Real Estate Market Recovery
REALTORS Thoughts on the Recovery
The National Association of REALTORS® just released the Market Recovery Survey of a random sampling to close to 100,000 members conducted June 24-26, 2020. The following statements are the members’ opinion on various aspects of the recovery to the Covid-19 pandemic as it relates to real estate.
In response to the safety of buyers, sellers and agents, REALTORS® are expecting within the next year to have increased demand for the following technologies used to market properties:
- 67% – Zoom or other video technology to communicate with clients
- 66% – virtual tours
- 63% – live virtual tours conducted by agent using video
- 60% – virtual open houses
Nine out of ten respondents indicated that some of the buyers have returned to the market or never left the market. Agents currently working with buyers report that slightly more than half of buyer’s timeline has remained the same with about the same level of urgency. 27% believe the buyers have more urgency.
The most popular reason cited by buyers with an increased timeline is that the delay during the pandemic has amplified their demand for a new home. Others realize that new home features would make their home life more comfortable. Some buyers are wanting to buy before a potential second peak of Covid-19 occurs.
During the week the survey was taken, three out of four buyers saw the home in person physically while 26% did not.
Roughly 2/3 of the buyers are looking for the same features as they were prior to Covid-19 while new feature considerations include home office, space to accommodate family, larger home for more space, place to exercise and bigger kitchen.
Most buyers are looking for the same type home, however, respondents reported that 13% are moving away from multi-family properties to a single-family home and only 1% are going from SFH to multi-family.
89% of respondents stated that some of the sellers have returned to or never left the market. Only 23% reported more urgency to sell a home due to the pandemic.
On the commercial side, 2/3 of REALTOR® respondents felt like the demand for office space would decrease and 72% felt that retail space demand would decrease.
The stats mentioned in this article pertain nationwide, although ALL Real Estate is local.
If you would like any professional residential Real Estate advice, contact us at Paramount Real Estate Services. 1008 12th St. SE Salem, OR 97302 503-851-1645
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Who Decides Value?
The seller can put a price on the home but the value is ultimately, determined by the buyer. Individually, a buyer could pay over market value because they love the location, or the elevation of the home or the proximity to something that is important to them. The shortage of available homes resulting in increased competition among buyers could drive the value higher.
Most experts agree initially pricing it properly will generally result in the highest sales price. If a home starts out too high, it could actually sell for a lower price after it has been on the market for a while. It gives the impression that there must be something “wrong” with the house because it didn’t sell immediately.
So, how does a seller determine what price to put on the home? It has nothing to do with what the seller needs to get out of it. Nor does the price the seller paid for it make any difference now. Even if the seller made considerable improvements, they may not affect the value of the home.
There are three common sources for a seller to determine market value: an appraisal, a broker price opinion or an automated value model found online.
AVM, automated value models, are mathematical estimates that analyze limited public record data to determine a value. While this process can easily compare square footage, age, number of bedrooms as objective data, it is much more challenging to make adjustments for subjective data like appeal, quality of construction, floorplan and updating. Zillow Zestimates are the most common AVMs but there are many others providing similar services. It is important to note that many of these values are just gimmicks to get website traction and are not all that accurate.
Appraisals can only be made by a licensed appraiser. Most mortgages require an appraisal as part of the underwriting process to verify that there is ample collateral to secure the mortgage in case of default by the borrower. FHA, VA, FNMA, Freddie Mac and USDA as well as most private lenders require an appraisal especially for high loan-to-value mortgages. In some situations where the risk is lower, some lenders may use an AVM.
An appraisal requires the appraiser to visit the property, perform a visual inspection, analyze the property considering three approaches to value and accurately report the property information that is verifiable.
Broker Price Opinion, BPO, as the name indicates, is a price opinion on a property made by a licensed real estate agent. The determination of whether the estimate accurately reflects the market will depend on the experience of the agent with that type of property and market area. It is possible that a BPO could be more sensitive to the actual market because it will consider homes currently for sale and recently expired properties as well as comparable sales.
While all three methods, used recent, comparable sales to arrive at a value, the appraiser and the real estate professional can make a series of adjustments for the differences in the comparables. While the appraiser is highly trained in this technique, the real estate professional also adds credibility to this process based on their experience in how the buying public might react to specific features and the home in general including positive and negative influences.
Current condition of the property is very important for a number of reasons. In some price ranges, a buyer may only have the necessary down payment and closing costs but is not able to make improvements like paint, floor coverings, appliances or other major items. In this situation, a buyer would have to live with the house in its current condition until they could afford to make wanted improvements.
Investors may not be deterred by making an additional investment in the home after purchasing it but will probably be motivated to do so only if it will increase the potential profit to be made.
An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.
Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate. Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately. If you are curious what your home is worth, call us at (503) 851-1645 or email brianandnina@paramountoregon.
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