4 Commercial Investor Tips

Emerging Trends in Real Estate 2011, an annual investor survey conducted by PricewaterhouseCoopers and the Urban Land Institute, offers these investors tips.


1. Lock in loans. Don’t make the mistake of waiting for loose credit that may be a long time coming. Interest rates are low but will inevitably increase.



2. Hold REIT shares. REITs are all about yields (forget appreciation) and a solid dividend in an uncertain environment. Even with recent REIT value run-ups of 28 percent in 2010, according to the National Association of Real Estate Investment Trusts, funds with high-quality assets should be less volatile than most stocks.



3. Buy land if you can afford to hold it. Developable land prices are cheap, although the wide bid-ask spread is still a challenge for buyers. Remember, says Rochelle, historically most of the big money is made in land plays.



4. Choose infill. Predicting the direction of new growth is tough, so central locations are somewhat lower-risk investments. Infill offers businesses a more diverse employment base, especially among younger workers who prefer urban living.





Source: Mitch Roschelle is U.S. real estate advisory practice leader for PwC, New York.

Below-the-Radar Short-Sale Issues

You could end up having to pay those outstanding incidentals if you don't work out responsibility for the seller's lenders with buyers ahead of time.

Incidental fees. In short-sale transactions, the seller’s lender typically won’t pay many of the outstanding incidental costs at closing such as title and survey fees, unpaid water bills, and overnight document delivery fees. So, you could end up having to pay those if you don’t work out responsibility for them with buyers ahead of time.



Home inspections. Given the uncertainty of obtaining the lender’s OK, it’s not unusual for buyers to want to delay ordering the home inspection until after lender approval. But such a delay can hurt buyers if the inspection turns up something they don’t like. They need to be comfortable with the condition of the house before seeking lender approval for the deal.



Contingencies. Buyers face the same contingency issues that they do in any other transaction. They need to be sure they can get financing before asking the seller’s lender to approve the deal; otherwise, after their lengthy wait for the seller’s lender, the deal might still collapse.



Client communications. During the approval process, weeks can go by with no contact from the seller’s lender. You should remain in regular contact with buyers to tell them what you’re doing even when you’re hearing nothing from the lender. If the lender eventually says no to the deal, your clients might wonder if you did all you could during the process. By checking in regularly, you signal to buyers that you’re on the job.



Distressed HOAs. Look carefully at the financial condition of the home owners’ association because lenders can throw your buyer for a loop if they refuse to make a loan for a home with a distressed HOA. From lenders’ perspective, there’s a risk of deferred maintenance and repairs and a risk of future dues assessment increases. Review the HOA’s financials with an accounting specialist, and look for elevated spending by the HOA on attorney fees.



Source: Kevin Coyne, The Coyne Law Firm, Oakbrook Terrace, Ill

Spring 2011 Market Update

6 Reasons Overpricing Does Not Pay

1. Most buyer activity comes within the first 30 days a home is on the market. Overpricing means you’ll miss that activity by discouraging qualified buyers who’ve seen similar homes for less.

2. A too-high price eliminates a whole class of buyers. Many buyers know just how high they can go and don’t even look at homes priced above their price limit.

3. Overpricing helps sell other, more competitively priced homes first. Your home’s over-market listing price makes them look better.

4. You waste time and suffer added weeks or months of stress as your overpriced home languishes on the market, preventinh you from moving on.

5. Your home may eventually be seen as “ stale inventory,” suggesting structural or mechanical shortcomings (although in realty, none may exist), even after you’ve lowered your price. A further price reduction, below true market value, may be needed to sell your home.

6. If you do get an offer, the contract may fall through because the appraisal of the buyer’s lender comes in too low. The buyer may not be able to borrow enough, or come up with enough cash to proceed with closing.

Price your home right -inside tips for serious sellers

Here are the factors we'll consider to arrive at the right listing price for your home:
1. Recent sales. In the fast changing market, using sales within the very recent past is imperative. What a property sold for last year-even six month ago- is just old news.

2. True comparables. We compare your property with similar, nearby properties called comparables, or comps.
Using true comps is key to setting the right price. We'll compare apples to apples looking at homes that are alike in terms of amenities and condition and also considering whether the comp is a distressed sale.

3. Expired. We'll also check prices of 'exprired' (properties whose listing contract ran out without a sale) and 'withdrawn from market' comparable properties. These properties may have been overpriced and the market indicated the listing price was higher than buyers are willing to pay.

4. Pending sales. When price information is available, we may use pending sales (properties under contract but not yet settled or closed), because these properties offer a trend indicator about what price active sellers and buyers are agreeing, right now, is the right price.

5. Active listings. Only closed sales truly reflect what buyers in today's market will pay. What other sellers are asking has little relation to the value of your property. Using other listings as a guide, however, is a smart way to position your property to beat the competition to the right price and great terms.

6. Appraisal. Although a seller-paid appraisal is often unnecessary, it can be an effective strategy in a situation where the seller wants to list as 'being sold under appraisal' to position a property as distinct from the competition in the area, especially where many similar properties are already for sale.

7. Online valuation. Home valuation websites that provide instant price estimates tend to be an unreliable guide to the right price. At best, these valuations give a ballpark one-size-fits-all estimate. As your area specialists, we know what your property is really worth in today's market.

8. New price. If your home has been on the market for two to four weeks, but has gotten to no traffic- or if there has been traffic, but no offers-this indicates the market believes your home is overpriced. What's more, since it was listed, other homes may have come on the market with better positioned prices. Buttom line: Time for a new price.

If you have any questions about setting the right price, call Tatyana!