QUESTION: WHAT COSTS ARE INVOLVED IN BUYING A HOUSE?

Let’s answer this question in chronological order. A buyer’s first out of pocket expense will be an earnest money deposit (or EMD). This represents some “skin in the game” from the buyer to the seller. Usually we are talking 0.5 percent to 1 percent of the sales price. The check is not given directly to the seller. It is either held by the seller’s title company or the real estate brokerage representing the seller. The EMD will be credited back to the buyer at closing and applied to closing costs and pre-paid expenses that are due. We will get to those in a minute.

Second, a buyer will need to pay for a series of home inspections, which can cost up to $1,000. For $1,000, a buyer will get to know their future home intimately. Inspections may include a whole house inspection, a termite inspection, a chimney inspection, a radon test — and, last but not least — a waste line inspection. In our experience, buyers who see inspections as an investment rather than an expense always get more value out of them. Our philosophy is that the more informed buyers are, the more comfortable they are with their purchase.

Once inspections are completed and both buyer and seller have agreed on the list of repair items, we arrive at step three: the appraisal. To arrange financing for a purchase, the lender will require an appraisal to make sure that the house is worth what a buyer is willing to pay for it. The buyer pays for the appraisal at the time that it is ordered (typically using a credit card). Most appraisals run about $400.

We are getting towards the end — just two steps to go.

Next, let’s talk about down payments. I know this feels like it should be at the beginning, but a buyer’s down payment is not collected until closing. Some of you may have heard about 100 percent financing options that are available. Sounds tempting, right? Well, those days are pretty much gone with two exceptions: VA loans (for those who have served in active military duty) and USDA loans (for rural purchases). That said, there are still great financing options available. The two most popular are FHA loans (which require a 3.5 percent minimum down payment) and Conventional loans (which require a 5 percent minimum down payment). Consult a competent loan officer on which product is best for your financial situation.

And, finally, a buyer will have closing costs and pre-paid expenses (taxes and insurance) due at closing. As an example, a buyer purchasing a $200,000 home would pay $4,000 to $4,500 in closing costs and pre-paid expenses. In our market, however, it is not atypical for a seller to cover some or even all of a buyer’s closing costs depending on the price range.

Your Home: The ‘Coming Soon’ phenomenon

“Coming Soon” to an MLS near you! The words alone are exciting for most potential buyers. Especially in a low inventory market. As buyers drive the streets hoping to get the inside track on the market, a “Coming Soon” sign is sight for sore eyes.

But what does “Coming Soon” really mean? And what is the purpose?

Coming soon means exactly that- it means that a listing will soon be on the open market and advertised in the MLS. We use the coming soon strategy on all of our listings and I believe that it is part of the reason that our average days on market for the last 12 months rolling is 11 days versus our area market average of 35 days currently. As the lead listing agent for our team, one of my primary jobs is to create a pipeline of buyers for our listings prior to them going live in MLS. By getting a wave of buyers through on the first weekend that one of our listings goes live, we increase the chances of multiple offers and do our best to ensure low days on the market.

Inman.com recently ran a story about a Chicago-based real estate firm who has seen huge success from coming soon listings. In their market, homes that were advertised coming soon sold on average in 35 percent fewer days than listings that were not marketed as coming soon. That is a huge difference. Especially today as the holidays are knocking on our door.

In a nut shell, advertising a home as coming soon simply provides the listing agent with an opportunity to promote his or her upcoming listings to fellow Realtors and potential buyers in the area.

Now let me tell you what coming soon listings are not: They are not an opportunity for the listing agent to try to convert potential buyers by showing the property to them prior to it going active in MLS. Nor is it an opportunity for buyers agents to call the listing agent and see if they can get their buyer in early, before it goes live. Both examples break MLS rules and regulations and could set the listing agent up for not only a fine from the Kansas Real Estate Commission or the Missouri Real Estate Commission, but also a law suit. There are pending law suits currently that have resulted from the examples that I have cited.

