Winners and Losers in Real Estate

Home Values. Who decides?

How Much Is That Person’s Coffee Mug ( Seller’s Property) Worth?

Why is it more difficult now to bring buyers and sellers together in real estate transactions than just a few years ago? Princeton economist Daniel Kahneman, Nobel Prize winning author of Thinking Fast and Thinking Slow sheds light on this seemingly perplexing question. Take a simple coffee mug for example.

“Kahneman’s work shows empirically what many individuals have long felt when confronted with economic models of rational cost-benefit calculation — people don’t always think rationally, even if they consider themselves rational actors. To give a concrete example, in a classic experiment, Kahneman gave half of the participants a mug and the other half no mug. He and his colleagues then asked how much those who had the mug would be willing to sell it for and how much those who did not have a mug would be willing to pay for one. Those who had a mug were not willing to give it up for under $7; those without one would only pay $3 to buy one. The result? What economists now call “the endowment effect” — individuals value what they have more than what they could have, even though rationally the mug should have the same value whether it is being bought or sold.” WWS News, Princeton University

Sellers and Buyers of real estate naturally exhibit the same tendencies. Sellers frequently value their home or other real estate substantially more highly than prospective buyers do, and more so the longer they have lived in the home or owned the property.  How much is that home worth?  “ It all depends on if you actually have one.  In the Kahneman study the mug owners estimated the value of the mug to be about double what the non-mug owners were willing to pay.  Rational? Maybe not, but that’s the point. Studies like this one, demonstrating that people respond differently to a proposition depending on whether it is presented in terms of a loss or a gain, are part of the 30 years of work that earned Princeton psychology professor Daniel Kahneman the 2002 Nobel Prize in economic sciences.”*

While most real estate sellers don’t usually seek double what the average buyer is willing to pay, there is a natural divergence between buyer and seller perception of value in real estate. A fascinating change occurs however, from the time the owner places their property on the market to the time the property actually sells and that change can be graphed. From the beginning when the seller feels someone would have to pry him loose from his home to the end when he just wants out at any price, his perception of value of his property clearly declines. It is a known fact that every seller will lower their expectations and price over time.

What is that property really worth? In one sense, whatever someone is willing to pay and if no offers are made, that is a sound indication the listed price was just too high.

The Article Below is Courtesy of  www.iBerkshires.com an online news source for Berkshire County MA residents

Berkshire County Housing Market On Upswing

By Stephen Dravis
Special to iBerkshires
07:10PM / Saturday, April 07, 2012

Berkshire County Real Estate as well as Williamstown Real Estate is showing anecdotal evidence of a good start in 2012.

The anecdotes make things sound really good.  “I had two showings recently where the buyers were paying with cash – one was from Boston and one was from Connecticut – and they literally signed a contract to buy during my showing,” said Realtor Paul Harsch of Williamstown, who has listings in Massachusetts, New York and Vermont. “That showed that we had priced these houses well and that they showed really well.

“We’ve written up several contract in the last two to three weeks. We’ve really been busy.”    Although no one is predicting a return to the sellers’ markets before the “Great Recession,” the region shows signs of recovery from the doldrums of 2011, according to sales figures from the first two months of the year.  Data from the Berkshire County Board of Realtors shows that 103 residences changed hands in January and February, 2012, up 5 percent from the same period a year ago.

This Williamstown Home was sold March 2012

In North County, the numbers are even better, with 25 sales in the first two months of this year, compared with 18 in 2011, a rise of 38 percent. North County homes selling from Jan. 1 to Feb. 28 spent an average of 143 days on the market, down from 207 days in the same sales period a year ago, a difference of 30 percent.  The flip side of those strong sales numbers: The median price of a home in North County the first two months of the year was down 54 percent from a year ago, from $193,500 in 2011 to $125,000 this year.  That is the price that sellers pay as the market readjusts to new realities, Harsch said.

