Real Estate Market Update - Montgomery County, MD

A review of the current Montgomery County market statistics confirms what most people already know: it's still a buyer's market. Inventory is up almost 15%, and median price is down to $410,000, about 8.5% from May 2007. Number of sales is down 33% from 2007, and days on market is up 24% from a year ago.
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Does this mean buyers should wait? Maybe. As always, it depends on your personal circumstances. However, with the passage of time comes the uncertainty in the lending market. Just in the past year, we've seen the elimination of 100%, 95%, and even 90% financing in many cases, meaning much larger down payments for buyers. We've seen higher interest rates, stricter credit requirements, and fewer loan options. Though FHA has become a viable option thanks to higher limits in our area, the loan limit of $729K remains temporary through the end of 2008.

Waiting might bring lower prices, but with the looming threat of inflation, high rates become more and more likely, and unless you have large cash reserves AND outstanding credit, changes in credit guidelines may surprise you (would anyone be surprised if 20% down payment requirements again became the norm given how badly banks were burned by defaults??)

Further, market statistics may be lulling buyers into a false sense of security that time is on their side. Similar to Arlington (see my 2007 Post: Some Sellers Do Get It, and Get It in 30 Days) the average days on market in Montgomery County of 103 is very misleading, and buyers may be fooled into thinking they have plenty of time to think about whether or not to make an offer on that house that they love.

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A review of the successful sales in May reveals that over 1/3 of the homes that sold were on the market less than 30 days, and almost 2/3 were on the market less than 90! Then, as with every market in our area, there are the homes with sellers that drop and drop and drop the price to what is eventually the 'correct' price, and they sell sometime in or after the 4th month.

As I've mentioned before, once a buyer sees 10-12 homes in a given neighborhood, it becomes pretty easy for one to identify the 'value priced' homes, that is, that 1 in 3 that will sell quickly. The issue for buyers is that all the other circling buyers out there recognize it too, and at least some of them will jump on the opportunity when they see it.

Montgomery County is a big place, and it's unfair to paint the entire area with one brush. Contact me to discuss the neighborhood you have your eye on, and to see whether it's one that is following the trend, or whether waiting may not bring as much benefit as you hope. After all, an average is made up of points higher and points lower--see where your dream neighborhood falls in the range.

Interested in learning more? I will be teaching a free, one-house first time home buyer class at Montgomery County Library on July 31st at 7:30. We will be covering a general market overview in addition to the mechanics of the home buying process, including tips and tricks. There is no cost to attend, but registration is required. Contact me to sign up.

Local Free Summer Concerts

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There are a multitude of free events in our nation's capital, including free summer concerts every day of the week! Some of the most popular include jazz in the Sculpture Garden on Fridays, the Marine Band on Tuesdays, and concerts in Reston, Silver Spring, Strathmore Hall in Bethesda and more. No matter what day you're looking to go out, you can find some live music to enjoy.

How Do I Start My Home Search?

If you read my recent post "Why I May Not Be Able to Represent You" then you know that it's imperative that you choose an agent early in your home search process. But what happens when you meet with an agent for the first time?

Everyone is different of course, but here is a general idea of how many of my first meetings with clients go. Typically, we'll spend about an hour to go over the basics:

1) Go over the home purchase process.

2) Get an idea of needs vs. wants (i.e., 'must haves') - Bring any listings that you are already interested in.

3) Discuss neighborhoods, what you get for the money, etc.

4) Discuss the financing process. Before we go out to look at properties, you will need to be pre-approved by a lender. If you have already spoken with a lender by this point, bring your Good Faith Estimate(s) and I will go over some key points on them.

We'll also briefly discuss buyer agency agreements, and our mutual obligations.

Depending on the situation, we may even go out to tour properties following this initial meeting. If not, then we'll work together to identify some properties that might fit your needs. If/when we have a few properties (about 6-8) that you wish to view, we'll set up a block of time that we can go see them.

I find that most buyers need to see 8-10 properties (through a combination of open houses and agent tours) in a given neighborhood before they have a good idea of what they like and what they get for the money. Typically during our first few weeks working together we get you "caught up" to homes that are already on the market. Following that, it's easy to keep up to date and see what's new via open houses and brief (1-3 property) tours.

The search process may take longer than you think, though it varies widely by person. The search process itself takes anywhere from a few weeks to a few months. I've had buyers make an offer after just one or two days of looking--it's part focus, part preparation, and part luck.

From contract to settlement (for loan processing, appraisal, home inspections, etc.) then takes 30-60 days additional. You should count on at least 3 months from start to finish.

Shoot me an email today if you'd like to discuss starting your search!

How do you know if your listing agent is doing a good job?

I was out showing homes this weekend and I went to a community to see 3 townhouses on the same street. I reviewed the showing instructions. The first house had instructions to call a showing service, which I did, to receive the combination to the lockbox. (As an aside I HATE combo lockboxes…it’s such a disservice to the seller…there’s no record of who came by and when, and no way to tell how many people have the combination. But I digress.) The other two were labeled ‘show anytime, electronic lockbox’. I dutifully took my buyer—who, by the way, is pre-approved and ready to write an offer as soon as she sees something she likes—only to find that the two ‘electronic’ lockboxes were actually combination lockboxes. No combination listed in the MLS printout. I called both agents and got voicemail. We walked around the community for a few minutes, then left. Later that day I got a call from one of the agents with the combination. I never did hear from the second. And my client? She decided to buy somewhere else.

