There are many factors at play right now that are fueling this market; taken individually the impact is nowhere as near as significant as when viewed collectively.

• Sharply reduced inventory. Despite the improving market, many home sellers remain “underwater”. About half of homeowners in Atlanta are underwater; they would need to bring money to the table to sell their home. Some can’t afford that and others couldn’t buy after selling if they wrote a check.
• Sharply reduced distressed inventory. Foreclosures are down and while many owners are still in trouble, rising values are giving some a little breathing room
• Continued low interest rates. Talk of increasing rates has many fence sitters jumping into the market. While rates may rise, neither the national or global economies are strong enough to see major increases. That said, a percent can eliminate some buyers and those sensitive to a bump are active engaged.
• Rising Rents. Renters that might not have been ready or able to buy are discovering that ownership is attainable. It is cheaper to buy in Atlanta than it is to rent.
• Institutional Investors. Although primarily in the under 200K range, we are seeing institutional investor activity in Atlanta to 300K and sometimes higher in areas like East Cobb, North Fulton and up the 400 corridor.
• Boomerang Buyers. Those owners that were caught in foreclosures and short sales at the start of the bust are now returning to the market as eligible buyers.
• “Regular” Buyers. The “plain Jane” buyers that are present in any market at any time are part of this mix. Folks upsize, downsize and have any number of reasons for being in market.
• Relocation Buyers. Atlanta remains a popular stop for many major firms and relocation activity is picking up.

Nothing is as illustrative as the real world. We have multiple buyers ranging from the low 100K to over 1.5M range actively looking to buy in this market. These are well educated buyers with clear definitions of success…and several are in temporary housing and others are headed that way. In many cases, there is no justification for prices being asked or prices being paid for some properties. In some micro markets, this sure feels like a bubble – albeit not a colossal one like years ago, but a bubble none the less.

Consider general data for a few zips – click to see market data for over 100 Atlanta zip codes

Bubble or just a strong market? That’s open for debate but what’s not debatable right now is that this combination of factors has resulted in a very competitive and heated market. The most important thing for buyers right now is to align themselves with trusted, experienced Atlanta real estate professionals. Prices and activity will settle; the New York lotto had a saying that applies here: Buy with your head, not over it.

The video below was shot because it’s a prefect illustration of a home built in a “bowl”. This video is a great example of what to look for – and avoid – when looking at a home. Retaining walls, reverse slopes, gutters not properly aligned…are all points of concern. If your agent doesn’t understand what to look for, rely on your inspector. Water is a tough opponent, it’s rarely defeated and mostly negotiated with – and it never sleeps.

Waiving the appraisal contingency is done to present a more streamlined, competitive offer – one that will better compete with cash offers or set them apart in multiple offer situations. But is it wise? In many instances, no. In fact, in most cases it’s stupid…in most cases, not in all. Investors do it frequently and they understand it is part of their business. They are not considered here nor are cash buyers; this review considers buyers requiring a mortgage loan.

So when should you consider removing the appraisal contingency? After thoroughly understanding the risk/reward and only if it seems to be a game changing move. Factors to consider:

• Is an appraisal required? That answer is yes with any type of loan. Obviously a cash buyer doesn’t but it is wise to get one anyway. A disinterested third party opinion of value is never a bad thing.
• Can the buyer’s agent evaluate the property as an appraiser will? Not as an agent; as an appraiser; with consideration to the underwriting process. The majority of agents are woefully ignorant of what an appraiser does or what is required of them.
• Is adequate data available to formulate an opinion of value? In some cases, not enough data may be present to provide a confidence level with the buyer.
• Can an appraiser be consulted during the due diligence period? This allows the buyer to terminate without penalty before being contractually obligated.
• If an appraisal comes in low, can the buyer cover the difference between appraised value and contract price?
• Is the buyer’s agent experienced enough to write the offer and still maintain a level of protection for the buyer? A strong working knowledge of contract law is important as removing this contingency voids a major buyer “out” and could result in major contractual issues.

There are likely to be other factors as well, each situation is unique. The largest and most dangerous variable is the appraiser themselves; just as there are ineffective agents there are ineffective appraisers. Of course a savvy listing agent is going to ensure that their seller is adequately protected. Any buyer getting a loan will require an appraisal; a smart listing agent should require not only loan approval but write very specific language into the contract detailing what will happen in the event of a low appraisal. The listing agent should look to close any loopholes.

