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Salt Lake

REALTOR Is New Home Construction Worth the Costs?

Magazine

October 2021

215

LAKE We know SALT time CITY at home is the most valuable.

S. 700 E.

80 That’s why we craft the home building experience as carefully as we craft E. 400 S. our stunning, energy-efficient homes. Our collaborative approach sets us 71 apart, with a deeper commitment to making the journey – and final E. 1700sure S. 80 result – is everything you imagined. That’s The Weekley Way! 201 80

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See a David Weekley Homes Sales Consultant for details. Prices, plans, dimensions, features, specifications, materials, and availability of homes or communities are subject to change without notice or obligation. Illustrations are artist’s depictions only and may differ from completed improvements. Copyright © 2021 David Weekley Homes - All Rights Reserved. Salt Lake City, UT (SLC-002170)

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% FHA (Federal Housing Administration) recently announced wonderful news that they have made changes to their guidelines for student loan monthly payment calculations in order to help benefit those with student loan debt. These changes may ultimately remove barriers and provide affordability for those individuals to attain an FHA-insured mortgage loan.

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Turning Houses into Homes®

Table of Contents Features

gustavofrazao©/ Adobe Stock

10 Avoid These Five Common Ethics Violations Professional Standards Committee

10 Avoid These Five Common Ethics Violations

12 How Your Response to COVID-19 Can Attract Clients Melissa Dittmann Tracey 18 5 Things Prospects Can’t Say No To Jared James 20 The Construction Conundrum Barbara Ballinger

Columns 7 Don’t Stop Matt Ulrich – President’s Message

Departments 8 Happenings

jchizhe©/ Adobe Stock

8 In the News

28 Housing Watch

How Your Response to COVID-19 Can Attract Clients

On the Cover: Cover Photo: karamysh©/ Adobe Stock

iQoncept©/ Adobe Stock

This Magazine is Self-Supporting

18 5 Things Prospects Can’t Say No To

Salt Lake Realtor® Magazine is self-supporting. The advertisers in this magazine pay for all production and distribution costs. Help support this magazine by advertising. For advertising rates, please contact Mills Publishing at 801.467.9419. The paper used in Salt Lake Realtor® Magazine comes from trees in managed timberlands. These trees are planted and grown specifically to make paper and do not come from parks or wilderness areas. In addition, a portion of this magazine is printed from recycled paper.

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October 2021 volume 81 number 10

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The Salt Lake REALTOR® (ISSN 2153 2141) is published monthly by Mills Publishing, located at 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106. Periodicals Postage Paid at Salt Lake City, UT. POSTMASTER: Send address changes to: The Salt Lake REALTOR,® 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106-4618.

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Stay educated. Stay ahead. Every month, we host Agent Advantage Live, a live one-on-one conversation with experts from across the industry on a range of hot topics. Here are some of our most recent webinars:

What Every Agent Needs to Know About New Construction Find out what every agent needs to know to stay competitive in this new home construction marketplace, led by marketing and housing experts. Mortgage 101: A Loan Product Guide for Real Estate Agents We cover all the basics of mortgages to help you close more clients—from the importance of getting your clients pre-approved to the unique benefits of different loan products. Your Personal Brand + Social Media Learn how to take your brand to new heights in the world of social media in this discussion with our marketing, social, and branding expert.

Watch these webinars and more here

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Salt Lake

REALTOR

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slrealtors.com

President Matt Ulrich Ulrich Realtors®, Inc.

Hannah Cutler Coldwell Banker Residential Laura Fidler Summit Sotheby’s

First Vice President Steve Perry Wise Choice Real Estate

Amy Gibbons KW South Valley

Second Vice President Rob Ockey Century 21 Everest

Jennifer Gilchrist Utah Key Real Estate Tony Ketterling Equity Real Estate

Treasurer Carlye Webb Summit Sotheby’s

Claire Larson Woodside Homes

Past President Alicia Holdaway Summit Sotheby’s

John Lucky Coldwell Banker Residential Sophie Reece Berkshire Hathaway

CEO Curtis Bullock

Janice Smith Coldwell Banker Residential

Directors

Dawn Stevens RealtyOne Group Signature

Morelza Boratzuk Realtypath LLC

Advertising information may be obtained by calling (801) 467-9419 or by visiting www.millspub.com