“Some [buyers] have figured, ‘It can’t get any worse, interest rates are fabulous and can’t get any lower,’ in terms of timing, it would be hard to argue it will get much better from the buyer’s point of view,” he said. “On the other hand, there are sellers who, for some reason, are not ready to meet buyers at current market values. That has held the market back, somewhat.”

The county real estate market took a hit last year, when the total number of sales slumped to 828, a drop of 5.5 percent from 2010′s pace.

Harsch is not alone in seeing positive signs for the 2012 market.  “I’m very encouraged,” Berkshire County Board of Realtors President Chapin Fish said. “There have been a lot of people showing and people looking. I think there’s a certain amount of pessimism fatigue, and people are ready to move forward.”  Fish, who works primarily in South County, said optimism is not limited to the Berkshires. “I was on a webinar (April 4) with Barbara Corcoran, who founded (Manhattan’s) Corcoran Group, and she felt, and I have to agree, that the low point of the market was four or five months ago,” Fish said. Fish said most of the activity is in the lower-priced homes, but he also is sensing more interest in land, which has been a quiet sector of the real estate market in recent years.

Another hot sector: condominiums.  “Keep in mind, condos represent only about 10 percent of our sales market, but we’ve seen significant gains in the first two months of 2012 in every part of Berkshire County,” Berkshire County Board of Realtors CEO Sandy Carroll said. “Sales jumped 200 percent, dollar value jumped from $164,000 transacted last year to $1.6 million this year, and our median prices are climbing, with a gain of over 15 percent.”  Harsch said the local market benefits from a strong community of local banks that make it easy for qualified buyers to obtain loans.

Sellers, on the other hand, are sometimes hamstrung by existing loans that make it difficult for them to realistically price their homes, he said.  “It’s a difficult and somewhat unwelcome adjustment,” Harsch said. “Let’s face it, no one wants to see their property values decline. But another way to look at it is they’re returning to a norm after escalating in an unprecedented manner from 2000 to 2007.

“We’re returning to a norm, but anyone who bought during the go-go years is struggling with the new realities.”     Full Article link on the iBerkshires News page

Harsch Associates Real Estate is pleased to announce the Spring 2012 recipients of the real estate firm’s Charitable Gifting Program.

Harsch Associates sets aside 1% of its gross pretax income from each sale and the buyer/seller chooses their favorite charity organizations to receive the money. Listing property or buying property through a Harsch Associates Real Estate Agent ensures your

favorite non-profit organization will receive direct support .

The spring 2012 recipients are:

Berkshire Family and Individual Resources,

Berlin Central School District,

Children of Fallen Soldiers,

Cystic Fibrosis Foundation,

Ecu-Health Care,

Flying Cloud Institute,

Greylock ABC,

The Haiti Plunge,

Hancock Volunteer Fire Department,

HooRWA,

Humane Society,

Little Red School House,

Mount Greylock Soccer,

North Adams Ambulance,

Northern Berkshire Community Action,

Northern Berkshire Habitat for Humanity,

Northern Berkshire Santa Fund,

Williamstown Cal Ripken Little League,

Williamstown Village Ambulance,

Williamstown Community Chest,

Williamstown Elementary School,

Williamstown Rural Lands Foundation,

Williamstown Youth Center.

Everyone at Harsch Associates extends a sincere thank you to all of our clients.

This is not your father's housing market... attracting buyers

Today’s buyer-take-all Berkshire County property bonanza is a boon for fence-sitters and buyers with great credit and deep pockets. But Williamstown MA home sellers are steeling themselves to new realities that include paying (rather than making) money at the closing table, providing extras to sweeten the deal, and spending more time and cash making the home camera-ready.

For Williamstown or Berkshire County MA home sellers who have never been through the process before, it’s a different world. One where the value of the house isn’t measured in the profit made on the sale, but by the enjoyment the owners had from living in the home.

Here are seven things experienced Berkshire County home sellers would tell you, if they could.

Make an Offer- I'll Consider it- 3 Magic Words

Is there a rule of thumb in the Berkshire Real Estate  market for how much below the asking pricea potential buyer should initially offer for a listing? 10 percent below? 20 percent below?

