Kalinski: How buying and selling a home will change in the Roaring 20s

As we enter a new decade, the massive wave of technological advancements fueled by entrepreneurial tech companies has reshaped consumers’ expectations.  Companies such as  Uber and Amazon have both dramatically shortened the time that people expect to wait for gratification and raised consumers’ expectations with regard to the ease and smoothness of the experience.  That is, consumers now expect to press a button and have whatever it is that they want delivered to them in a matter of a couple days (Amazon shipments), hours, or even minutes (Uber rides); moreover, they want to be able to track their shipment’s progress through a simple, pleasing interface on their phones.

While consumers now expect smooth, pleasant and near instant gratification in most aspects of their lives, the real estate home sale process still typically takes 30 to 45 days and — due to its complexity, legal ramifications, and the fact that it is an ongoing negotiation between multiple parties — it is usually neither frictionless nor “fun.”  This growing friction between consumers’ expectations and the longer duration and complexity of completing a real estate transaction has made the industry ripe for innovation.  What follows are the likely developments that will make real estate transactions faster and easier over the coming decade.

1.  The home search-to-closing customer journey.  The days of agents-as-gatekeepers of real estate listings are gone.  These days, most buyers start their search online and look at up to hundreds of homes to educate themselves.  When they get serious, though, about 90 percent of buyers (and sellers) choose to use an agent to help them with the home buying/selling process. 

Why is that?  It’s because Realtors realized that they needed to change their value proposition to buyers and sellers in order to stay relevant and, well, valuable.  One of the challenges for buyers and sellers is that, with the exponential growth of information available on the internet, the amount of “noise” has grown exponentially as well, but the valuable information (the “signal”) has become harder to find.  Today’s Realtors have things that are in short supply online: hyperlocal and market knowledge, a network of trusted vendors and professionals, expert negotiation skills, a refined process to make the home buying/selling experience less painful, etc.  These skilled Realtors who have adapted to consumers’ shifting expectations provide their clients with better technology, a smoother process, and expert advice.  Those agents who fail to adapt will eventually exit the business.

Other innovators, such as so-called iBuyers, will make you an offer, often within a day, to buy your home for cash quickly.  This convenience, however, comes at a cost, as many iBuyers will likely cost you two-to-five times more out-of-your-pocket than using a Realtor would.

2.  The loan experience.  Typically, the longest (and perhaps most annoying) part of a real estate transaction is the loan process.  Many lenders can take 30 days or more to complete their due diligence, including their assessment of your loan-worthiness and an appraisal of the home, before approving a home purchase loan.  Anyone who has been through this process knows how frustrating and slow it can be.

Fortunately, at least for many people, this process may get a lot shorter and easier.  Lenders are using artificial intelligence (AI) to conduct automated appraisals on properties and help with assessing buyer’s applications.  For “in the box” situations, with well-qualified “W2 employees” buying homes that the AI algorithms can value with a high degree of confidence, the underwriting process can be dramatically shortened without the need for a physical appraisal.  This is already a reality — last fall, we represented buyer clients whose lender did not require an appraisal on the home they were buying and gave them very fast loan approval.

3.  The title and closing process.  Almost everything can seemingly be accomplished these days online from the comfort of your home.  However, at least in Colorado, you still need to physically go to the title company and hand-sign a stack of documents in front of its notary public (how barbaric, right?).  Well, this isn’t actually the title company’s fault, as many lenders — and state law — still require physical notarization of certain documents.

The good news is that this may change in 2020, if the Colorado legislature passes a bill similar to Senate Bill 18-109, which would allow optional remote notarization of documents.  If such a bill were to become law, then notarizations could be done using audio-video recording of the document signing (kind of like signing over Skype or FaceTime, but with more layers of security).  Thus, you would be able to close on the purchase/sale of your home from anywhere in the world, so long as you have a good internet connection.

Conclusion.  The players in the real estate industry have (finally) recognized that consumers’ expectations and demands have shifted and are innovating quickly to make the home buying and selling process faster, easier, and more enjoyable (or, at least, less painful).  Within the next few years, many people will be able to buy/sell a home in half the time or less than it takes on average today, and with a lot less disruption to their lives.

Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.

Posted on January 15, 2020 at 5:00 pm
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Boulder’s average single-family home price surpasses $1.2M

This 4,987-square-foot home on Boulder Creek was featured in Bizwest’s Distinctive Homes of the Boulder Valley in April 2016. According to Zillow.com it sold in May 2017 for $3,495,000.

 

At the close of 2017, many were speculating that Boulder had finally reached a price ceiling at the limits of people’s purchasing power. The speculation continued that prices in Boulder would level off for some significant period of time as the city waited for buyers to accumulate more savings, wages to rise, etc. After all, approximately 40 percent of the homes sold in Boulder were over $1 million last year, so surely the pool of buyers able to buy a million dollar home must be depleted, right? The first quarter of 2018 has largely disproven that theory.

The average single family home price in Boulder reached $1,207,403 by the end of March, which represents a whopping 21 percent increase over the same period last year. Anecdotally in my real estate sales practice this year, I have seen multiple homes listed over $1.3 million ultimately sell for at least $200,000 over asking price. On the seller side, it is a cause for celebration, as the next chapter of their lives will be unexpectedly more comfortable. On the buyer side, it can be incredibly frustrating and demoralizing to save for a major purchase, believe you are well-positioned to make your dream come true, only to have the finish line moved forward on you. When you include the fact that about one quarter of the city’s recent home purchases have been cash transactions — and mortgage interest rates are a full point higher than last year — you begin to understand the size of the challenge facing buyers.

Looking back to 2008, you can see that home prices have almost doubled in the last 10 years (see City of Boulder chart).

Looking back even further to 1978 (see Appreciation chart), one can see that this appreciation trend is not an anomaly in Boulder. In fact, according to the Federal Housing Finance Agency, Boulder County has appreciated more than anywhere else in the country going back to 1991.

I have used earlier versions of the chart [to the right] in previous articles to try to assess when our current appreciation cycle would level off. Back then, I noted that the pattern going back to 1978 would have predicted that our appreciation cycle would have ended in mid-2017. I further stated, however, that there were factors present today that were not issues previously, the most prominent of which being that Boulder has almost reached full build-out under current zoning regulations.  That is, we are much closer to running out of land now, which will continue to put upward pressure on existing homes.

 

What does all of this mean?

Crossing the $1.2 million threshold means that Boulder is becoming disconnected from the surrounding cities. Some call it becoming a “resort market” like Aspen, others compare it to Silicon Valley (Nerdwallet published a study in support of this assertion, wherein in Boulder was listed in the top five least affordable housing markets, along with San Francisco, Silicon Valley, Honolulu and San Diego). However you characterize the situation, it is becoming clear that this is not an aberration and the challenges facing buyers will likely continue to mount as summer approaches.

 

Jay Kalinski is broker/owner of Re/Max of Boulder.

Originally posted by BizWest on Wednesday, May 2nd, 2018. Original found here.

Posted on May 3, 2018 at 3:52 pm
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