Managing Editor Dave Anderton Publisher Mills Publishing, Inc. www.millspub.com President Dan Miller Art Director Jackie Medina Graphic Design Ken Magleby Graphic Design/ Web Developer Patrick Witmer

Office Administrator Cynthia Bell Snow Sales Staff Paula Bell Paul Nicholas

Salt Lake Board: (801) 542-8840 e-mail: d ave@saltlakeboard.com Web Site: w ww.slrealtors.com The Salt Lake Board of REALTORS is pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support the affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. ®

The Salt Lake REALTOR® is the monthly magazine of the Salt Lake Board of REALTORS®. Opinions expressed by writers and persons quoted in articles are their own and do not necessarily reflect positions of the Salt Lake Board of REALTORS®. Permission will be granted in most cases, upon written request, to reprint or reproduce articles and photographs in this issue, provided proper credit is given to The Salt Lake REALTOR®, as well as to any writers and photographers whose names appear with the articles and photographs. While unsolicited original manuscripts and photographs related to the real estate profession are welcome, no payment is made for their use in the publication. Views and opinions expressed in the editorial and advertising content of the The Salt Lake REALTOR® are not necessarily endorsed by the Salt Lake Board of REALTORS®. However, advertisers do make publication of this magazine possible, so consideration of products and services listed is greatly appreciated.

OFFICIAL PUBLICATION OF THE SALT LAKE BOARD OF REALTORS ®

Don’t Stop What do you do when you are out of options? According to Derek Miller, president and CEO of the Salt Lake Chamber and Downtown Alliance, the solution is: don’t stop. “When the pioneers came into the Salt Lake Valley, they must have thought two things: One, they must have thought this is going to take a lot of hard work to survive. Two, they must have thought this is going to take a lot of hard work together to survive,” Miller said. “This is what sets Utah apart – rugged individualism with community building.” It is no accident, Miller added, that Utah’s economy today is the bestperforming economy in the United States. Rugged individualism and community building are why Utah outshines other states when it comes to being fiscally prudent and attracting businesses. The same principle can be used in our personal lives. Don’t stop. Why do so many real estate agents fail and quit the business? According to a recent article by Inman News, poor schedules, weak routines, no mentors, and lack of commitment are the top reasons. “Show me your routines, and I can predict your future,” said Tom Ferry, CEO of Tom Ferry International, a real estate coaching and training company whose mission is to hold professionals accountable to fulfill their greatness. “If your schedule isn’t aligned with your goals, you’ll end up wherever your schedule takes you instead of achieving your goals.” When I think of determination, I recall the story of Aron Ralston, the 27-year-old man who dislodged an 800-pound boulder that fell and pinned his right hand in Utah’s Blue John Canyon. Ralston spent five sleepless nights in a standing position with temperatures dipping into the 30s. After he ran out of food and water, he was left no choice but to drink his own urine. He used climbing ropes and equipment to try to dislodge the boulder, but to no avail. On the morning of the sixth day, he twisted his forearm against the boulder, breaking the two bones and then used a small knife to cut off his hand. After freeing himself, Ralston still had to make his way through a narrow and descending canyon. With one hand, he managed to rappel down a 60-foot cliff and hike another six miles before reaching anyone who could call for help. Ask yourself, “Do I have the drive and determination to not stop? How badly do I want to be successful? How well do I respond to my clients? How do I treat other agents? Am I available and ready to help others in need? Do I offer my knowledge to help others, even when there is no direct benefit to me?” Remember, “Change is painful, but nothing is as painful as staying stuck somewhere you don’t belong.” Let’s keep moving. Don’t stop.

Matt Ulrich President

REALTOR® is a registered mark which identifies a professional in real estate who subscribes to a strict Code of Ethics as a member of the NATIONAL ASSOCIATION OF REALTORS®. October 2005

October 2021 | Salt Lake Realtor ® | 7

Happenings

In the News

Image licensed by Ingram Image

Average Mortgage Increases to $410,000 The dollar value of mortgages home buyers are taking out is soaring as they try to afford higher home prices.