As a seller, there really is no down side to a coming soon listing. With the exception of possibly being stopped by potential buyer while working in your yard (we have had this happen to clients of ours). Yet again, this is just another opportunity to showcase your home for the market before they can actually see it.

Finally, let me offer a quick word of caution. We have found that coming soon listings loose their luster after about three to four weeks of being advertised via the sign in the yard. After that point, the market seems to think of you as “crying wolf.” A best practice would be to place the coming soon sign two to three weeks prior to hitting the open market. Please remember that to meet MLS guidelines, you must have a signed listing agreement with a Realtor before he or she can place any signage in your yard.

Your Home: The Taylor-Made Team, 73 years in the making

Tyalor_Made_BillThis week I am going to ask for a little creative license. I ask because last week my grandfather, Bill Taylor, retired from the Arkansas Democrat-Gazette newspaper after 73 years of dedicated service. That’s no typo folks: 73 years.

As I have considered his retirement over the last couple of weeks, it has been virtually impossible for me to look at my own business today and not see his influence. Not only does our real estate team bear his name, but it also bears his character and his standards.

Here is a little bit of his story. Bill Taylor grew up in Bearden, Ark., until he and his mom, moved to Little Rock when Bill was 12. He has always been an ambitious person and was taught not to be scared of a hard day’s work. Bill started at the Arkansas-Democrat at age 13 as a newspaper carrier and was married to my angel of a grandmother, Juanita Johnson, at the ripe old age of 16 on Christmas Eve 1944. Eventually they had six children including my dad, David Taylor. Papa Bill, as I call him, moved his way up the ladder at the Arkansas Democrat, which eventually merged with its competitor the Gazette, until he became the State Circulation Manager for the paper. Eventually he retired from that position to become the Gazette’s Credit Union President and treasurer.

Yes, my grandfather has worn many hats and has always gravitated towards leadership. In his leadership, however, he is a man of few words. I have never heard him say the quote, but I bet that he believes that “God gave you two ears and one mouth for a reason. You should listen twice as much as you speak.” I haven’t quite perfected that one, and I am working on it daily.

As my wife, Leah, and I continue to grow our company and our business, we continue to focus on the standards that we believe in, many of which I learned from watching Papa Bill.

Instead of listing these standards, I would like to share with you some quotes from my grandfather’s co-workers that were recently cited in a commemorative edition of Between Editions, the Gazette’s employee newsletter.

  • “Thoughtfulness for others, generosity, modesty, and self-respect are the qualities which make a real gentleman. You are all of the above and will be greatly missed.” Debbie Chaney
  • “Bill is someone I have great respect for. Honesty, humility, kindness and someone that leads by example come to mind when I think of him.” Shawn Synco
  • “Mr. Taylor is the most sincere, compassionate person I have ever known. No matter how bleak the day is, I can always count on him to make me smile.” Joni Strike
  • “About 25 years ago, when I was a young Zone Manager, I approached Mr. Taylor about a $5000.00 loan to help me purchase a fixer-upper house that I planned to convert into a rental property. He kindly explained that the Credit Union did not do real estate loans but that he would be willing to loan me the money personally! I was stunned and asked him, ‘Why would you do that Mr. Taylor?’ He explained that he had some money saved up and wouldn’t mind helping a young fellow like me. I was totally surprised that he offered to do that for me. The world needs more Mr. Taylors.” Ron Forrest.

The world does need more men and women like my grandfather. He is one of a kind.

Leah likes to tease that I will put my name on anything and that I get a kick out of seeing our name out in the community. And she is probably right, like she is most times. But there is more to it. I grew up very proud of my Taylor name and due to the high integrity of Papa Bill and my dad, I don’t take the responsibility lightly. So, yes, I am proud to see the Taylor-Made name around our city. However, I am more proud of the legacy behind the name and please know that some day when I choose to leave this wonderful business of real estate, I only hope to have such kind words said of me by our friends and clients.

