This one is actually not bad for a simple calc.
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I think finding a place that you are stimulated by is important. Whether itās keeping active, learning, compelling conversation, the arts, or peaceful relaxation as long as it makes you feel alive and engaged itās good. I have a brother who is in love with rural Colorado. He lives in the mountains not too far from Pikes Peak. He is in heaven. I enjoy going to visit but really am glad to get home when itās over and I live in Ohio. Itās just not a place I would want to live though itās beautiful. I am a suburbanite. I like the city I live in as it has the proper amount of arts, activities, opportunities to learn and change of seasons that work for me. Itās fairly low cost and I can retire here with my modest saving quite comfortably and visit anywhere else Iād like to go. I really donāt think too many others would choose my city as their place of choice (although many do us being an Air Force city that may give it away). So I donāt intend to move when Iām retired just enjoy where I am more. By the way those conversations and the people you meet must be fascinating.
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Iām sorry for the loss of your father. Iām glad your mother has you to give help and advise. Per the house sale, there could be advantage of schedule flexibility (which you may not need) when selling to the real estate investor. Also savings on real estate commission and avoidance of any house prep. But in a hot market it probably makes sense to also explore other options.
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IMHO the property like you say may be a tear down and two places on the lot. Of course the realtor is interested because he can make a great return in a short time - you could ask him what he would offer just to get a general idea. If your mom is happy and safe in her home, you can think about keeping track of the real estate market. During the year, she may express different ideas but as long as her health holds out and she is safe at home, give her at least a year w/o introducing another change. At some point if you do want to sell, ask for a number (with your research) after all commissions etc. - the amount you will be paid, net - only get a full market proposal/analysis if you do want to go through an agent and sell through them. But be sure to ask for enough of a price - they can always counter offer - because if there is an immediate āyesā to your price you have put in a number too low.
We had our home appraised for refinance - just got the appraisal emailed yesterday. Already got a phone call this morning on our land line (the number we give out so any calls can go to messages) about wanting to buy our home. The appraisal is way below what it can sell for but it is a fair appraisal as far as those go - other homes built when ours was built in our general area. 2021 in our area houses were going like hotcakes.
Real estate will have its ups and downs, but in a hot market that is generally on an upswing holding is fine for a while. As time permits, help get clutter out of the house - that will help you when she does move out, and also less strain with not moving stuff that would get tossed.
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Definitely get estimates from several realtors. What your realtor offered may not be a better deal that what she can get on the open market minus commissions (not counting closing costs and excise tax because those are fixed costs). Homes here have been selling like firestorm. With mortgage rates skyrocketing, buyers are trying to lock in whatever they can. IMO, the real estate craze will continue through 2022, so I would not rush.
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That calculator was fun to play with. I kept upping our monthly expenditures until we ran out of money.
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It has been crazy here. The house is in a hot area in Seattle, sheās not in a major rush to sell so it seems like this would have little benefit to her. Kind of feels wrong that he would even mention this, like taking advantage of an elderly person who doesnāt know the market.
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There are studies that show that, on average, real estate agents get much significantly better deals for themselves than they do for their clients.
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Not surprising at all, as many folks just want āoutā fast and quick, adn donāt want to hold out for the best value.
The more I think about this, your mom might want to contact a developer or contractor and see about selling and splitting the property to build two homes with your mom getting a piece of the action.
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I think agentsā financial interest is in closing a deal, pretty much any deal, when they are representing you. There is not a big difference in commission between selling at one price relative to another $20K higher for them, the big prize is from getting a deal versus not getting a deal. So their financial interest is to convince you to close, whatever the price and then move on to the next sale. The RE firm gets say 2.5% of the benefit and the broker may get half of that (or less). So, getting you an extra $10K means that they get an extra $125 or less.
In contrast, when they own the property, they will take the time to push for the best deal as they get 100% of the benefit. If they get a $10K higher price, their benefit is $10K.
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Sale of my dadās house could have been the headliner of that study. Conflict of interest followed by more. Only contact agent had with title company was to ask when she would get her commission check.
Commission structure (at least traditional one that we see) is messed up. Lets say you have a $300,000 house. Unless its falling down, you could likely flag down people driving by in cars and get someone to buy it for $100,000. So why get anything for that? And if the commission is 5% and you get an offer for $280,000, trying to get another $10,000 only yields $500 for the realtor (and they may be splitting that with the buyers agent). So how much do they want to work for that additional $250/$500? Certainly not as hard as the seller for $9,500.
And when that offer comes in, its now 3 against 1 because the realtors want to close any deal to get the commission (with no real incentive to try to get more and trying to get more may push the buyer away which means agent starts sale process all over) and the buyer wants the lower price too.
Would make more sense for sellers if the agentās fee was structured (like some financial institutionsāwe do better when our clients do better) such that at certain price points, agent gets a higher percentage. That is where the benefit is not in any percentage of sales price that is a no-brainer/easy sale.