Two New Directors Elected Jodie Osofsky and Jenni Barber were recently elected to the Board of Directors. Each will begin a four-year term beginning on Jan. 1, 2022. They replace outgoing directors Alicia Holdaway, who is past president, and Sophie Reece. The Board of Directors is made up of 16 Realtors® who establish policies and objectives for the association.

The average amount for a mortgage averaged $410,000 in the last week of September, according to data from the Mortgage Bankers Association. That marks the highest average mortgage amount since May. “With home price appreciation continuing to run hot, increasing more than 19% annually in July, applications for larger loan amounts continue to outpace lower-balance loans,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. While home prices continue to rise, they are inching up by smaller annual gains than they have been. The National Association of Realtors® reported a 14.9% annual gain in home prices for August’s existing-home sales.

Housing Shortage is Topic of Mayoral Panel The Salt Lake Board of Realtors® Government Affairs Committee recently hosted a mayoral panel. Six mayors took part in a discussion on growth and residential development. Utah’s population surge is affecting home prices, traffic and infrastructure. The panel addressed Utah’s housing shortage. Over the last ten years a 54,000 gap has accrued between the number of Utah families or individuals needing housing and the supply of housing units. The gap is likely to expand in the next few years, according to the Salt Lake Chamber. “Cities don’t build houses,” said Riverton Mayor Trent Staggs. “We can zone things and try to do our best to address the problem of the 50,000-unit shortage, but at the end of the day we rely on the development community to step up and build. If you look at everything that is entitled just in the South Jordan, Riverton, and Herriman area we have over 30,000 units that are entitled.” Pictured: Draper Mayor Troy Walker, left, South Jordan Mayor Dawn Ramsey, Riverton Mayor Trent Staggs, Salt Lake City Mayor Erin Mendenhall, Holladay Mayor Robert Dahle, West Jordan Mayor Dirk Burton, and moderator Nigel Swaby. 8 | Salt Lake Realtor ® | October 2021

Also, more housing inventory is coming onto the market. Nearly one-third of the 50 largest metros saw increases in the number of newly listed homes compared to last year, according to a new report from realtor.com®. That said, there are still fewer homes for sale than a year ago. As buyers face higher home prices, they’ll need to set a budget and stick to it as they continue to face competition for homes. Most financial experts recommend homeowners limit their spending to 30% of their take-home pay for housing. That 30% also considers additional expenses of homeownership, like property taxes, homeowners insurance, private mortgage insurance (if applicable), and homeowners association fees.

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Avoid These Five Common Ethics Violations By the Professional Standards Committee These five cases were recently heard by the Salt Lake Board of Realtors® Professional Standards Committee. This information is intended to provide additional training and guidance to members on how to represent their clients more effectively.

Case #1 – The Respondent made disparaging

comments on Facebook related to a competitor. The ad continued to run after being notified of the complaint. The Hearing Panel found the Respondent in violation of Article 15 of the Code of Ethics and was fined $500 and required to take an additional COE class without CE credit.

10 | Salt Lake Realtor ® | October 2021

Case #2 – The Respondent scheduled a showing

with Complainant’s listing. Showing instructions for the listing required Covid-19 safety precautions be followed including – no more than 2 people at a time in the home, no children, wearing of masks, gloves and booties among other things noted in the showing instructions. The Respondent allowed 3 people including a dog and child into the home in violation of the showing instructions. During the hearing, the Complainant’s client expressed her deep concern for the Respondent’s failure to follow the Covid-19 showing instructions and the fact that a dog and child were allowed in the home. The Respondent apologized for disregarding the showing instructions and

not for CE credit. A letter of reprimand will be held in Respondent’s file for 30 days.