This seems like an easy question, but unfortunately quick fix answers will  not work in the Williamstown MA real estate market.   The magic words to begin the process of negotiation are “make an offer.” The truth is that there will be number of factors at play you are not aware of , no matter where in Berkshire County or Williamstown  MA the home is located, no matter who the seller is and no matter who the buyer is.  Getting to the bargaining table is a poker game in the beginning.  Throwing down your cards and walking away means you lose without a doubt.  Staying in the game means you may sell your home or buy the one you want for a great price.

For a seller the three magic words are “I’ll Consider it.”    Consideration is the beginning of negotiation.  Negotiation is a poker game taken to the highest level.  Taking a hard line on any offer is unwise as another offer may not appears for many years.  A Williamstown MA seller is competing with thousands of homes suddenly available in the Berkshires.  Historically during the period of 2004-2007 Berkshire County and Williamstown Real Estate were undoubtedly  HOT second home housing markets and Western MA, Berkshire County was the place to be for executives, stockbrokers, and those in the upper income brackets who lived in New York or Boston and summered in the Berkshires.  The Stock Market was hot, the Real Estate Bubble was growing, fixing and flipping properties was a viable career option for college graduates in mid 2000′s.  Wages and bonuses were high and America was coasting along a financial pinnacle path that has since become unsustainable. 

The vital and most important thing to remember is that the simple rules of supply and demand usually prevail. If it’s an attractive Williamstown MA property at a a below market price, there will be competition for the property.  Competition is the Williamstown Ma Home Seller’s BBF (best friend forever).   Pricing a minimum of 10% lower than your neighbors means your property will get rapid attention and probably sell quickly and you will get closer to the initial asking price.

A new home to the Williamstown MA housing market with a price 10% below its Comparative Market Value ( new=on the market for less than two weeks) is likely to get multiple offers if it is attractive and the sellers are willing to entertain any and all offers.  Keep in mind we stated “entertain” which does not mean accept.  This is not the time to take offense at low and outrageous offers.  It is the time to use the three magic words “I’ll consider it.”  

If  the Williamstown MA property has been on the market at the same price for two months or longer, the uninformed buyer’s agent will most likely recommend that an offer of 3-5% below the asking price be offerred.  We recommend to our buyers they consider offering 8 to 10% below asking not unusual for a market where thousands of Berkshire Properties are for sale.   Even if the property is great often we can spend a few hours crunching numbers and recent sales after which we can show hard data supporting a much lower price.  Keep in mind this is the advice a buyer’s agent is giving to their client.  You as a seller now have an insider’s peak into how the offer process works.   

This is the point in the transaction process when the seller’s agent and the seller will be called upon to use all their negotiating and social skills to reel in the buyer to get to the negotiating table.  This is the time for a level head and cool poker face and a willingness to “consider it.”  Keep in mind “consider it” does not mean acceptanceof a ridiculous offer.  “Consider it’  means only that “you will think about it and get back to the potential buyer and their agent”.  Think carefully about what you are willing to give to the buyer in lieu of lowering the price and what you can give to the buyer to make the property worth more to the buyer.  Using a skilled seller representative will be the vital key at this point in the process.  You are fishing for a buyer and you will need all the skill you and your agent possess to land a qualified buyer and then get them to the closing table.

The worst thing that can happen is the buyer will say no to your first counter offer.  The best that can happen is the buyer will negotiate further up than he or she would have liked and you’ll increase your selling margin.  Either way the chances of a sale increase the more negotiating skills the seller’s agent has.   The take away from this conversation if you remember nothing else is to repeat the three magic words before you respond to any offer for your property “I’ll consider it.”  And for any buyer the magic words remain “make an offer.”

Patch all holes and cracks in walls and ceilings. Check with your local Home Depot or Hardware store for the items needed to make these easy do it yourself repairs.   Inspect every room for spider webs and lint clinging to ceilings.  A simple long handled duster will make short work and give a cheap face lift to an aging room.  Don’t forget to dust the tops of  light fixtures with fans- consider temporarily removing the blades and washing them.

