What is this “MLS” everyone’s talking about?

I’ve referred to the MLS in previous blogs, but I don’t know that I’ve explained what it is and why it’s so valuable, so here you go.

MLS stands for Multiple Listing Service, and it is a system whereby real estate agents in a specific geographic area share information about all the properties for sale (“listings”). Access to the MLS is restricted to real estate brokers, and by extension the agents that work for them.

For each property, the MLS includes address, photos, price, detailed descriptions, disclosures, access information (so the realtor can show the property), and more. The information’s available online and, ideally, offers everything a person would need to make a decision about whether to buy.

The MLS can also be used to match buyers with their ideal property by entering a wish list. The system will automatically inform potential buyers when a property matches their list.

In my opinion, your real estate agent must be a member of their local MLS to provide you with the service you deserve. Without the MLS, they’re working in the dark – offering you a narrower set of choices than you’d get with a realtor who checks the MLS regularly for updates. In addition to listings, the MLS also includes data about recent sales, so your realtor can accurately assess the fair market value of your home or the home you’d like to buy.

In the last year or so, some private listing services have tried to compete with the MLS. Within a region, a small number of offices have opted out of MLS and chosen only to share with each other. I really feel this is a disservice to the buyer and seller. Candidly, I see no advantage to these private programs because the MLS, when used as designed, provides the most information to the broadest audience. Also, with the traditional MLS, rules and a strict code of ethics have been designed to improve the relationship among all parties to make the entire transaction smoother and easier.

The MLS also feeds public and governmental online listing services. So, while brokers are the only ones who access the MLS, their willingness to enter all that data allows public sites like trulia.com, zillow.com, and realtor.com to be populated. “For Sale By Owner” (also known as FSBO) properties are not on the MLS, but nearly all other properties are.

A note of caution when listing your home: if you’ve upgraded your home without the appropriate permits, government databases fed by the MLS may give you away. If the county has your property listed as a house with three bedrooms and one bath, but you are selling a three-bedroom, twobath house, flags may go up.

Next time I’ll write about why I’m optimistic about the housing market. If there’s something you’d like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. Dick Selzer is a real estate broker who’s been in the business for more than 30 years.

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Appraisals 101

It’s a seller’s market, but whether you’re talking about a sales transaction or a lease situation, it’s important to know the value of your property, and which home improvements will pay off. Here are some of the factors that affect a property’s value the most.

  1. Size. Square footage is the single biggest factor in determining a property’s value. Be sure you know the square footage of the home. Measuring it is not always easy and even professionals make mistakes, so estimate it yourself to check the numbers.
  2. Land. How much property does the structure sit on? A big back yard can add a lot of value. However, sometimes the difference between 10 acres and 20 acres isn’t as big when it comes to overall impact.
  3. Condition. The condition of the property (both visible and invisible) is a major factor. Obvious signs of wear and tear are unappealing, but sometimes it’s the structural issues that have a bigger impact on a property’s value.
  4. Location.  Location used to be more important than it is now. While it’s still a major component of value, our telecommuting world allows people more freedom in where to live.
  5. Décor. The style should not only be attractive, but appropriate to the home and the era. It helps to be internally consistent as well as consistent with the neighborhood.
  6. Room Count. In addition to how many bedrooms and bathrooms, the total room count matters. These days, “outdoor kitchens” almost count as another room.
  7. Other Amenities. Pools, hot tubs, and other amenities, while nice, do not increase the value by the amount it costs to install them. And, they can detract if they are poorly placed or in disrepair.
  8. View. To let you know the value of a view, I once knew an apartment building owner who said, rent was $1000 and the view was an extra $200. Yep, people paid it.
  9. Community Amenities. If a property is close to good schools, parks, shopping, and other amenities, the value increases. Now, of course, these are subjective. For a retired couple without children, clearly the schools won’t be much of a draw.
  10. Financing. If the seller is willing to carry the loan, the value of a property may go up. No fuss, no muss (simpler loan application, no fees, etc.).

When it comes to things you can change about your house, the absolute best return on your time and money is to clean and de-clutter. Haul stuff away and deep clean your house—top to bottom. Once that’s done, you can decide  on additional improvements.

People often ask, should I update the kitchen or the bathroom(s)? Well, as with most things, that depends. If you have a four-bedroom/one-bath home, add a bathroom (preferably a master bath). If your kitchen fixtures were done in a nice shade of 1970s avocado, consider renovating your kitchen.

When updating, go neutral. If you want a snazzy color, paint a wall. Paint is inexpensive to replace. Appliances and flooring are not. And, think long and hard before you convert a garage into a family room, because what you gain with one, you lose with the other. It’s almost a fair trade in overall value, so you’re getting little or no return on the money you spent to make the change.