Buyers must carefully consider the pros and cons of removing the appraisal contingency. Like fire, this can be a very effective tool – also like fire, it can do severe damage in the hands of an ineffective buyer’s agent or misinformed buyer. Any buyer that considers this must have absolute confidence in their agent; any agent proposing this must have absolute confidence in their ability. HMT has successfully used this maneuver several times over the last year; but never without running scenarios with buyers. As those buyers saw, when properly applied this can be the edge that makes an offer the winning one.

Many of the highly desirable Atlanta metro areas are experiencing a shortage of quality listings. Homes accurately priced, well presented and well situated are selling; and they’re selling quickly for very high sale to list ratios. There are many reasons for this market surge – most are not attributing it to the economy but rather to a combination of things:

• Low rates that are expected to rise
• A shortage of quality inventory
• Return of boomerang buyers – those that lost homes early in the crash
• Regular seasonal cycles
• Institutional investors influencing the market
• Rising rents making buying more attractive
• Significantly increased use of FHA and FNMA Homepath mortgages

However, despite conversation about loosening the lending environment for buyers, mortgage underwriting and appraisals continue to be an obstacle.

Some estimates have about 50% of Atlanta homeowners “underwater”, while they might like to sell they are unable as they cannot cover the gap between likely purchase price and what they owe. Some sellers however, well they just chose not to consider the current data.

Over the last few weeks, we have had the opportunity to meet with several owners of homes that were previously listed but failed to sell. All were sound, in areas that are experiencing increased activity and all have appealing features that will attract attention. In every situation, the seller was walked through the process that a buyer’s agent AND appraiser will use; a road map for success was laid out. No listings were taken; but some very interesting statements were made.

“I don’t need to sell it; I’ll just hold on to it and let the market shake out”. So said the owner of a previously listed home as he signed with another agent to list 26% over the highest comp and 32% over the median value for excellent community comps. He was leaving the country for a year and the home will be sitting vacant. If you don’t need to sell, why list?

“I just put 30K into the house; I have to get it out”. Words of another previously listed owner as he waved his hands over the data. This was listed 15% higher than it expired at and a good 25% over the community.

“The power lines have never been an issue”. Said by the owner as we walked the yard in the rain and the arcing on the wires sounded like corn popping. Dismiss the clear, recent data demonstrating a good 20% negative value influence, never mind public perception.

The market has shifted to buyers; that is clear. However, buyers are well educated and lenders remain cautious; the Wild West days of the real estate boom are not being repeated. Sellers that fail to understand this will find themselves sitting in homes that become stigmatized with buyers asking “what’s wrong with that house that it’s been on the market for so long?” When questions like that start being asked, nothing good happens.

Selling a home is not rocket science; price it accurately, make certain it’s appealing, present and expose it well to both buyers and agents and actually sell it – follow up and be attentive. The market ultimately determines the market value of a home, nothing else.

“Public transit within walking distance results in a 42% boost in home value. Neighborhoods near MLB stadiums cost more – especially if the team has a better shot at winning the 2013 World Series. A sex offender living next door to a family renders their home “virtually unmarketable” . Is there really any way to support these types of claims? Common sense has to come into play of course, along with the understanding that location trumps everything when it comes to real estate. Location is a prickly thing – it makes generalizing anything “real estate” very difficult.

Let’s take the National Association of Realtors report titled “The New Real Estate Mantra: Location Near Public Transportation”. To be certain, this is exactly what you expect; a detailed and lengthy analysis of property values close to vs. distant of public transit hubs. There are ample pages of data and explanation along with the requisite number of graphs and charts. However, the study looked at five metro areas – Boston, Chicago, Minneapolis-St Paul, Phoenix and San Francisco. Is it accurate to take the data from this study and apply it broadly with a headline that can lead readers to misinterpret the results? Especially when the study ignores the entire southeast and central United States?

With as many major league baseball teams as there are, everyone in the county probably has some experience with being at and around ball parks. How many of these are in areas that can be considered highly desirable? Well Trulia will answer that question with their post “Take Me Next Door to the Ball Game”. I think this article is generally accurate; obviously cities like San Francisco, Boston and Washington are highly desirable areas. Despite a team that seems to be competitive, areas around Turner Field in Atlanta are considered second to last in expense – something we know to be true as any local in the Atlanta area would likely prefer to be located elsewhere. This is an article that intuitively makes sense; the specific data might be open for discussion but the gist of the post is sound.

The AP article “Molester Should Buy Victim’s House So She Can Move, Suit Says” relates a nauseating story. A neighbor molested this family’s daughter, went to prison and returned to live in the home next door that he owns; clearly not a good situation. However, how can the adverse impact on value due to a sex offender next door be determined? It shocks many people to log onto registered sex offender sites and look at where these people are living, there are more than a few out there. Would paired sales analysis be used? How can you conclusively determine that $XXX was lost due specifically to the sex offender?

