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Market ready

Hints to help get the highest value out of your house RUTH LINK Missoula Organization of Realtors® The low inventory of homes on the market in Missoula has created a sellers’ market, especially for homeowners with homes in sought-after neighborhoods and price ranges, according to Brint Wahlberg, president of the Missoula Organization of Realtors® (MOR). Wahlberg recommends that homeowners thinking of selling should talk to a Realtor about listing now, rather than waiting until next spring or summer when interest rates and inventory could go up. But how do you prepare yourself and your home in order to get the best possible price from a buyer without spending too much time and money? Realtors share a few tips they tell their clients before listing their home.

Declutter and Clean Lived-in houses look, well, lived in. Well-loved and used homes have lots of furniture to sit on, decorations and family photos to demonstrate the personality and style of the homeowner, as well

as appliances and other devices on kitchen countertops that homeowners use regularly. Wahlberg recommends clearing out belongings and some furniture to make rooms look a little bare but not completely empty. Keeping a home clean and clutter-free while it’s on the market can be a challenge, especially if there are kids and pets in the house. But smells of mildew, pet dander, or left-out food can turn off buyers immediately, and studies show that buyers form an opinion about a house during the first 10 seconds. A deep cleaning before the home goes on the market can dramatically improve the chances of the house selling quickly and for more money. Cleaning and decluttering result in an average 1,577 percent return on your investment, according to a 2013 HomeGain study.

Remove Personal Items Wahlberg recommends removing most personal photographs and personal decorations. If there are a lot of family photos and report cards on the refrigerator and walls the buyer could become curious about the owners and concen-

trate on the personal items instead of focusing on the property and imagining themselves living there. “Keep one family photo and the buyer will focus on the house and not the portraits,” Wahlberg suggests. If sellers need to move immediately, a

vacant house as opposed to a “staged house,” one that is deliberately decorated into an attractive product to appeal to potential buyers, is not always bad, according to Celia Grohmann of Banana Belt Realty. “I like buyers to be able to use their imagination.”

Buy or rent? Statistics suggest you are better off in your own home RUTH LINK Missoula Organization of Realtors® Jennifer Iverson feels at home for the first time in her life since she purchased her house in Windsor Park in Missoula just over a year ago. “We didn’t want to just purchase a house, we wanted a home, a place where we could make memories, that is safe, warm and inviting, where we could really start building a future,” Iverson says. She admits that the home she shares with her husband Vic and son Liam, 3, would be considered a starter home for most families, but Iverson hopes Liam will spend his childhood there. Homeowners like the Iversons are happier, healthier and more financially secure, according to the National Association of Realtors®. “Homeownership boosts the educational performance of children, induces higher participation in civic and volunteering activity, improves health care outcomes, lowers crime rates and lessens welfare dependency,” boasts NAR’s 2010 paper “Social Benefits of Homeownerships and Stable Housing.”

Wealth and Economic Impact Homeownership is the largest investment most Americans make in their lifetime. Owning a home allows Americans to accumulate wealth while having a safe place to live. “Over time when people retire, own-

ing their home is a huge part of their net worth,” Missoula Organization of Realtors® President-elect Mike Nugent says. Americans who own a home have on average 30

real estate-related industries for each home sold. The economic impact continues after the sale when the homeowner makes improvements and purchases items for their home. For each home sold in Montana, $4,429 is spent on consumer items such as furniture, appliances and paint service. “It’s nice to know we’re building an investment in our home that benefits our community,” Iverson says. “We’re paying taxes. When we purchase things for our home it benefits our community—and we try to buy local as much as we can.”

Community Involvement

times more wealth than renters, according to a 2012 study by the Federal Reserve. The benefits go beyond the homeowner. NAR estimates that one job is generated for every two homes sold. In Montana $16,731 of income is generated from

Homeowners live in their communities four times longer than renters, making them on average more committed to their communities and active in their neighborhoods, according to NAR. MOR President Brint Wahlberg has owned four homes in Missoula. “All gave me an incredible sense of pride and ownership,” he says. “When I live in a home that I own I feel a sense of belonging and I want to make my neighborhood better. I haven’t felt that same sense of ownership and pride when I have rented.” Homeowners also tend to be more politically active: 77 percent of homeowners vote compared to 52 percent of renters, according to NAR. Real Estate 406, September 2014 5

ing their home is a huge part of their net worth,” Missoula Organization of Realtors® President-elect Mike Nugent says. Americans who own a home have on average 30

Community Involvement

Happiness The two things Kellie Battaglia, operations and program director of Homeword, hears most from new homeowners is they feel pride in homeownership and that owning a home allows them the control and freedom to live as they desire. “Homeowners don’t have to check with a landlord to make changes to their living space,” says Battaglia of the Missoula-based organization committed to providing safe, healthy, affordable housing and education. ”They can choose their own paint colors, put up a fence, have pets or landscape their yard.” says Battaglia. Homeownership also creates a sense of stability and permanence in a household. Studies show that homeowners are happier than renters, but homeowners are typically wealthier so it’s not clear if their happiness stems from having their basics needs met or from owning their home. But one study cited by NAR found that renters who become homeowners in the same home became more satisfied with their accomplishment of owning that home. “You can’t explain how it feels to own your own home, to be part of the American dream, be part of your neighborhood, community council, and community garden,” Nugent says.

