Smart Moves

A divorcing couple in suburban Maryland is under pressure from a court order to sell the contemporary house they bought a half-decade ago, when their marriage was still intact. Their decree requires them to accept the first reasonable offer they receive in their very tight housing market.

Just days after the house went up for sale, a pair of scientists put in an offer on the four-bedroom place, built in 1958. Knowing the house needed work -- including new kitchen cabinets -- they refused to go over asking price. They also insisted on the right to a full home inspection with the chance to back out if serious issues were discovered.

“We’re not naive. We know this house is a real fixer-upper that could cost us boatloads of cash. So getting a thorough inspection is paramount,” says one of the buyers.

The couple are still awaiting the owners’ response to their bid. But meanwhile they’re continuing to search in their favorite area, where available inventory is exceedingly scarce.

Danielle Hale, chief economist for home listing service Realtor.com, doesn’t know the buyers in this true story. But she’s not surprised by the dearth of available listings in popular U.S. suburbs.

“Existing homeowners, many of whom were able to refinance at record lows, are sitting on a really good situation right now. Their payments are low. Their mortgage rates are low. There’s not as much incentive as there normally would be to get out and decide to make a move,” Hale says.

Granted, people are still moving when they face life changes, including marriage, divorce, childbirth and major job transitions. Others are selling when financial or health reversals compel them to do so.

“People are still moving but just not at the same rate as we saw before. We still expect 4 million home sales this year. And as people see their equity increase, there will be a gradual return to a more normal market,” Hale says.

Many homeowners with low-rate mortgages are now weighing the pros and cons of making a move in the current market versus waiting for a decline in rates. One way to help set the timing of your sale is to engage an agent to advise you and to handle your listing when you do go forward.

Here are a few pointers on finding that seasoned pro to advise you:

-- Interview at least two to four potential listing agents.

Without interviewing other contenders, you may be tempted to hire the first agent who comes recommended. But Ron Phipps, a past president of the National Association of Realtors (nar.realtor), says it’s still wise to interview other candidates.

“When you talk to several people, you’ll get different perspectives on your sale,” Phipps says. “Several opinions on pricing can be especially helpful.”

He warns that you should be wary of any agent who suggests you list your place for more than 10% above what others say is its fair market value.

“Find out how they arrived at that higher price,” says Phipps, noting that occasionally some agents may suggest an above-market list price to try to flatter you into hiring them. This practice is known as “buying the listing.”

-- Look for an agent with local knowledge.

Your cousin or that highly recommended friend-of-a-friend might be an excellent agent. But should you consider hiring this person if their office is located a significant distance away from your place?

Absolutely not, says Eric Tyson, co-author of “House Selling for Dummies,” who contends that a faraway agent is likely to be much less effective at marketing your property than one who knows your local turf well.

“Anyone who works more than a 15-minute drive from your place is probably a very poor bet,” he says.

It’s especially wise to have an agent close by if you’re trying to sell a property in a city setting, such as a condo in a high-rise building. In such a case, the ideal agent is typically someone with proven experience selling units in your same building.

“Agents with an intimate knowledge of the floor plans and sales history of your complex can hit the pricing target right the first time. That spares you the agony of multiple pricing adjustments later,” Tyson says.

Agents who say they handle your area should be able to demonstrate this with a list of transactions they’ve done there recently.

-- Ask for information on each candidate’s awards and honors.

How can you identify agents who have achieved an unusual level of expertise? Phipps says one way to distinguish among agents is to ask if they’ve been elected to positions of leadership within their professional groups.

“This shows they have a reputation for collaborating with other real estate people,” Phipps says.

-- Choose a pro with a proven record of closing deals.

During boom times, most sellers feel home free once they’ve obtained a ratified contract, meaning their deal has been agreed upon by both sides of the transaction.

But in a transitional period like the current one, many sellers are understandably nervous that complications along the way to closing might jettison their deal. That’s because qualifying for a mortgage is trickier than it was a few years ago when mortgage rates were lower.

“Selling has become much more complicated. So it’s smart to find an agent with experience handling many different kinds of transactions. Look for their record of closing deals, not just taking listings,” Phipps says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Though the worst of the pandemic is behind the country, its aftereffects are still being felt. That’s a reality for many spheres of society -- including housing.