Case #4 – The Respondent represented a buyer

who made an offer of $650,000 to purchase the Complainant’s home. The home was listed for $550,000. The Respondent provided the seller with an approval letter from the buyer’s lender. The approval letter indicated that the buyer was approved for the purchase price, subject to an appraisal and other conditions. The offer included a Financing condition, but did not include an Appraisal or Due Diligence contingency. The seller accepted the offer with the understanding that although the purchase price was significantly higher than the list price, the buyer was willing and capable of purchasing the home at that price. It was represented to the Complainant that a low appraisal would not be a problem and that the buyer had family money and was otherwise financially capable of purchasing the home for the contract price. The appraisal ultimately came in significantly below the purchase price. Shortly thereafter, the buyer submitted an addendum requesting a lower purchase price notwithstanding the fact that there was not an appraisal contingency. The seller did have back-up offers but because she had moved out of town and for various other personal reasons, she made the choice to not move forward with any back-up offer. She closed the transaction with the Respondent’s client at the lower purchase price. The seller felt upset that the Respondent had represented to her that his client was capable of purchasing the home at the higher offer price and that is why she had accepted his offer. The Hearing Panel determined that the Respondent did not act honestly in the presentation of his clients offer and that the buyer’s financial ability to purchase the property at the offer price was exaggerated. The Respondent was fined $500 and required to take the Mandatory Residential Course for no CE credit.

gustavofrazao©/ Adobe Stock

explained that she did not intentionally mean to cause the Complainant’s clients any harm. The Hearing Panel found the Respondent in violation of Article 3 of the COE and was fined $500. Respondent was also required to take a live Code of Ethics course for no CE credit.

Case #3 – The Complainant had an Exclusive Buyer-

Broker Agreement with a buyer. During the term of the Exclusive Buyer-Broker Agreement, the Respondent had communication with Complainant’s client about possible representation. The Respondent waived the right to attend the hearing and provided an apology letter in response to these actions. The Hearing Panel determined that the Respondent should have kindly referred the Complainant’s client to their agent and should not have engaged in such communication. The Respondent was found in violation of Article 16 of the COE and required to take a live COE course and Agency Law course,

Case #5 – The Complainant was represented by

the Respondent on the purchase of a new home. At the beginning of the representation, the Respondent explained to the Complainant that she would provide a 40% commission discount or rebate to the Complainant. It wasn’t determined exactly how the discount would be received but it was discussed. The discount was never put in writing in clear and understandable terms. The transaction ended up taking two months longer to close than anticipated for various reasons. The day before settlement, the Respondent decided to not provide the commission discount that was discussed. The Complainant became upset and filed this complaint. The hearing panel determined that the Respondent failed to put the commission discount in writing and failed to sufficiently explain the discount in understandable terms. The Respondent was required to take a live Code of Ethics class for no CE credit and also the Mandatory Residential Class for no CE credit.

October 2021 | Salt Lake Realtor ® | 11

jchizhe©/ Adobe Stock

How Your Response to COVID-19 Can Attract Clients A customer-centric attitude and awareness of what people need right now is key. By Melissa Dittmann Tracey In a relationship-driven business like real estate, it may seem impossible to keep physical distance yet still feel emotionally connected. But practitioners are finding new ways to form bonds with their clients during the coronavirus pandemic and increase their customer pipelines.

research, consists of the following steps: • • • • •

Humanize your company Educate about change Assure stability Revolutionize your offerings Tackle the future

To do that, take “HEART.” Texas Tech University researchers, as well as professors Ted Waldron and James Wetherbe, developed the HEART framework to guide small businesses through their response to the crisis. The model, which reviews seven decades of business practice and scientific 12 | Salt Lake Realtor ® | October 2021

‘H’ is for Humanize Leverage empathy by acknowledging the unique circumstances your past and current customers are facing during this time. Be careful about blending

“caring” messages with a sales message, Waldron and Wetherbe note. Also, don’t be afraid to address the grimness of the current reality. If your business webpage or marketing doesn’t mention COVID-19 at all, you risk looking irrelevant, Chris Smith, co-founder of the digital marketing company Curaytor, told attendees during a recent realtor.com® webinar. Reach out to customers in a variety of ways, from sentimental to humorous gestures. Connie and Dan Carlson, founding partners of Ansley Atlanta in Marietta, Ga., launched a “Marietta Strong” blog at their website, promoting a “we are all in this together” message. A video at the site shows community hot spots and local businesses, along with a message of hope, resilience, and unity in the face of COVID-19. Even seemingly small gestures can have a big impact. Brad Inman, founder of Inman News, recently shared how the makings for a dinner treat—chicken and leg of lamb—was unexpectedly left on his doorstep. “It was from my local real estate agent,” he said on a recent podcast. “No card, no expectation, and exactly what I needed. Never before have smart, caring agents proved their value more so than right now.” Fun and humorous ways of connecting may inspire the greatest following. Kristina McCann, broker-owner of Chroma Realty in the San Francisco area, started a ‘mingo’ movement that other real estate professionals