Once your property is in tiptop shape, it’s time for an appraisal. While there are three methods appraisers use to estimate the value of the property; theoretically, they should all come up with comparable values. It costs about $400 to get a single family residence appraised, and this is another one of those times when it’s really important to have a reputable, local professional do the job. Call your local REALTOR for a referral.

In case you’re interested, the three methods of appraisal are as follows.

  1. The Market Approach – compare physical data, get data on several comparable properties, and make adjustments for size, condition, etc.
  2. The Income Approach – figure out the fair market value for renting the property, get income/rental information for comparable properties, and multiply by a ratio to get the appraised value.
  3. The Replacement Cost Approach – figure out the top value (what it would cost to replace it), assess the cost of doing so (including permits, hookup fees, insurance, taxes, etc.) and adjust for the aging of the property (physical, functional, and economic).

Lenders require appraisals, and they can be handy if you’re a For Sale By Owner type of person. If you work with a REALTOR, they can provide a market evaluation as part of their service which will help you estimate the value of your home.

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What to Expect from a Real Estate Agent

For those of you who may not have noticed, the real estate market has changed recently. Prices are up, inventory is down, and buyers outnumber sellers. This makes it a seller’s market. Buyers are in the market because rates are still at historic lows (and have only one way to go in the future). Prices are still affordable, and the economy is looking stronger. If you are thinking of selling in the near future, you should consider starting right now.

Whether you’re thinking of buying or selling, the question is whether to employ a real estate agent to help you. Are they expensive? What do they do for you, exactly?

To answer those questions, I thought I’d define a real estate agent’s legal obligations, as well as the difference between a real estate agent and a realtor®. All realtors are real estate agents, but not all agents are realtors.

Licensed real estate agents have a fiduciary responsibility to deal honestly and in the best interest of the principal (you) — this is not just an ethical responsibility, but a legal one. Real estate agents must follow your instructions unless they are “patently frivolous.” But, as long as you are reasonable, your agent must represent you according to your wishes.

A realtor is a real estate agent who is a member of their local realtor association (which also affiliates them with their state and national associations). So, in addition to being well trained, realtors adhere to a strict code of ethics and standards of practice, higher than those mandated by law. Membership in the associations also makes it easier for realtors to stay up to date with the latest legal issues. The question remains, should I hire a realtor to help me buy or sell a house? I’d say yes, and here’s why.

First, it is in a realtor’s best interest to help you meet your goal. realtors only get paid if you get what you want – if you complete a buying or selling transaction.

Second, people in the real estate industry hire realtors – brokers and lenders with the knowledge to do the work themselves. They know the value of a good realtor. It’s kind of like when you find out your doctor goes to a specialist when he needs one. Don’t you want to do the same?

On the selling side, a realtor will assess your property to determine its market value and bring to light any issues that make it unusual (e.g., is it in a flood plain? Does it have historic value?). realtors advertise your property locally, online, and via the Multiple Listing Service (MLS), reaching thousands of potential buyers. realtors are also connected to other real estate professionals and can share information about your home via those relationships. And, the realtor doesn’t make a dime unless your house sells. As a mater of fact, they spend time and money marketing your property on the prospect of collecting a fee when it sells.

On the buying side, realtors can act as a buffer between you and a homeowner, so you don’t tip your hand. In negotiations, he who speaks first loses. However, if realtors communicate, they may act as independent parties, providing you with information without giving away your position. (This is true whether you’re a buyer or seller.)

If you’re a buyer, realtors can save you a ton of time. As long as you are clear and specific about your needs, a realtor can filter through all the properties for sale so you only see ones of interest to you. Also, realtors are likely to hear of properties coming on the market before the general public, putting you in a position to know sooner.

The idea of saving money with a For Sale By Owner (FSBO) isn’t really accurate. From a seller’s perspective, unless you’re a marketing genius, your property just won’t get the same exposure it would with a realtor. And, advertising can get expensive. If you are not well versed in real estate law, mistakes can also be very costly. Not surprisingly, most FSBO homes end up being listed with a realtor.

On the buyer’s side, you do all the work and receive none of the benefits of an agent. Without a realtor, you may not know what’s for sale or what legal rights you have, what sellers should provide and/or pay for, or other legal issues. And, real estate contracts have a lot of details. If you aren’t familiar with them, you may agree to things you shouldn’t.

Whether you are buying or selling a home, if you have a smart phone you can download a free app that will give you a lot of information about what’s for sale. Text “Selzer” to 87778 and you’ll be sent a link to an app that uses your location to identify all properties in the MLS (not just Realty World listings). It also offers recent sales so you can compare your property to others.

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