I value our partnership with PVPost.com and I am proud to continue my family’s legacy in the “news business.” You see my grandmother, Juanita, went on to become a writer and the Religion editor for the Democrat-Gazette, so I share her passion for writing and am proud to follow in her footsteps.

Please know that when the time comes to hire a real estate team to help you with a home purchase or sale, our team will do its best to provide you with a level of service that Bill Taylor would be proud of.

Congratulations Papa Bill! Words cannot describe my level of pride.

Your home: Things that won’t affect the value of your home

Price it Right - MLMS

I have recently had the pleasure to meet with several potential sellers. And I am noticing a trend. The word is finally getting out that now is the time to sell. This is very true. The market is HOT!

However, even in a hot market a home is only worth what a seller is willing to sell it for and what a buyer is willing to pay for it. Pretty simple equation, right? Not always. In a hot market, we find that sellers want to push for the highest value possible. And we are right there with them — to a certain point, that is. You see, sellers hire me to sell their home, not just to advertise it. There comes a point where even a hot market will not accept a home that is overpriced.

I thought it would be healthy to discuss a few things that don’t affect the fair market value of your home.

1. Functionally required updates: Although replacing an existing roof with a new one certainly makes a home more marketable, it does not have much of an affect, if any, on the market value of a home. Similarly, replacing the furnace and air conditioning, hot water heater, dishwasher, or even stabilizing a shifting foundation, although important, do not change the perceived value of a home. Buyers expect these things to be in good working order. They see these improvements as just part of owning a home. In their eyes, you have done your job by replacing these items, not gone above and beyond. Unfortunately, the aforementioned improvements/repairs can be some of the most expensive to address.

2. Historical appraised value: If at one point you refinanced your mortgage to capitalize on better interest rates or to access some of your equity, and your home appraised for X, that is a snapshot in time and has very little bearing on today’s market value. Even if the appraisal was just done six months ago, please keep in mind that the lender offering you the home equity line of credit (HELOC) wants to keep your business. Although I have been told by appraisers that a refinance appraisal and a purchase appraisal are exactly the same, I don’t believe it. I have met with so many sellers who are upside down on their mortgage simply because a lender over-appraised their home and allowed them access to more equity than currently existed in their home. If you perhaps ordered an independent appraisal of your home, please keep in mind that the appraiser was being paid by you, the homeowner, and in my experience these appraisals can be inflated.

3. What your neighbor’s home sold for: In our market, especially when it comes to resale, each and every home is different and has its own nuances. Although you might think that the neighbor’s house down the street was just like yours, I would bet that there are some differences. And even if they were very similar, when did your neighbor sell his home? What was their situation? What was their buyer’s situation? And most importantly, how did you come to find out what the home sold for? Often what a neighbor said they sold for and what they actually sold for are different. Neighbors leave out closing costs paid for the buyer, major repairs, and sometimes they just leave out the real sales price. It’s a pride thing.

4. What you paid for the house, what you owe on the house, what you need to sell it for: These are all pretty self explanatory. And I will use the stock market example again. Just like a stock on Wall Street, none of these factors have any bearing on a stock’s value. Can you imagine if an investor went to Wall Street and demanded a price based on what they paid for the stock, or what they need from the stock? They would be laughed off of Wall Street. The same applies to the real estate market. Once you decide to sell your home, it is no longer about what you need or desire from the sale, it is about what the market will support.

5. How much you have put into it: Please keep in mind that there is no single home improvement project that will return 100 percent of the investment cost. According to the 2015 Cost vs. Value report, the highest return on investment from a home improvement project was 70.9 percent and it was for fiber cement siding replacement. They estimated the cost of that project at almost $15,000. It is an unfair expectation to recapture all of your investment in home improvement. It placed unrealistic pressure on a homeowner and can take the fun out of selling. Don’t do that to yourself.

If there is one thing I would ask you to take from this column, it is this: no more than 30 percent of the buyers out there are willing to pay even 3-5 percent over fair market value for a home. Even in a hot market. Therefore, by overpricing your home you have eliminated 70 percent of the buyer pool. Yet in a hot market, when a home is priced fairly and is in good condition, it can often receive multiple offers bidding the price up 3-5 percent. You see, it is all about perceived value. Starting at a fair price is the key.

