There is NO Bubble Here!

Recently, a very sweet client who is an avid reader of our newspaper (thank you for both being a client and reader) wondered if we would be doing an article soon about preparing your home for sale.  I told her that would-be buyers and sellers are so concerned about the state of the market, that lately we have devoted every issue solely to that subject.  Ever since the debacle of the “housing bubble” over a decade ago, it is understandable that consumers need reassurance that our recovered market is NOT a new “bubble”.  Fears are best addressed by facts, so for those who need reassurance that we are not in a second bubble we will address that.  But for those who are considering selling and would like some advice on what to do to prepare, we will address that as well.

With those promises in mind, first let us examine why we are not in a bubble (i.e. repeating the sins of the past).  No one explains the facts better than Michael Orr of the Cromford Report.  As he points out:

“In some parts of the valley, the market is so hot that a few people have been drawing parallels with 2005 and expressing fear of a bubble. While I agree that the Southeast Valley, Pinal County and parts of the Northwest Valley are much hotter than they have been for a while, the market is more akin to 2013 than 2005. 

I think some people forget quite how ridiculous 2005 was. It was exactly 12 years ago that:

Days of Inventory stood at 28 (currently 85)

Months of supply was 0.9 (currently 2.8)

Annual appreciation rate was 27.9% (currently 6.8%)

Dollar volume was up 43.9% annually (currently up 14.6%)

Listing success rate was 84.3% (currently 81.9%)

Average percent of list for closed listings was 99.16% (currently 97.69%)

New homes sales were 42,724 a year just in Maricopa County (currently 13,958)

The Greater Phoenix market has a long way to go before conditions get bubbly, and we should remember how few skeptics there were in 2005 that the market could ever go down. Now there are skeptics everywhere, which is a very good reason that another bubble is unlikely to develop. The next housing bubble is likely once everyone who experienced the last one has retired or passed away.”

We can only hope we are retired by the next one.  We have been through two housing meltdowns – the first in 1989 when the S&L’s went under, and the more infamous and severe mortgage meltdown that began in August of 2007.  We are hoping 3 is NOT a charm in this case.

Now to our promise to address how to prepare your home for sale, there are some tips that are not surprising but still worth reviewing.  But first, let’s look at the underlying principles that should guide you in prepping your home for sale.  These are – never bring your home significantly above the ceiling for your neighborhood (i.e. don’t over-improve for the basic value of the area) and never spend a dollar to get a dollar.  Any improvements should return in excess of the expense to make the improvement.

Hence, some of the best preparations cost little to nothing.  Here are our suggestions:

Improve your landscaping. Curb appeal is the first impression made upon a buyer and can determine if they even will enter your home. Mow the lawn, prune the bushes, weed the garden and plant flowers.

Clean the outside. A sloppy exterior will make buyers think you’ve slacked off on interior maintenance as well. Be sure to clean the sidewalks and front doors (no cobwebs!)  Replace the front door mat if it looks worn.  Look at the front door – does it need a fresh coat of paint or refinishing?  A new color can make it pop and don’t forget the house numbers so they can be seen.

Remove clutter and depersonalize. Clutter can make a home look smaller visually than it is.  Remember in the buyer’s mind (and the appraiser’s) size is equal to value – so you want it to look open and inviting.  Pack away clutter and make sure furniture is appropriate to the scale of the room. It is also important to depersonalize, but we believe some agents go overboard instructing sellers to have no personal photos of any kind.  We think some well- placed photos are appropriate, but an overload of photos, children’s art and religious symbols can be distracting and impede the charm of the home. Clean up by renting a storage unit if needed for knickknacks, photos, extra or oversized furniture and other personal items.

Organize closets and drawers. Messy closets give the appearance that your home doesn’t have enough storage space.  Box up extra clothing and clutter.  If you cannot rent storage, then pick the garage or one bedroom for boxed items.

Take color down a notch. You might like your bright blue family room, but it may sour buyers. Paint your walls a neutral color that will appeal to a wide range of buyers.  When we are selling a home, we are no longer decorating for the current owner but rather the future owner.

Eliminate bad odors. We can all become a bit nose blind.  Hide the litter box and spray air neutralizer throughout your home.  Make sure your home smells fresh.

Some sellers wonder if they should hire a home inspector prior to placing the home for sale.  If you are concerned that you may have deferred maintenance on numerous items, then it may be worth the money.  On the other hand – addressing specific concerns such as getting the A/C serviced and a roofer if you have roofing concerns may be the better path.  Most sellers do not need to pay for an inspection only to have their buyer get one as well.

In closing, don’t miss the point that differing price points have differing standards.  A $250,000 home will not have the same buyer expectations as a 2.5 million dollar home.  Curious about the specifics of your home?  Our preference is to tour the home with you and make specific recommendations based on your unique circumstances.  As always, we are here to advise and help.

Russell & Wendy Shaw (mostly Wendy)