Fix all broken appliances (or replace them with mid-range priced appliances).  White appliances will appeal the most, with black or stainless steel coming in second. Mid-Range Appliances even cheaper appliances will dress up a kitchen more than costly but old, stained and highly used appliances.   If you can’t afford to purchase new appliances think about adding an appliance allowance of cash in your negotiations on final price.

Get the HVAC system checked out by a professional with detailed facts and estimates in writing and cost of repairs if any  (a good bargaining tool in your pocket if they check out in good shape).

Repairing  simple gasket replacements on leaky faucets and using a polish created for bathroom/kitchen plumbing fixtures will go a long way toward making a good bathroom impression.  Anything that is a mirror surface is attractive to buyers if they can see the shine.

If your carpeting is badly stained and worn in places (be brutally honest when you evaluate the condition of your carpet) – replace it with cheap (to save costs) but clean carpeting.  This is a trick that many people who buy homes cheap and sell higher (flipping) use.  Keep in mind that the new buyer can replace the carpet in time if they desire, but carpeting is seen as a costly replacement at the negotiating table.  Be pro-active and get it done first with a cheap carpet, perhaps thick padding and neutral color. Then take your shoes off each time you enter the house until the house is sold to keep that brand new look. 

Remember the Addams Family Home on Television in the late 60′s.  Do you have broken, chipped or cracked windows that painfully remind the neighbors (and any buyers) of  the Addams’ home?  Replace every broken, chipped or cracked window pane now.  Then wash them so that sunlight streams through them.  If you aren’t able to reach them or have a physical injury/disability that prevents climbing on ladders ask someone to help you with this task, be it family, friends or hiring labor for a day to get it done.   Some communities have charitable organizations that will help freshen up a home for elderly or disabled residents.  Check it out.

 What is happening under your roof?  Most of us have no idea.  For this reason have a professional inspect the roof and write you a detailed fact sheet on the condition of the roof.  You can bet the first buyer and every buyer after that will inspect the roof visually first thing as this can be one of the most expensive repairs that any home has.  If you know in advance the roof may be an issue you will have pro-actively established the amount you will allow in the negotiation of the final price.  

Clean and repair all light fixtures so they shine.  Then replace every bulb with a brighter one which provides the full spectrum of light.  Colors will brighten.  Bright is Right when selling a home.

Consider taking down even fairly new drapery which can hide odors and replacing the cloth window treatments with thin white vinyl slat blinds cheaply purchased at a discount store and easily installed with a few tools.  White is always the right color for a buyer.  To a buyer white is like a new canvas upon which the buyer can paint their own picture of home.

Hire a home inspector FIRST (most likely the biggest cost you will face but the one that will give you the most return on your money when the negotiating starts).  If at all possible get a real estate agent to provide you with three different names of local licensed home inspectors used by banks.  When the negotiating starts you will have fixed all of the minor issues with your home and have a price (estimates provided by the inspectors)

to allow when you reach the final negotiations on price.

Neutrality Sells. As a general rule homeowners are shocked by buyers first impression of their home.  The seller associates ” home” with a lifestyle they cherish which may include  family members (kids/parents/friends), pets, vocations/avocations and the many objects they have collected for each unique interest.  It can be slightly “insulting” to hear that a buyer thinks the home has an unpleasant odor, is too cramped without enough open space and that the level of cleanliness isn’t up to standard.

Neutral Colors Can Sell your Home Faster.

Every home has a unique smell of combined foods, pets, furniture, aging building materials, moisture or dampness and neighborhood/urban/country odors common in these locations.   Convincing buyers whose own lifestyle is made up of totally different olfactory and visual experiences to imagine themselves in what is to a buyer a strange environment is a hard sell.   