Selfie with a Sign Location List

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If you’re here from our Facebook page, scroll down for a list of current sign locations. If you happened upon this post without visiting our Facebook page first, please “Like” us on Facebook and check out our “Selfie with a Sign” contest!

Announcing our Selfie with a Sign contest! We are pretty proud of our brand-new signs and hope you like them too! We have 16 of these beauties in front of homes around town and we want to see your best/funniest/craziest poses with them. Post a “selfie with a sign” photo to our Facebook page by Wednesday Friday at 5 PM. We will then randomly choose a winner, who will get a $100 Visa gift card (heck, maybe we’ll even throw in a selfie stick)! See below for a list of our current sign locations. We can’t wait to see your selfies! (And don’ t worry – we’ve let our sellers know about the contest, so you don’t need to feel self-conscious about hanging out in someone else’s yard for a few minutes.)

Sign Locations
5206 W. 71st St., Prairie Village, KS
7062 Granada Rd., Prairie Village, KS
5615 W. 81st Terr., Prairie Village, KS
7416 Springfield St., Prairie Village, KS
7740 Howe Dr., Prairie Village, KS
2817 W. 74th St., Prairie Village, KS
3724 W. 77th St., Prairie Village, KS
5642 Horton St., Mission, KS
8116 Lowell Ave., Overland Park, KS
11100 & 11102 W. 113th St., Overland Park, KS
13206 W. 66th Terr., Overland Park, KS
5721 Metcalf Ct., Overland Park, KS
818 W. 77th St., Kansas City, MO

Your home: To disclose or not to disclose

Dripping Faucet

Over the course of my career, I have seen some really interesting things. After participating in hundreds of inspections, you can only imagine what I have seen. Although I am most shocked (usually) by how some sellers participate in the home selling process when it comes to disclosure.

Disclosure laws vary state to state, but in general a seller is obligated to disclose all known material defects to a potential buyer. When I say I have been shocked it is because a home inspection is like putting someone’s home under a magnifying glass. It exposes most if not all material defects. Every now and then we will come across a seller who has not in good faith disclosed all material defects. Or in some cases, they have also gone to the trouble of trying to hide the defect. This is a big no no!

Not only will failing to disclose kill a real estate sale in the blink of an eye, it can also set a seller up for a law suit for any cost incurred by the buyer. And no one wants that, right?

So what must you disclose? My answer to this question is always the same, “When in doubt, disclose.” We coach our sellers to be extremely forthright when it comes to the condition of their home. We also go so far as to coach them to perform a pre-inspection of their home and attach it to the seller’s disclosure statement. Our goal is for the buyer and seller to enter into a contract with “eyes wide open.” And after a year of having sellers perform a pre-inspection, I can tell you that it has made for a much smoother process for both buyer and seller.

Back to the question: What must I disclose?

Here are some items that you certainly don’t want to skip over when filling out your seller’s disclosure:

1. Water leaks in the basement, crawl space, or roof.
2. Electrical safety issues.
3. Active plumbing leaks.
4. The existence of any health hazards such as radon, asbestos, or lead based paint.
5. Pest infestations such as termites or carpenter ants.
6. If the home is in a flood plain.
7. Multiple layers of roofing.
8. Mechanical disrepair when it comes to the furnace, a/c, or hot water heater.
9. A death in the home.
The last one, death in the home, is a tricky one. Several states only require this disclosure if the death was a suicide or murder. This is called a psychologically impacted property. That being said, the last thing that a seller wants is for the new owner of the home to find out from a neighbor that someone died in their new home. Whether the law requires it or not, this kind of a housewarming gift is always bad and can certainly cause bad feelings if not a law suit.