Educational Achievement Studies show that the responsibility and commitment of maintaining a home and paying a mortgage is transferred to children of homeowners and they are

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more likely to gain life management skills and become homeowners themselves. It’s not clear if homeownership or stable housing are the direct cause of educational achievement of children, but studies confirm a correlation between the two.

• Teenage students of homeowners have a 25 percent greater likelihood of graduating. •Daughters of homeowners have a lower incidence of teenage pregnancy. •Homeownership and stable housing are linked to school performance and high school graduation rates. •Young children of homeowners have higher levels

of achievement in math and reading and fewer behavioral problems.

Less Crime Homes occupied by homeowners are often in more stable neighborhoods with less crime. Homeowners have more incentives to deter crime than renters since they have more to lose financially from vandalism and have made a commitment to their neighborhood and their mortgage, according to NAR. Iverson says her new neighborhood, where most of the residents are homeowners, is safe and consistent, something she didn’t have growing up. Iverson grew up living in rentals and never thought she would own a home. Homes in Missoula seemed expensive, Iverson says, but their Realtor explained their options and they took a homebuyer education class offered by Homeword. Iverson’s husband Vic is a veteran, which allowed them to qualify for a homebuyer assistance program. They discovered that homeownership–even owning “a really nice, brand-new home”–was realistic. The Iversons purchased the home before it was built, allowing them to choose the lot, the exterior and interior paint colors, as well as the flooring, cabinetry and countertops. “I like the part of the community we’re in,” Iverson says. “I feel more stable and safe. There are a lot of young families like us here. We’re here for the long haul, unless something unforeseen happens, and that benefits our community.” B

Your personal expert When selling your largest asset, you don’t have to go it alone Professional Standards

RUTH LINK Missoula Organization of Realtors® Andy Lake tried to sell his townhouse in Missoula on his own for six and a half months. He stayed at home watching TV and looking out his window for prospective buyers every Sunday afternoon during open houses, but no one ever came. He paid $500 to list his townhome on a for sale by owner website. In six and a half months only one person had looked at it so Lake listed with Brint Wahlberg with Windermere Real Estate. Within a week Wahlberg had five showings and one successful offer. “Realtors put property in front of people who are looking to buy a home,” says Wahlberg, also President of the Missoula Organization of Realtors® (MOR). “Putting a sign in the yard is an old tactic and will not necessarily get it done.” Buying a home is the biggest single financial transaction most Americans make in their lifetime. Consumers don’t hesitate to hire auto mechanics to service their vehicles, CPAs to do their taxes and attorneys to write their wills. When it comes to purchasing or selling a home, real estate agents can help homebuyers through this serious financial and emotional investment. In 2013, 88 percent of sellers were assisted by a real estate agent when selling their home, up from 69 percent in 2001, according to the National Association of Realtors® (NAR).

Real estate agents and brokers are licensed by the Montana Board of Realty. Realtors are licensed agents or brokers who also pay dues to NAR and their local

Missoula Realtors must also take continuing education courses with MOR focused on ethical work habits and consumer protection in addition to the courses required by the Montana Board of Realty to attain a real estate license.

Connections

and state association, and subscribe to a code of ethics, which includes being honest, contractual, and ethical with all agents, buyers and sellers. “It’s important to me to work with a group of professionals who care about ethical practice and honesty in all forms of business,” Wahlberg says.

photo courtesy of Aaron Theisen

Only Realtors have access to the Multiple Listing Service (MLS), a database that lists properties for sale to connect listing brokers with brokers representing buyers. There are over 800 MLSs in the United States. “When you list with a Realtor there’s a pretty good chance that the Realtor doesn’t have the buyer for your home,” Wahlberg says. “But the Missoula area has over 500 members and the power of the Realtor network comes into play.”