The enforced isolation of COVID-19, with all the loneliness that entailed, has resulted in a “resurgence of interest in close-knit communities among homebuyers,” says Kate Foster-Bankey, a longtime real estate agent for Compass, the national brokerage firm.

Buyers in the millennial age cohort -- born between 1981 and 1996 -- are especially keen on walkable neighborhoods that promote interaction. These are strongly preferred over traditional suburbs, which millennials consider isolating.

“Walkable neighborhoods give residents easy access to coffee shops, restaurants and grocery stores. Millennial buyers want quick access on foot to buy the basics -- including milk, eggs, beer and wine,” says Foster-Bankey.

In addition, she says millennials are driven by the quest to live near open spaces and parkland -- in large measure because many are now so enamored of having pets and particularly dogs who need outdoor space to romp.

A recent survey by the National Association of Realtors (nar.realtor) found that Americans indicated a strong preference for walkability.

“With COVID in our rearview mirror, this study shows that a substantial demand for walkability persists for Americans of all ages,” says Kenny Parcell, the organization’s president.

Sidewalks and other amenities for walking proved “very” or “somewhat” important to 85% of the respondents in the association’s survey. And 90% of those from the millennial and Generation Z age groups said they would pay more to live in a walkable community.

Gabrielle Bosche, who heads a consulting group on millennial issues, says many young adults appreciate a more communal lifestyle than did their baby boomer parents.

“Millennials grew up in the suburbs as latchkey children. They lived in group houses in college and after. They’re steeped in social media but want authentic interpersonal relationships,” says Bosche, the author of “Five Millennial Myths.”

Here are a few pointers for millennial buyers:

-- Question whether square footage is the key for you.

Bosche says “millennials are not only buying at a later stage, but they also have different markers of success.”

She notes that “many boomers measured success in terms of the size of their house. They bought large houses in the suburbs with lots of land. But millennials will easily sacrifice the big yard and spacious interior to live close to the action of a walkable town or city.”

-- Consider a town house versus a detached property.

Marc Angelo, a real estate broker in Portland, Oregon, says his millennial clients would rather buy a diminutive town house in a lively city neighborhood than an equally priced but much larger detached property 10 miles outside the city.

“Young buyers want to live around people with energy and ideas -- a place where they can walk to a grocery store and restaurants. To get all that at an affordable price, a town house can be the perfect solution,” Angelo says.

-- Don’t overlook the importance of adequate parking.

Newer town houses are typically built to give each unit a one- or two-car garage. That means your own parking needs should be met. But what about the visitors to your home?

“It’s important for town house owners to feel confident that their friends and family members will not face lots of hassles when they come over to visit,” says Tom Early, an independent real estate broker and past president of the National Association of Exclusive Buyers Agents (naeba.org).

He recommends that the best way to scope out the parking situation near a town house is to ask those already living there about their experience with parking in the common areas of the complex.

“You should get unvarnished opinions about all the pros and cons of life in the community through informal conversations with the neighbors there. It can be particularly helpful to go back to the area without your real estate agent at your side,” Early says.

-- Rule out a noisy community.

Angelo cautions buyers to make sure they don’t choose a city neighborhood that’s noisy and crowded on weekend evenings.

“That hip neighborhood near bars and clubs could seem calm on a weekday afternoon when you’re touring (the) property. But come back to visit on a Friday night and see if you’d actually be at ease living there during party hours,” he says.

-- Always remember that a strong location is paramount.

It can be tiring to hear that location should beat all other factors when it comes to the selection of real estate. But this principle remains true, says Eric Tyson, a personal finance expert and co-author of "Home Buying for Dummies.”

What constitutes a location where you can reasonably expect strong or rising property values? Tyson urges you to look for a neighborhood served by high-quality public schools, even if you have no plans for children.

Granted, many millennial homebuyers are not focused on the investment potential of the property they buy now. They’re assuming their next property will be their “forever home.” But to obtain a property with strong resale potential, buyers should always look beyond their own years of tenure to the time when they will sell.

Besides walkability, there are other key factors that will determine whether the place you buy in 2023 will appreciate years later. These include the quality of local government in an area, along with its crime statistics.