Again, “when in doubt, disclose,” is the best frame of mind to be in when completing a seller’s disclosure. Setting all legal reasons aside, isn’t it best for all parties when there are no surprises? As I have said before, I am a firm believer in putting good real estate mojo into a transaction. Mr. and Mrs. Seller: Your seller’s disclosure could be your first opportunity to plant a seed of good mojo into the sale of your home. And that seed should bear the fruit of a great real estate transaction.

Photo Credit: https://www.flickr.com/photos/kozumel/

Your home: Top reasons why homes aren’t selling in a seller’s market

The title of this column almost feels like the “Top 10″ segment on David Letterman’s Late Show, but this list is no joke.
That’s right: There is no humor in getting your home and keeping your home ready to show at a moment’s notice all day every day and then never receiving an offer. In fact, I would say it’s downright depressing.

So how is it possible that in a strong seller’s market there are homes that have not been able to sell? It is a great question and one that I am hearing more often lately. So let’s explore some of the most common causes for “not selling in a seller’s market.”

1. Overpricing: I have mentioned before that only 30 percent of buyers are willing to pay up to 10 percent over fair market value for a home. If it is priced more than 10 percent over market, the percentage drops even more. So overpricing your home eliminates 70 percent of your potential buyer pool on day one. In an improving market like ours, there is a little breathing room when it comes to pricing. But I mean little. One might be able to price a home at $225,000 instead of $220,000 (the current market value) and count on appreciation to pull your value up. It does happen. However, in our example the difference in price is only 2.2 percent and the seller would still need to be prepared to adjust if the market did not respond in short order. This is where a Realtor and their seller must have a clear understanding of fair market value based on recent sold and more importantly (in my opinion) pending comparables.

2. Competition: “It’s a price war and a beauty contest.” I have said that a million times and it still holds true today. The moment that a seller decides to sell their home they have also decided to enter a contest. A contest in which the competition changes almost daily. One day you might have three homes that you are competing with and then wake the next day to find that you have three more. Double the competition in 24 hours! Can you see why staying ahead of the market is important? A seller must also know how many homes are selling each month (absorption rate). If three homes are selling each month and there are twelve for sale in a given area, then it will take four months for all of them to sell at the current rate. AND if you must sell in the next 30 days you better know that you are confidently in the top three when it comes to condition and price. Otherwise, you will be waiting until next month.

3. Deferred maintenance: Yes, it is true that in a low inventory market buyers are more forgiving when it comes to the condition of a home. That said, I believe that it is more accurate to say that buyers are willing to overlook functional obsolescence and outdated areas of the house. They are not, however, too excited about inheriting a lot of deferred maintenance. When buyers see repair items that should have been repaired by a seller but were not, it begins in their minds a narrative of habitual neglect. And in many cases, a buyer will choose not to consider the home for purchase. If a seller’s home is in disrepair, then it must be repaired before it can compete in the open market. If it just needs updating, price it accordingly and jump into the race.

Your home: The fastest selling prices, locations and floorplans in NE Johnson County right now

All of them! Just kidding, kind of. With less than three months of inventory in our area, most homes are selling quickly. The average time on the market right now is hovering around 60 days. However, if a home is priced right and in good condition, it is selling within days. Most of our homes in the Prairie Village/Leawood area are selling in less than a week.

Even though the market at large is quite healthy, there are still several price ranges and floor plans that are remaining the most sought-after. Let me give you some examples. In Prairie Village right now the most popular price range for a home is $160,000- $180,000. South of 75th Street this price range represents over 20 percent of the market. That is a big number. I attribute the popularity of this price range to the cross section of residents who are moving up in size and price. As I have said before, there has never been a better market for a move-up. Not only are you selling a home with very little competition, you are also financing a home at historically low interest rates. Talk about a one-two punch!

The second most popular price range is $200,000- $250,000. Kinda makes sense doesn’t it? Where do you think the $160,000- $180,000 seller is moving? To a $200,000- $250,000 home. This price range represents about an average of 11 percent of the market. So where are the other 9 to 10 percent of the buyers moving? Out south and west seems to be the answer. Due to the low inventory in this price range, more buyers are considering a move a bit further out of the area.

