Why The Luxury Homes Market is Booming

Since June interest rates have risen roughly 1% causing renters who were on the fence about their buying timetable to speed up their searches. In the Essex County market we have seen a huge surge in buyers from areas such as Hoboken, New York City, and Jersey City. A lot of these young couples were renters who became active buyers.

The surge in buyers has caused record lows in inventory and made prices appreciate above normal appreciation rates. We've even seen bidding wars break out in the luxury home market which is usually not common due to the "jumbo" loan process.

However, is this boom sustainable? The answer is, it depends. If the fed continues to buy mortgage backed securities to keep interest rates low, we should continue to see buyers come out in the droves in all price ranges. Once interest rates hit roughly 6% and the cost of renting vs. buying become even, then we'll see the market slow down and appreciation scale back. Until then, we will continue to have a booming sellers market.

-Kyle Kovats, New Jersey Realtor

Why Do Some Agents Overprice Properties?

So, you're selling your home and you want to get top dollar. You interview 3 agents and decide to go with the agent that will list your home for the most money. Sounds smart. You're figuring if they're going to list it for the most money they'll surely sell it for the most money, right? Wrong.

Beware of agents who overprice listings, they intentionally do it for a couple of reasons that I will outline below.

1) They bought your listing- the term "buying a listing" refers to a strategy some agents use to get listings. Buying a listing means that they essentially told you that your home is worth alot more money than it actually is to excite you and get you to list with them. After you list with them, month after month after minimal showings they will tell you that your home is priced too high and that you must reduce the price. After six months go by and your home has still not sold, you're left with what we in the industry call a stale listing. You missed the initial excitement of the market during the first 6 weeks that your house was listed. Now, you find yourself in a bad spot where no matter what you do you're not going to get top dollar.

You're probably asking what's the point of agents doing that, they only get paid if they sell my home, so why list it unrealistically? The answer is #2.

2) They intentionally overprice your listing knowing that it won't sell at that price so that they can get buyers to work with from your listing. Here's how it works. An agent will overprice a home, host open houses and field calls on the property for the sole purpose of gaining buyers to work with to sell every home but your own. Your home is essentially a lead generator for them.

How do you combat this? Simply ask any agent that you are considering hiring the following two questions.

1) What is your sale price to list price ratio?
2) What percentage of your listings are actually sold?

-Kyle Kovats, New Jersey Realtor

Housing Inventory Near All-Time Low, Seller's Edition

Housing inventory is near an all-time low, but what does that mean for homeowners considering making a move?

Sellers find themselves in a great position in this market. With interest rates slowly rising and buyers flooding the markets looking to take advantage of the rates while they're still low, sellers are finding themselves choosing between offers rather than hoping to receive just one. As a seller you have a couple of options in this unique market in regard to pricing.

1) Price your home at market value: What we've seen in this market is that if you price your home at market value you will generate a ton of interest in your property and most likely wind up with a bidding war on your hands that very well can cause your home to sell above it's value. The only problem in this scenario is often times the buyer will have to come up with more money at closing because the bank appraisal will come in less than the sales price. It is important to have your realtor look over the details of the contract and put a contingency in the contract that the buyer will agree to pay the difference between sales price and appraisal at closing. This will deter any speed bumps in the closing process.

2) Try to stretch the market: in areas where there is very limited inventory for your specific home, you could potentially try to stretch the market and see what it will bear. However, I would recommend not overpricing too highly because in that case you'll have nobody even taking a look at your home. Again, you could potentially deal with appraising problems if you effectively stretch the market, so it's important to put necessary contingencies in the contract.

If it were my house what would I do? I'd price my home at fair market value and have as many potential bidders get involved as possible to entice a bidding war. Once a bidding war breaks out there's no telling where it can go, and you can REALLY stretch the market in this scenario. Keep in mind the most action on a home is in it's first 6 weeks on the market so pricing at fair market value will catch the publics eye and have the most people interested as possible.

-Kyle Kovats, New Jersey Realtor
NorthJerseySuburbs.com