in California have replicated. In the evening hours, pros stake out a flock of plastic pink flamingos in people’s yards with “happy birthday” messages for those missing out on special celebrations during the pandemic. The gesture is not about marketing their companies. “My intention was to just spread joy and happiness to people during this time,” said Anthony Marguleas, broker-owner of Amalfi Estates in Pacific Palisades, Calif. “We just wanted to put a smile on people’s faces.” Likewise, Terry Wolak and his alter ego, “The Messy Chef,” are becoming an internet sensation. Wolak, a sales associate with Howard Hanna Real Estate in Penfield, N.Y., shows off his culinary talents in Facebook Live videos shot from his “quarantine kitchen.” His humorous cooking shows also occasionally feature a friend— keeping distance from one another, of course—such as one captured playing a guitar outside his kitchen window. “I think right now people yearn for the humor, the connection, the interaction,” Wolak told Spectrum News about his videos.

‘E’ is for Educate Share with customers via social media, e-newsletters, and on your website how they can interact with you during the pandemic. Let them know the business changes you’ve made, too. As Chicago issued its stayat-home orders in March, Erica Cuneen, CIPS, GREEN,

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‘R’ is for Revolutionize “Technique often lags behind technology,” Wetherbe said. “The pandemic has forced innovation in doing things differently.” Real estate professionals are using tech tools for showings, such as virtual tours and agentled video walkthroughs. Carlson is doing a Matterport 3D tour for all her properties, enabling online house hunters to walk through a property virtually, assessing a home in all directions, and even peeking inside closet doors. She’s also holding virtual open houses on Sundays, where online visitors can tune in to livestreams of house tours.

Image licensed by Ingram Image

broker-owner of Beyond Properties Realty Group, was quick to reach out to customers with weekly emails informing them of how real estate was adapting. The brokerage’s emails detailed simple format steps that were being taken among four customer categories: for sellers closing, buyers purchasing, active sellers, and active buyers. Eric Rollo, CIPS, a sales associate with William Raveis Real Estate in Boston, launched a “COVID-19 Resource Hub,” a one-stop website where visitors can learn about health department updates as well as guides on how to access emergency aid. The site culls links on the latest number of coronavirus cases in the Boston area and the state of Massachusetts, homeowner mortgage assistance information, rental assistance and small business help, unemployment aid, and volunteer opportunities.

‘A’ is for Assurance As the economic and personal toll of the virus mounts, customers may look to companies for assurance. Connie Carlson, associate broker for Ansley Atlanta in Marietta, Ga., posts weekly market snapshots on social media, which include the number of homes listed, under contract, and sold. “We do this to reassure that the market is still continuing on,” said Carlson, who recently listed seven new properties in one week. “Sellers still need to sell, and buyers still need to buy.” Carlson also requires her clients to sign a COVID-19 release form prior to home showings, which she says puts them at ease. The form asks buyers to verify that they aren’t currently ill and to keep their hands in their pockets during tours. Sellers are asked to turn on all lights and open closet doors prior to any showing. “We want to limit how much people have to touch things in the properties,” Carlson said. “We have our clients sign these forms to feel more comfortable that everyone is doing their part to prevent the spread of germs from house to house.” 14 | Salt Lake Realtor ® | October 2021

Kara Keller, SFR, a broker at Baird & Warner in the Chicago area, is using a drone to show off her listings (video above). She teamed with Doola, a digital marketing company, to send a drone inside properties to capture video footage. Keller then narrates the drone-led video tours and promotes them on the MLS and her website as a way buyers can tour properties remotely.