Home Newsletter free at local businesses in Williamstown Harsch Associates Berkshire Real Estate is and has been your Source for Solutions, Service, and Stability in the Berkshires for 35 years.  Welcome Home to Harsch! Love personality quizzes???  You will absolutely adore the 10 House-onality Quizzes we gathered to help you find the perfect home.  Share our blog page with your friends and then laugh together as you share the results….  House-onality quizzes Spring is here!  March Madness is upon the Berkshires and here at Harsch Associates we are beginning a new feature- Video Blogs with Tips, Topics and Takes on Real Estate in the Berkshires.  Quick and to the point face to face info you can use today.  We call it “In A Real Estate Minute.” The Good, The Bad, and The Ugly of FSBO (for sale by owner) .  Should you try it?  read more Want to watch the video blog instead of reading the story about For Sale By Owner, then watch more Did you know that there are actually FOUR different prices you can put on your home depending on what the appraiser says?  read more Want to watch the video blog instead of reading about the Four Different pricing strategies?  Then watch more Spring is the most active time for listing your property on the market.  We offer 7 fast tips on getting the attention of buyers NOW!  read more Want to watch the video that shares top tips from home appraisers on how to get the attention of buyers?  Then watch more Welcome to Spring and Mud Season in the Berkshires.  We are here to sell your Berkshire Home or represent you as a buyer when you purchase your Berkshire Home. Call us and let us share the unique features we can offer YOU.  413-458-5000     If you no longer wish to receive these messages, please click the appropriate link below: Unsubscribe me from this one Harsch Real Estate e-mail list. Unsubscribe me from ALL Harsch Real Estate e-mail lists.
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Anyone in Williamstown or Berkshire County who expects to collect a fee for selling real estate in Massachusetts MUST be Licensed in Massachusetts.  A large percentage of real estate licensees are members of the National Association of Realtors (registered trademark), the trade organization of the profession.  Only members of the National Association of Realtors and the state and local Boards may participate in Multiple Listing Service and the Information Data Exchange.

Licensees must assist the public in one of the following ways in Massachusetts: Buyer Agency, Seller Agency, or Facilitation.  It is very common for clients to sign a working agreement with a licensed real estate agent and under law, licensed real estate agents must provide a disclosure form to members of the public with whom then intend to work upon first meeting to discuss a property or upon first meeting to discuss creating a working relationship.

Agents or those real estate licensees procurred as Buyer’s agents or Seller’s Agents have a duty of ABSOLUTE faith to the lawful instructions of their Principals (similar to employer in some ways).  The licensee must follow strictly the  guidance of the client and advocate only for the client’s interests above and beyond all others.  Creating an agency relationship with a licensee also creates what is called vicarious liability for the principal (you the client).   You are responsible by virtue of creating an agency relationship for what your Real Estate Agent does on your behalf.  Should your agent inadvertently state a false fact or otherwise perform a misdeed in the transaction then you are responsible for the resulting liability.   You may also be responsible for other agents if your own agent assigns “showings” to another agent in the firm during the time you have agreed to agency representation.   You should read and understand fully any document your agent asks you to sign.  If you are unsure of the liability involved consult with your attorney before signing an agreement.

Facilitation brokerage does not create an “Agency” relationship and thus removes the risk of vicarious liability from the client.   In the facilitation brokerage agreement the Real Estate Agent has a duty to treat both parties (buyer and seller) fairly and equally providing complete disclosure to both parties involved in a real estate transaction.  The information provided to both  parties allows the clients to make decisions based on full and equal disclosure.  The real estate agent acting as a facilitator has the same  legal obligation to the client in regards to trustworthiness, accountability for all funds, and full disclosure of known facts as any other licensee in the State of Massachusetts.

The majority of buyers and sellers want competent assistance with what is a relatively complex transaction of considerable financial importance in their lives.   A seller wants to sell their property for the best price and a buyer wants to buy a property for the best price.   Both the buyer and seller are working toward the same goal.  A facilitation agreement allows full disclosure to both parties of the same information, requires that the facilitator be neutral in the transaction, and that every effort is made to bring all parties to the closing table in a mutually agreed upon and satisfying price for both seller and buyer.   No adversarial activity is required or encouraged in a facilitation transaction, in fact the goal of facilitation is  closing the deal with EVERYONE content that the best outcome has been achieved.