“For real estate, one reality remains constant through time and economic cycles. That is that location tops all other factors in defining value,” Tyson says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

After her successful treatment for breast cancer, a photographer in her 50s was in a celebratory mood. An ardent cook, she embarked on a major renovation of the small kitchen in her modest town house. Ultimately the work -- which involved high-end black appliances and custom cabinets -- cost more than $80,000. But when it came time to sell the town house the next year, she recouped only a fraction of the funds spent.

Mark Nash, a longtime real estate broker, doesn’t know the photographer in this true story. Still, he says it’s not uncommon for homeowners to overspend on presale upgrades.

“In desirable areas, available homes are now in painfully short supply. But that doesn’t mean the sky is the limit on what buyers will pay for your overdone improvements. Most buyers are pinched on affordability. They’re in no mood to shell out needless cash,” says Nash, the author of “1001 Tips for Buying and Selling a Home.”

Many would-be buyers hoped that after the pandemic, home prices would fall enough to put more properties within reach -- despite higher mortgage rates. But that hasn’t happened, says Andrea Chopp, an agent for Redfin, the national real estate brokerage.

As Chopp notes, “a lack of homes for sale is keeping prices afloat.” As of the end of June, new listings had fallen 27% from a year earlier. That resulted in a mere 1% drop in average home prices to $383,000. Meanwhile, bidding wars are still happening in some popular areas.

“Buyers should keep in mind that desirable homes are getting multiple offers and selling above asking price,” she says.

Despite strong demand from buyers, Chopp cautions sellers against hubris about the condition of their property, because “making small repairs and staging are important again.”

What’s not needed is the level of spending the photographer did to upgrade the kitchen in her modest town house with custom cabinetry and appliances.

“When it comes to presale improvements, classic cases of overkill include projects that involve tearing out walls or building on additions. These days, there’s no need to spend a fortune to get your house sold,” Nash says.

Danielle Hale, chief economist at Realtor.com, the home listing service, reminds sellers about the continuing housing crisis affecting many young adults.

“We expect prices to continue to soften, but not by that much,” she says.

Here are a few pointers for sellers:

-- Seek advice from local real estate pros.

Even if you have no intention of selling immediately, Nash recommends against signing any home improvement contract until you’ve asked for the advice of someone who’s sold real estate in your neighborhood for at least five years. That person should tell you how much of a project’s cost you can expect to recoup.

Those who are unsure how long they’ll stay in a home are often hesitant to ask a real estate agent for advice until their selling plans are solid. But Nash says a reputable agent should be happy to help, even if you have no idea when you’ll sell.

“Another plus is that good agents from your local market should be in touch with contractors. They know folks who can handle any work you decide to do smoothly and expeditiously,” Nash says.

-- Review neighborhood standards.

Tom Early, a real estate broker who was twice president of the National Association of Exclusive Buyer Agents (naeba.org), says current home purchasers are especially resistant about paying for renovation work that raises a property above local norms.

“After the Great Recession way back in 2008, recovery came to most real estate markets. But buyers are still totally resistant to overpaying. That means they won’t bail you out if you outstrip your market,” he says.

What sort of upgrades constitute “over-improvement”? For example, Early says you wouldn’t be justified to install expensive antique light fixtures in a neighborhood of starter homes. Likewise, you couldn’t recoup the full cost of building a three-car garage in a community where most homes have no garage at all.

-- Move slowly when seeking to renovate.

As many homeowners realize too late, a thoughtlessly done presale renovation can hit the wallet hard.

“It’s super easy to overspend on renovations. And you’re most at risk of overspending when you rush the process,” says Sid Davis, author of “A Survival Guide for Selling a Home.”

-- Reduce your losses on projects that prove too extensive.

It didn’t dawn on the photographer that she was spending too much on kitchen upgrades until her $80,000 kitchen project was underway. But Davis says she should have paused the project once she realized she was overspending.

When it occurs to you that you’re spending excessively, Davis recommends you contact all your contractors to negotiate your way out of expensive upgrades. For example, you might decide to cancel top-brand bathroom and kitchen fixtures in favor of something more generic.

“Average buyers don’t care if they get super fixtures or appliances in any given room. It’s the overall house that they’re looking for -- not perfection in every room,” Davis says.

Real estate agents often recommend less-expensive products than those suggested by contractors. For example, you might not need high-end Berber carpeting for your family room when a midgrade carpet would do just as well.

“Even if you’re compelled to pay penalties to back out of some work, you could ultimately save money by dropping the most costly elements of your renovation plan,” Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)