‘T’ is for Tackle (the Future) As your company innovates, look for ways to adopt new processes for the long haul. After all, “some of this technology being embraced could help real estate professionals ultimately sell even more houses in less time,” Wetherbe said. For example, relying on face-toface showings before the pandemic may have been time-consuming. Now brokerages have developed new ways to virtually show homes and keep people from having to spend time traveling to a property. Businesses should not be quick to abandon new processes once the pandemic is over, the researchers note. These new ways of doing business could prove to be a differentiator in the future. Companies that are quick to return to older business methods may ultimately fall behind. “I believe the companies that will stand out will be doing things a different way in the future, too,” Waldron said. As businesses sort out the future, the researchers say that a customer-centric attitude and awareness of what people need right now is key. “Companies can emerge from this crisis with strengthened relationships with customers,” the researchers note in an article published in the Harvard Business Review. “Give consumers your HEART during this difficult time. It will cultivate longlasting goodwill with past customers and help ensure they will stay with you in the future.” Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine. She can be reached at mtracey@ nar.realtor. Follow her on Instagram and Twitter: @ housingmuse. Reprinted from Realtor® Magazine Online, May 2020, with permission of the National Association of Realtors®. Copyright 2020. All rights reserved.

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5 Things Prospects Can’t Say No To There are five phrases you should incorporate into your client communications right away if you want to start converting at a higher rate and making more money. By Jared James “I’m not a scripted person!” As a guy who runs a company that coaches thousands of agents, I can tell you that I’ve heard that line more than once … today. I used to say it about myself. Nobody wants to be the robotic telemarketer calling at 8:30 p.m. when you’re putting the kids to bed. That’s not what you become when you use scripts; you become a professional. Besides, you already follow scripts and dialogues in almost every other area of your life. When you bump into someone and say, “Hey, how’s it going?” or when conversation gets awkward and you start talking about the weather — those are scripts you have mentally adopted. It doesn’t matter whether you’re a “people person.” Without knowing how to use the proper phrases in your real estate business, you will never convert your leads and potential clients on the level that you should. There are five phrases you should incorporate into your client communications right away if you 18 | Salt Lake Realtor ® | October 2021

want to start converting at a higher rate and making more money. ‘Would you be offended if …?’ When you first approach a prospect with an offer of service, they instinctively want to say no. So you need to change what they’re responding to. Don’t say, “Hey, can I come by tomorrow and look at your house?” The answer to that question is an easy “no.” Instead say, “I’m going to be in your neighborhood tomorrow around [insert time]. Would you be offended if I stopped by for a quick five-minute onsite price consultation?” Of course, there’s nothing offensive about that! So, the prospect will say “no,” which, in this case, is a “yes” for you. ‘Do you have anyone sending you good deals right now?’ When you ask a buyer if they have an agent, they are going to say yes 90 percent of the time — even if it’s not true — to get you to back off. But asking them if

they have anyone sending them good deals right now has a completely different psychological effect. This makes the buyer wonder if you have access to properties that they don’t. They’ll give you a real answer: “Well, I had a friend sending me some stuff, but I haven’t signed anything with them. Why? Do you have access to deals I’m not seeing?” Now it’s game on. ‘What would need to happen for …?’ This question sets the expectation for whatever you want to happen. For example, start a listing presentation with, “What would need to happen for you to consider this meeting a 10 and leave no doubt that I’m the agent who should sell your house?” For a buyer consultation, you might say, “What would need to happen for you to believe that I’m the right agent to help you find the home of your dreams?” This phrase allows your prospects to lay out their criteria and create the expectation that if you meet such criteria, they are expected to hire you. ‘It’s funny that you’re contacting me about …’ People like to believe things are meant to be. So when a seller calls to inquire about the value of their home, you can increase the chance of conversion by saying, “It’s funny that you are contacting me about your neighborhood in particular. I was just telling two of my buyers that I was hoping something would come up over

there because it’s perfect for them!” Now don’t say this if it’s not true; we don’t build trust by lying. But you get the point. Have something coincidental to mention whether you are working with a potential seller or buyer. ‘I’m going to be at this number for the next 30 minutes.’ Please stop saying, “Give me a call back when you get a chance.” They will never get a chance — not because they’re rude but because life gets in the way. Instead, say something like, “Looks like I missed you but I wanted to let you know something really cool about that property. I’m going to be at this number for the next 30 minutes, so call me back as soon as you get this.” Give them a deadline, and they’ll be more motivated to call. People don’t like to miss deadlines. It also gives you an excuse to call them again later with another deadline if they don’t call back. Try it; it’s pure gold. Converting leads into clients is a science that involves skill over luck. Precision matters over the length of time that you do something. Jared James is a national speaker and trainer in the real estate industry who has tens of thousands of followers on Facebook, Snapchat, Instagram, Twitter, and Youtube. Reprinted from Realtor® Magazine Online, September 2016, with permission of the National Association of Realtors®. Copyright 2016. All rights reserved.