Now that we have talked about price ranges, let’s talk about floor plans and other features that are highly sought-after in today’s market. Here is the hit list. If your home fits one or more of the following criteria, you might want to consider giving us a call. It could be the market that you have been waiting for!

Completely remodeled from stem to stern: The ROI on home improvements is quite high right now compared to the last several years AND a majority of today’s buyers are looking for an updated home
Completely original condition and very well cared for: I am referring to a home that is in great condition and just needs to be updated. As a Realtor, I applaud the homeowner who can maintain a home built in the 1940′s or 50′s and keep it in pristine condition. These homes offer a great benefit for those seeking a certain floor plan or location, and would like to personalize any updates.

A two-car garage home: Enough said. If most of your neighbors have a one car garage, and you have two, you might consider selling.

3+ bedrooms with 2+ baths: Again, this is a potential move-up home and is under high demand.

$300,000-$500,000 homes:This price range represents about 10 percent of the market. Please note that is a huge price range yet only represents 10 percent of the market. Therefore, inventory is this price range is pretty much non-existent. If you have a home in this range, now is your time!

Master suite on the main floor: This floor plan appeals to almost all buyers, especially the empty nester market.

Now, I will be so BOLD as to name a few subdivisions that I get calls about almost weekly: Indian Fields, Reinhardt Estates, Corinth Hills, West Riding, Kenilworth, and Prairie Village/Prairie Hills (right by the shops). If you live in one of these areas, we should talk. How would it be to get top dollar for your home and pretty much name your terms when it comes to closing/possession dates, inspection repairs, etc.? That’s what I thought you would say.

Your home: An insider’s view from a recent NEJC home seller

This past week, our Director of Operations (Rebecca Holcombe), had an awesome idea. She suggested that I interview a recent seller and buyer for our column. Immediately, I loved the idea. I can go on and on about our market, but nothing speaks to a potential seller or buyer like someone who just sold or bought a home.

My first client interview was with Mrs. Sara Callen. She and her husband, Clayton, recently sold their home in Prairie Village. Unfortunately for us, they have moved to Dallas, but Sara was kind enough to make some time to answer a few questions for me. Here is what Sara had to share.

Chad: Based on your experience with selling recently, how would you describe the market?

Sara: It is a strong market! We had a lot of showings in just a few days on the market and then sold quickly.

Chad: How much time did it take for you to prepare your home for sale?

Sara: We spent several weeks preparing our home. We rented a storage unit for extra items that we weren’t using (like off-season clothing, kitchen items, etc…). We also took down personal photographs and replaced them with other artwork. Lastly, we replaced worn items like rugs and towels to freshen things up.

Chad: What did you look for in a Realtor?

Sara: Our main goal was to find a strong advocate. We wanted someone who would get to know our home and then create a marketing plan that would play to its strengths. We wanted someone who was organized and communicated well. It was also important to find someone who was familiar with our neighborhood.

Chad: What surprised you about the process, good and bad?

Sara: I will give you the bad first. I was surprised at how difficult it is to have and keep your home show ready at a moment’s notice. The good surprise was how quickly we sold our home. Actually, it was a great surprise.

Chad: What would you do differently if you could do it all over again?

Sara: Clayton and I have both discussed it and we would have hired a Realtor from the beginning instead of trying to sell it on our own. Having a good Realtor made the process of selling much faster and much easier. We could have saved ourselves several weeks of work had we just done that from the start.

Chad: If you could offer a potential seller only one piece of advice, what would it be?

Sara: Don’t wait on your projects. Start preparing your home today.

Chad: Is there anything that I should have asked you that I did not? Any other advice for a seller?

Sara: Sure. Stay updated on the market because it changes quickly. And then make sure that you research the Realtor that you are considering for the job.

I would like to offer a special thank you to Sara for her time and honesty. We wish you the best in the big “D”!

We will be chatting with a recent buyer client in an upcoming post. I am excited to see what the other side says.

Stay tuned!