Caution must be exercised when seeing headlines that scream “Adding Granite in Your Kitchen Adds 15% to Value” or “New Garage Doors Shorten Marketing Time”. Channels like HGTV can be intoxicating with their advice and recommendations, but the fact remains that while generalizations might be fine, it’s misleading to get too specific. The public is a pretty smart group; as long as common sense is maintained when reading how to “Sell Your Home in a Week Using Aroma Therapy” everyone should be alright. In the end, the real estate market determines the value of a home, nothing more.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

Uh Oh…

Administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default. Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan. 

So the Feds are telling the very same banks that we bailed out to knowingly make high risk loans…with no risk to them because we’ll cover it? Does the President understand that FHA is $65 BILLION in the hole already? And many say that’s a low estimate.

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

The FHA historically has been dedicated to making homeownership affordable for people of moderate means. Under FHA terms, a borrower can get a home loan with a credit score as low as 500 or a down payment as small as 3.5 percent. If borrowers with FHA loans default on their payments, taxpayers are on the line — a guarantee that should provide confidence to banks to lend.

Yup – make those loans, make those fees, foreclose and collect the insurance and property AND the tax payers will cover it – no worries because the banks are too big to fail.

Can someone please tell me this article does not say what it seems? Where is this “change”? What happened to cleaning up the “Wall Street” nonsense and getting everything under control? This is nothing short of amazing for all the wrong reasons…READ THE ARTICLE and shake your head as well

How this move ends is unknown right now, but good money says “not well”. Corporate investors fixate only on return, once a new flavor of the week comes along these homes will be cut loose. Consider as well that in about 2 or so years, updating will be needed in these homes, spending more money on an asset already in place isn’t something that they like to do. At some point, one of these firms will release inventory and when they do, that may trigger the others as no one wants to be selling off property in a saturated market. Is that a bubble I see?

See Distressed and Foreclosure Property for additional posts about this category

Researcher Michael Seiler tracked the eye movements of 45 people viewing 10 online real estate listings with six photos in August 2011, determining that 95 percent of participants viewed the first photo—an exterior property shot—for just 20 seconds. The study is relevant because knowing how house-hunters view a listing online can help agents fine-tune their marketing approach.

Founder and director of Old Dominion University’s Institute for Behavioral and Experimental Real Estate, Seiler says participants moved their eyes in a “Z” pattern from the upper left corner and after reaching the bottom right corner, they scanned up the right column of the screen.

After viewing the home’s exterior photo, 76 percent looked at the property description; but 41.5 percent did not bother to ever read the agent’s remarks. Researchers also cautioned practitioners against using all capital letters, overhyped adjectives, and brand names in property descriptions.

Seiler determined that overall, participants devoted 60 percent of their time to photos, 20 percent to property descriptions, and 20 percent to the agent’s comments; and he found that their interest diminished after clicking through numerous properties.

“You have to grab people’s attention within two seconds,” Seiler remarked. “Do it the way a billboard does.” Some agents ensure the photos, property descriptions, and remarks can be seen without scrolling; while others limit their remarks to only a few paragraphs and focus more on the lifestyle and neighborhood than appliances and other features.

This begs to ask a very simple and fundamental question; why do many agents fail to ensure their listings are as presented as best they can be? Why do they post them in the MLS without photos, take only one or two, take poor quality low resolution photos, fail to highlight the best parts of a home….

That of course leads to an even more vexing question; why would a client hire that type of agent? This Wall Street Journal video is worth a look – and if and when you think of listing your home, give us a call or drop us an email; we’ll show you how it’s done

ABC News recently ran a clip about how the housing market is roaring back to life – Atlanta was referenced and this is worth a look.

The Atlanta real estate market has changed. As we noted in our 2012 Atlanta Housing Market Review, the statistical bottom of the market occurred in January 2010. Since then it’s been an ebb and flow upward with noticeable and more consistent improvement since. While it’s probably too early to say things are all good, we can certainly say that things are looking better than they have with positive expectations moving forward. Now the challenge is to keep that forward progress…

This is a list of things that we believe every home buyer in Atlanta should have a firm grasp on. By that we mean have in hand, have answers to, have considered and be prepared to act upon. It’s in no order and it’s far from all inclusive. It’s compiled after almost twenty five years of working in real estate; seeing how successful people operate and seeing  things that common in failure. Of course there are cases where folks did everything “right” and still failed; the criminal activity of lenders and Wall Street that embodied the real estate collapse did not discriminate.