It’s really too bad that there isn’t a standard level of service provided to—and expected by—sellers. Here is a short list of questions to ask and ways to check up on your quality of service:

1. Does your property have multiple pictures in the MLS? Have you looked at them? Too many times I see a picture taken with a point-and-shoot that is really a picture of the furniture rather than the room. You can’t get wide enough angles from a run-of-the-mill camera. Buyers DEMAND pictures. I work with a LOT of buyers, and they assume that something is wrong with the property if there are no pictures.
2. Is there an electronic lockbox (this is for the seller’s safety)? Does it open properly (Ask your agent to check periodically...I tried to show one last week and the box wasn’t working so we weren’t able to get the keys.) Are there keys in it? (Yes, I’ve had this happen, too, when trying to show a property to a buyer.)
3. Web Site – Does your property have its own website (e.g., www.1225NStreet.com) These sites aren’t for search engine ranking, but rather for your marketing materials—the brochures, the open house ads, the signs. Buyers want as much information as possible. Buyers DO look at these sites (my listings get dozens of hits per day), and they show them to their friends for opinions, and I want buyers spending as much time as possible looking at information about my listings versus others.
4. Open Houses – I’m a big fan of open houses. (See my open house post here.) Any agent who says “No one buys off an open house” is WRONG. I’ve had several of my buyer clients buy a house that they saw for the first time when it was held open, and I sold one of my listings to someone who saw it at an open house. Do you want to be denied that chance? Make sure the ad in the paper has your property’s web address (see #3) in it – buyers are more likely to make the time to see your home if they’ve seen it online and the pictures are good—see #1. See how all of these fit together to form a marketing strategy?
5. Updates – Make sure you get a full market analysis from your listing agent at least every week. Market conditions change, and it’s important that you know what your competition—those other listings—is doing.

This is just a brief list of some of the most common mistakes (or, dare I say, lack of effort) that I see out there. Make sure you optimize your chances of selling by demanding the best from your agent.

To discuss what I do in addition to the above for my sellers, email me.

Read more: Open Houses and Route Optimizer

Read more: 5 Mistakes Listing Agents Make

Why I May Not Be Able To Represent You

When someone calls me to tell me they want help writing an offer and they already know what property they want, my heart sinks. Seems counter-intuitive, right? I had to turn down two qualified buyer clients so far this year. I really wanted to work with them, and they each really wanted to work with me. What gives?

Both instances had procuring cause issues. Procuring cause is the legal term that gives a buyer agent the right to claim the person as their client, and therefore claim the compensation due in the sale. The agent must cause the buyer to procure the property—and only one agent can be a procuring cause for any given property. Interestingly, procuring cause has very little to do with whether or not a buyer has signed a buyer broker agreement, which leads to some very unfortunate circumstances like I experienced.

In the first case, the buyer had contacted the listing agent (who represents the seller) to view the property. The agent went on to recommend a lender, and discuss specifics of what an offer might look like in terms of a proposed offer price, settlement date, inspections, etc. (This brings up another pet peeve of mine—dual agency. I’ve yet to have someone explain to me how a single agent can best represent both the buyer and seller in a single transaction. You can deal honestly of course, which one would hope an agent would do regardless of whom they represent, but to fully represent the best interests of both sides seems impossible to me. That’s why many states have made it illegal.) This buyer did NOT sign an agreement with the agent, but nonetheless had an implied agency agreement due to their interactions, which prevented me from representing her.

Moral #1: Do NOT call the listing agent to view a property you’re interested in—you may inadvertently restrict your representation options later. Wait for an open house, or better yet, find your own buyer’s agent.

In the second case, the potential client again reached out to me to ask me to represent him. Unfortunately he had already seen the property—new construction—on which he intended to make an offer. He had seen the property with another agent he had been working with, but whom he now did not wish to be represented by. Again, no signed agreement was in place. But merely by being accompanied by this agent to the sales office, he was now ‘registered’ with this agent. He did it exactly right by registering with an agent—sales offices are notorious for now allowing representation later if you don’t, but unfortunately he decided he just didn’t work well with this agent. But my hands are tied—the other agent is his registered agent, at least for purposes of that particular property.

Moral #2: Choose your agent carefully. You may not be able to change later, with or without a signed agreement.

In both of these cases, the agent is reasonably seen as the procuring cause—that is, the agent who took significant steps to help the buyer procure the property either by providing access, assisting with process guidance, or simply being present at time of registration. Which is why my heart sinks a little bit whenever someone calls me to ask me to represent them and says ‘and I already know which property I want.’ Because chances are that I can’t help them, as much as I’d like to.

Procuring cause gets very complicated. It doesn’t mean that once you start working with an agent, you’re locked in even if you didn’t sign anything. Assuming you are not bound by a written contract, you can begin working with another agent. It just gets a lot trickier (though not impossible) if you end up buying a property you saw with the first agent.

If you’re concerned that you have unwittingly created an implied agency relationship, talk to the agent, or if you’re uncomfortable, the agent’s managing broker. Or barring that, the agent you then wish to engage. It’s quite possible that the first agent will ‘release’ their right and you can move on as you wish. Or alternatively, the old agent and the new agent may be able to work something out. Of course, the best thing to do is, right at the beginning of your search, choose an agent with whom you’re comfortable, but hindsight is 20/20 in that regard. I encourage potential clients to get me involved as early in the process as possible—even if your purchase is many months away. Better to have a patient advisor (I have clients who have been looking well over a year!) than to be denied the representation you want later.