Advertising Ninety percent of home buyers start their search online with websites like Zillow.com, Trulia.com or Realtor.com, according to NAR. Realtors, through Real Estate 406, September 2014 7

their MLS, can help sellers easily reach buyers by advertising homes on multiple websites. Realtors advertise homes in other ways so the seller doesn’t have to pay for the advertising expenses out of pocket. Homebuyers used multiple sources to search for homes in 2013: In addition to searching online, 23 percent looked in print newspaper advertisements, 51 percent used a yard sign and 45 percent used open houses.

“He took a little out of my pocket, but Brint had everything lined up: the appraiser, the home inspector, the title company,” Lake says. “He [Wahlberg]

Finding A Realtor

Price Sales price is often the key to a quick sale. Realtors have access to data in the MLS that will help sellers come up with the most accurate asking price so the home will sell quickly. For sale by owner sellers like Lake may think they can save money by avoiding real estate agent commission fees and selling on their own, but sellers may get more if an agent helps with the asking price and the negotiation. Last year, the typical for sale by owner home sold for $184,000 compared to $230,000 among agent-assisted home sales, according to NAR.

Paperwork and Negotiation When Lake got an offer on his townhome he was 190 miles away visiting relatives. He didn’t like the offer so Wahlberg countered and the buyers accepted. Lake says the transaction would have been difficult for him to take care of without Wahlberg because he was out of town and unfamiliar with the paperwork.

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“If you go through the process of buying a house with a Realtor it may look easy because the Realtor is taking care of the hard stuff for you,” says Mike Nugent, President-Elect of MOR. “The single biggest thing the Realtor helps you with is the unusual or the unknown. Things pop up on a transaction that they have seen a few times but the buyer has never seen before.”

earned every penny and I would definitely use him again.” The transaction of buying and selling a home is more complicated than ever so it’s not surprising that for sale by owner properties have dropped from 19 percent to 9 percent in the last 20 years. For sale by owner sellers also report that the most difficult task was “understanding and performing paperwork,” according to a 2013 NAR study.

There are over 1 million Realtors in the United States and more than 500 in Missoula. So how do you find the right Realtor? Personal referral is best, according to Nugent. “Ask someone you know who has worked with a Realtor and had a good experience.” Seventy-three percent of buyers and 65 percent of sellers who used a Realtor would use the same agent again, according to NAR. Nugent also suggests researching the Realtor online and looking at what they have to say about themselves and what others are saying about them while keeping in mind that not everything you read online is accurate. Ask the Realtor questions and be sure you are comfortable doing business with him or her. “You want someone who is prompt and willing to answer your questions,” he says. “There is no such thing as a dumb question when it comes to real estate.” A directory of Missoula Realtors is available on MOR’s website, missoularealestate.com. B

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Market strength In-demand homes push median prices to new heights BRINT WAHLBERG Missoula Organization of Realtors®

Median sold price through August

The number of Missoula homes sold is down $227k while the median sold price is up compared to this time last year–and low inventory is playing a major factor in these market trends. While 727 $216k homes sold from January through August 2014 $215k compared to 847 in same time period in 2013, the $205k median sold price through August 2014 was $227,000 compared to $216,000 at the same time last year, according to the Missoula Organization of Realtors® Multiple Listing Service. 2012 2013 2014 2011 Although sales are down compared to last year, 2014 numbers are higher than 2011 and 2012 and similar to the pre-housing bubble days “Inventory is the biggest factor for the decrease in of 2007, revealing a slow and steady recovery. But if the homes sold and increase in the median price, especially inventory of homes available for sale continues to de- at the bottom of the market,” says Mike Nugent, prescrease, Missoula’s housing market will slow down and ident-elect of the Missoula Organization of Realtors®. could tip to a sellers’ market. “More listings on the market below $250,000 are 10 Real Estate 406, September 2014

needed to resolve our supply issues.” ••• Fewer sales this year compared to last year (through August) are due to the following factors:

Inventory The current absorption rate–or the time it will take for the homes on the market to sell–is five months and just four months for homes $250,000 and under. A healthy market has an absorption rate of between three and nine months. The low inventory of homes for sale means there are fewer options for buyers, causing buyers to delay their purchase or not buy at all. Missoula Organization of Realtors® started tracking the absorption rate in 2008 as it’s a better tool to monitor the health of the real estate market than “days on the market,” which only reflects the average time on the market for sold properties. The absorption rate compares sold inventory to active inventory.

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Interest Rates Interest rates in 2013 were at record lows and almost 1 percent lower than they are now, making the borrowing power of buyers and the incentive to buy greater in 2013 than this year. Buyers also hurried to purchase homes or refinance in 2013 to get the lowest rates they’ll probably ever see. Experts expect interest rates to reach 5 percent or more for a 30-year fixed mortgage in 2015.