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@Marilyn tagging you because I think you can add to this discussion!
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Since @thumper1 tagged me:
We sold our house in a hot Chicago suburb directly to a developer. It was nothing as hot as the
current Seattle market, but everything had finally swung out of the 2008 dip. I had the advantage of having followed the tear down market in our small upscale town for years, and had even casually been in touch with some developers. I knew we were in a prime location, walking distance to all schools, town, and the commuter train.
So when we were ready to move (after a year long delay due to husbandās hip replacement surgery) , I drove around town and noted the signs of who was building all the new houses in our part of town (there were always a few homes going up). Then I contacted all the developers and basically asked if they were interested and what they might offer. I had a fair idea of what we ought to be able to get. I also got in touch with a local real estate attorney based on a recommendation from our bank.
Some of the replies were clearly low bid, or had caveats I didnāt like. But eventually one of the major developers said he would give me $5000 over our best offer. And he did. So no inspections, no commissions, and the attorney handled all the paperwork. We got $20,000 over my goal price.
It was serendipitous because the developer was not at all close to wanting to build. (He was sort of a big deal guy; had competed in some reality show in California and came in second.) He had two other properties in development, and needed all sorts of permits from the village. So just for fun, I asked for a six month rent free post possession agreement, and he was fine with that. We paid all the taxes and utilities, and kept up maintenance, but no other costs.
On my husbandās insistence, we did have a Realtor take a look at the house. She said we would have to cede a ton of money because so much of the house needed repairs etc. that it was smarter to sell direct as a tear down. As I knew.
In the process, I learned that the good developers all had a list of clients desperate to find a lot to build on, price no object. So not being in a hurry, I would recommend starting to track the tear downs in your motherās area, see what theyāre selling for, figure out who the good developers are, and start a casual conversation. You will likely get a strong bidding war.
Iāll add the text of my initial inquiry email in another post.
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This was how I first approached the developers:
Hi John - we were given your name by XXX at XXX Bank. We live in the XXX school district in XXX, and understand that you build houses in our area. For various practical and aesthetic reasons, we believe our property would be an excellent candidate for someone looking to tear down and build a new home. We are aware that the tear down market has been gaining strength over the last year.
Our house at XXX is in a perfect location at XXX Park. It is walking distance to town and all levels of public schools (also[diocese school]). The wooded lot is 60x174/180; the house is built on a slab with no basement. We are interested in moving out of the area within the next year and would appreciate any advice or information you could provide on the tear down market in our neighborhood. It would also be great if you could keep our location in mind for any inquiries you might receive from clients looking for properties. Thank you for any assistance you could provide.
Marilyn
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@busdriver11 - it looks like upzoning is coming to Seattle and possibly soon. That lot might fit a few townhouses! Definitely talk to some developers, but donāt rush and just keep an eye on what the City Clowncil (not a typo) does. Thatās what I would do. YMMV, of course.
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The mutual of omaha calculator is very simple, helpful to give an initial ballpark idea. As with any method, so much depends on your estimated need (a bigger factor for those with no pension / medical) & predicted return on investment & future increases (to cover inflation etc). For those close to retirement, especially if retiring well before SS, a year-by-year analysis would of course be much better. My husband did that via complicated spreadsheet, but financial planners (and probably many websites) have tools for that.
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Great information here. Iāll definitely refer to this and start tracking some teardowns around her place. Excellent letter you sent to the builders. I donāt know that Iāve seen many, as people tend to just fix the houses up or build onto them, but there have to be some. My husband thinks there is likely so much quality lumber in her home that the sale of the wood would pay for the cost of the teardown itself. A builder might be interested in that, or interested in completing what they started.
What a great deal that you were able to stay there for another six months for free.
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Good point BB, thereās no telling what those clowns will do next! Interesting, upzoning. I guess that makes sense with so little supply.
Yeah, still canāt believe we pulled that off. But our house was really not in good shape - I used to say that it was tearing itself down - and the developer knew he would not be able to rent it out for any decent amount without a lot of investment. So better for him to have us there keeping an eye on things and paying ongoing costs. And he had access to the property for surveying and such.
Our village was famous for tear downs; it made one of those news stories as a tear down capital of the country in the early 2000ās.
That six month window gave us the luxury of taking our time finding a new house, not to mention packing! You never know what you might be able to get if you donāt ask.
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To them it is ābusinessā. It is like when a realtor or desiring homeowner canvases a neighborhood - a realtor may hang door signs. I talked to a lady that was thinking about moving in with a relative as she was widowed, and a couple were interested in her house due to interest in that neighborhood. Of course they proposed a price āas isā through their realtor contacting the lady - and the realtor got double commissions and this lady selling didnāt contemplate her selling costs and the fact that she didnāt get as much as she could have on the house - she thought about that after it all went down.
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