highest offer might turn out to be your best one, but find out all the details before you accept it. If the high offer seems risky—or will cost you a lot in closing costs, repairs or other factors—then it probably won’t be your best offer.

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10 Ways to Win a Multiple Offer Situation the “Premier Way”

Who would have thought that the market would be where it is today with the minimum levels of inventory. This is lead to a buyers having multiple bidding wars to obtain a home. Here are some successful strategies to assist you in winning your next bid:

1. Strong Earnest Money Deposit-10% usually seals the deal!

2. Short inspection or Due Diligence Period- Three to Five days preferably.

3. Working with a lender that has already provided you with an underwritten approval

4. Adding an Escalation Clauses *See RE/MAX Premier agents for this to ensure that you aren’t over paying for the property.

5. Working with a reputable lender that the listing agent may know about

6. Having the lender call the listing agent the moment your offer has been presented to let them know where you are in the credit/approval process

7. Letting the seller know that your offer is an As-is offer impresses the seller because they know that you will not ask for any repairs thereafter. Consult with your RE/MAX Premier agent to ensure that you aren’t getting any code related defects in the property

8. Adding a stipulation in the contract that gives the owner time to lease back if necessary –This is becoming more common as the inventory levels are staying low sellers aren’t truly sure on where their next move is.

9. Going over asking price- Be sure that your RE/MAX Premier agent includes an appraisal contingency to prevent any discrepancies.

10. Submitting a Buyer Cover Letter to your offer. If not in the form of a cover letter we have had purchasers send Next Day Air heart felt letters to the seller as long as this was within the expiration dates of the original offer.

Happy House Hunting! Let a RE/MAX Premier agent show you how we are selling homes in “Today’s” Market!