Not for sale? Not necessarily a problem

May Buying Advice: Choked by a weak housing inventory, some agents are coaxing homeowners to the market with a different approach.

By Melinda Fulmer of MSN Real Estate

Frustrated with the lack of housing inventory, homebuyers in many markets are taking matters into their own hands by sending letters to homeowners and asking them to sell. In this month’s Buying Advice, we’ll consider this direct approach and its effectiveness. We’ll also check in with the latest housing numbers and dish out some tips for first-time buyers who are insuring a home.

Wanted: Sellers
After about nine months of unsuccessful home searching in the historic Olde Worthington neighborhood of Columbus, Ohio, real-estate agent Anne DeVoe’s clients were frustrated. No homes were coming up for the couple in the small, 10-block neighborhood.

So she suggested they make a wish list.

“I asked them to drive around and identify the houses they were interested in,” says DeVoe of Coldwell Banker King Thompson. She drafted letters to the owners of 35 homes, asking if they would consider selling. Two were interested. After looking at both houses, the couple put in an offer on one of them, a two-story Colonial. The deal is expected to close this month.

“I made the same suggestion last fall, and it was a success,” DeVoe says. “It’s great for someone who wants a particular street or neighborhood.”

Jeff Beggins of Tampa, Fla.-based Century 21 Beggins says he agrees that sellers are few and far between. He says many owners who were once underwater still mistakenly believe that property values are lower than they are. Others have seen the gains and are holding out for more appreciation, despite today’s low mortgage rates. Either way, there are far more buyers than homes to buy, he says.

To generate some listings, Beggins and his team have begun courting homeowners in coveted neighborhoods, mailing monthly newsletters with recent sale prices and current listings, as well as an offer of a free home-price analysis. In many areas, his agents are even going door to door to solicit homes to sell.

“Our message is simple: Our South Tampa market is hot. Interest rates are low. It’s a great time to move up, move down or just move around” to a new area, he says.

The appeal has had limited success, he says, but it’s worth it when an agent walks away with two or three new listings.

Suzanne Zinn Mueller, chief marketing officer for CB Bain in the Seattle area, says a letter or postcard from a local agent can be just the reassurance a would-be seller needs that there are enough buyers waiting in the wings to ensure a speedy home sale. “One of the biggest fears of sellers tends to be concern over the hassle of selling,” she says. “How long will it be on the market? How long do I have to keep my house looking perfect?”

These days, she says, this shouldn’t be a concern for most Seattleites. As of April 25, the absorption rate for homes in King County, Wash., was 105%. For every home sold, only 0.95 of a home came on the market — a far cry from the 30% to 40% absorption rate that is typical in that market.

Nationally, the inventory of for-sale homes is down 17% from last year’s levels, according to the National Association of Realtors.

Hence the flurry of agent letters hitting mailboxes around the country. Indeed, in DeVoe’s case, her letter reportedly wasn’t the only one the seller received. But her timing was spot on: Both of the owners who responded had recently contacted agents and were thinking of listing their homes this summer. Her letter was enough to speed up those plans.

Of course, agents say, the letters have more luck if they are targeted to specific types of homes, specific houses or blocks within neighborhoods. Mass mailings haven’t directly brought in listings for Kim Drusch of Century 21 Award in San Diego. But they do get her name out there as an agent, she says.

If you keep coming up empty in your search, agents say, maybe your agent should try hitting the streets for you. If he’s not willing: “Find a good, aggressive agent who is willing to go above and beyond for you,” Beggins says.

Housing-market snapshot
Existing-home sales declined 0.6%, to 4.92 million in March from 4.95 million in February on limited inventory. But they were 10.3% higher than in March 2012, according to the NAR.

“Buyer traffic is 25% above a year ago, when we were already seeing notable gains in shopping activity,” says Lawrence Yun, the NAR’s chief economist. “In the same time frame, housing inventories have trended much lower, which is continuing to pressure home prices.”

The median existing-home price for all housing types was $184,300 in March, an 11.8% increase from March 2012 and the strongest price bump since November 2005, before the last housing bubble burst. In the West, where inventory is particularly scarce, the median price increased 26.1% from March 2012 to $258,100.

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Homes are selling faster because of limited supply, says NAR President Gary Thomas of Evergreen Realty in Villa Park, Calif. “The typical home sold in March was on the market for one month less than it took to sell a year ago,” he says. The median time on market for all homes was 62 days in March.

Fewer foreclosures and short-sale properties are in the mix: Sales of distressed homes continued to fall, accounting for 21% of March sales, down from 25% in February and 29% in March of last year.

First-time buyers: How to insure that home
Finding insurance for that first home purchase can be just as anxiety-provoking and confusing as the negotiation itself. How much insurance do you need? And what kind of coverage should you choose?

We asked Jana Bell, vice president at HomeInsurance.com, for tips on how to select the right coverage for your new home. More can be found here.

The biggest confusion, Bell says, is how much to insure the dwelling for. Owners must insure for “replacement cost,” or the cost to rebuild the home, not what it is worth it in the market or what they paid for it.

“Today, with foreclosures and short sales, you are sometimes paying less than what it would cost to rebuild it if it was a total loss,” Bell says. You can use a number of insurance calculators, including this one on HomeInsurance.com, to get a rough idea of what it would cost to rebuild your home should disaster strike.

Next, Bell says that when you’re looking for a standard home policy, you want to make sure that it offers the “replacement cost” for your home and its contents rather than “actual cash value,” which means a depreciated reimbursement based on age that probably wouldn’t cover the cost of buying a replacement for that new roof or sofa today.

Finally, most policies will include liability coverage for people who might injure themselves on your property, such as that delivery guy who trips on your loose step and breaks his ankle, or the kid who slips on the concrete by your pool.

While the standard policy usually includes $100,000 in coverage for these types of events, you can triple that amount for just $12 to $24 more annually, Bell says.

Most policies also include coverage of a home’s contents to as much as 70% of the building’s value. You must document these items with receipts and photos to justify your claim. Snap some shots of everything after you move in and email them to yourself and your mom, or put them in a cloud server, so they are there for you even if your computer is destroyed.

“It takes 10 minutes to snap photos,” Bell says. “If anything should happen, you could always refer to those photos. It makes the claims process much easier.”

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