Weather The harsh weather in the winter of 2014 hampered sales in January, February, March and even April. While Missoulians were inside staying warm or on the slopes skiing, fewer homes went on the market and fewer prospective buyers were out looking at homes. June, July and August of 2014 are close to staying on pace with sales during the same months in 2013, but the low sales numbers in the winter of 2014 will hurt overall numbers this year. ••• The median price of homes is on the rise for a couple of reasons:

Inventory Low supply of homes on the market causes the median sold price to increase. Low inventory allows sellers to increase their asking price and sometimes causes buyers to become competitive, especially for homes in lower price ranges and in desirable neighborhoods. Investment buyers with larger down payments and cash are also competing with first-time buyers for lower-priced homes. Although buyers in some neighborhoods and price ranges are becoming 12 Real Estate 406, September 2014

competitive, Nugent cautions sellers to prepare their homes accordingly. “Buyers are still discerning and are more conscious about over-paying than they previously were,” he says. “You can’t expect to not have updated or maintained your home and get top market dollar.”

Fewer Distressed Sales The number of distressed sales, or short sales and foreclosures, is down significantly compared to recent years. Distressed sales tend to sell for lower prices and can therefore cause the median sales price to decrease. ••• As the housing market slowed in 2007 so did the pace of construction throughout the United States and in Missoula, causing the local market to fall behind the demand needed for new workforce housing. In 2013, a median family income of $77,309 was needed to purchase a median priced home of $215,000 in Missoula. That is above Missoula’s median income of $61,200 for a family of four and well above the median income of $42,900 for a singleperson household. As the median price of homes rises in 2014, the prospect of owning a home will become more unrealistic for Missoulians. The poor housing market and low interest rates caused housing in Missoula to temporarily become more affordable. But as the market is on the upturn, more listings—and specifically more development of workforce housing—are needed in order for Missoula’s housing market to thrive. “How do we create more inventory for workforce housing?” Nugent asks. “I don’t have the answer. Land prices in Missoula are expensive and the cost of building is expensive.”B

Troubleshooter

Home inspector explains what ails the common Missoula home Local home inspector John Jacobs knows his toilets—and furnaces and roofs and crawl spaces. For the last four-plus years, Jacobs has worked with current or potential homeowners to point out problems that may otherwise go unnoticed. He searches for toilet leaks and traces of vermiculite, evidence of mold and faulty wiring. And he spends his days at both older and newer homes. “Just because the house is brand new, or just a year or two old, that doesn’t necessarily mean you don’t need a home inspection,” says Jacobs, noting that certain details can sometimes get overlooked during construction. Jacobs encourages his clients to educate themselves on basic home repair and to always keep an eye out for potential problems within their home. We asked Jacobs to discuss what some of those problems may be, and how to address them. Indy: What are some common problems you find in Missoula homes? Jacobs: Most things I find are the Harry Homeowner repairs—someone tackling something they don’t know much about, like somebody who finished off a basement and rewired stuff, or shoddy plumbing. Most problems that I find are people trying to do it themselves and doing things that aren’t quite up to code. People have the best intentions, but sometimes they just don’t know.

Indy: Where in a house do you find the most problems?

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Jacobs: Kitchens and bathrooms. These areas have constant moisture and the number-one problem that causes problems in a bathroom is a faulty bathroom fan. A home’s enemy at all times is water–water on the inside and water on the outside. You’ve got to keep your home dry inside and out, and you’ve got to keep water away from your house. Whether it’s through a roof leak or through a plumbing leak inside the home, it can create wet rot. You’ll see this in the flooding of basements or crawl spaces, stuff like that. Some of the worst things I see are due to a lot of water damage. Indy: How do you suggest dealing with these types of issues? Jacobs: The first thing: We always take a color picture of what we find and disclose that in our report, of course. And then normally we’ll recommend that they either hire a licensed contractor or licensed plumber to come in and repair the damage. Or if it’s above and beyond—something we can’t quite see what’s going on, but we know there’s a

water leak—sometimes it’ll require having that contractor come in and do further exploration by either removing drywall or whatever it may be. Indy: What are some of the first signs that a home could have a problem? Jacobs: The number one thing, usually, is if you walk in the front door of a place and you just take a smell. Mildew and mold, and wet rot in wood have a certain smell. You know then that there’s going to be some moisture issues in the house. Indy: What’s your best advice for avoiding these types of problems? Jacobs: If you currently own a home and something doesn’t break within six months, it will soon. About every six months you should be looking around. Look in the crawl space and make sure you don’t hear any leaks or drips. Keep your eyes and your ears open. Things are going to happen, but how you deal with it and how fast you deal with it are what’s important. B by Ira Sather-Olson. This article originally appeared in the 2009 issue of Homesteader.

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