October 2021 | Salt Lake Realtor ® | 19

20 | Salt Lake Realtor | October 2021 ®

The Construction Conundrum With inventory still low, more home buyers look to plan B: new builds. But with land prices climbing, some home buyers are contemplating the popular 1980s alternative of tearing down a house to build a new one. By Barbara Ballinger

As the pandemic housing boom continues, many buyers are still losing out on homes as they go up against higher bids. Some are now seeking out land and new construction to get the home they want.

want more space, Bakke suggests starting with a larger footprint to have square footage to manipulate.

But this strategy has its own set of peccadillos, including a shortage of buildable sites, which associate real estate broker Kim Cantine, with Halter Associates Realty in Bearsville, N.Y., said is not brandnew. “My area is experiencing its fifth year of low land inventory,” she said.

Hiring an architect or builder to design a house from the ground up is a major undertaking that requires making countless decisions, such as the size of the kitchen, height of ceilings and windows, number of bedrooms and bathrooms, type of doorknob, and even width of hallways. The advantage of this route is it gives homeowners more of what they want for their budget. “They can put solar panels on the roof to lower costs and make it passive and environmentally friendly, for example,” said Los Angeles–based attorney Robin Finch, a real estate partner at Greenberg Glusker.

Land prices have also climbed and are experiencing bidding wars, Cantine said. To cope, some home buyers look to the popular 1980s alternative of tearing down a house to build a new one, said Ben Brittingham, vice president of marketing and sales with MN Custom Homes in the Seattle area. However, that’s not a solution either since builders, architects, and contractors are swamped with requests, and building materials and appliances are priced higher and are frequently out of stock. Those performing the work can charge more or take only jobs they prefer. What’s a frustrated buyer to do? Real estate agents and brokers can enable them to explore all options and find a big dose of patience.

Buy a Stock Building Plan One way to shorten the new construction process and pare costs is to go with an existing house plan, a process like buying off the shelf rather than developing a custom plan. Tim Bakke, director of publishing at The Plan Collection, a 30-year-old company that now has more than 22,000 plans in its inventory and continues to design new ones, said a predesigned plan can shave a few months off the process and cut the design cost by at least $7,000 to $8,000, depending on the complexity and cost of labor. Though the design won’t be custom, choices are sufficiently varied in number of bedrooms and bathrooms, style of layout, number of levels, amount of outdoor space, and many other features. The exteriors are also diverse, from the popular modern farmhouse look to more traditional Tudors and Colonials. One drawback, Bakke said, is that substantial changes, such as structural walls being moved, can’t be made without incurring added costs. But if a buyer thinks they may

Build Custom

The downside to building custom is that the process takes typically three to six months for the design, time to secure permits and approvals, and, depending on the size of the project, 12 to 16 months for building under normal non-pandemic conditions, said architect Victor Body-Lawson of Body Lawson Associates in New York City. Costs are also generally higher: The architect often charges a design fee (4% to 10% of construction costs) and a 10% contingency fee. On top of this, materials and appliances have jumped by as much as 20% per month in the current frenzied climate, he said.

Go With a Spec Home Buyers have another possibility—selecting a house that a builder is constructing or has finished as a standalone residence or perhaps as part of a development. Depending on when clients buy affects how many choices they get to make, said Brittingham. If the house is finished, they buy what the builder has selected. But if framing has just begun, they may be able to make choices in such categories as tiles, countertops, vanities, flooring, cabinets, lighting, and more. Some builders offer choices at different price levels, such as laminate at a certain cost or pricier marble at a higher cost. One distinct advantage is that the price point may be 10% to 20% less than a custom home because of economies of scale—though this is not guaranteed due to COVID-19, said Brittingham, whose homes average $2 million to $6 million.

October 2021 | Salt Lake Realtor ® | 21

Think Prefab Prefabricated home options have increased, with more companies building houses in a factory, said Sheri Koones, author of several books, including Prefabulous and Sustainable. Many of these companies are seeing great demand, including for houses to help house those experiencing homeless, she said. Because of the building boom, the supply chain for this sector has been disrupted, too, said John Colucci of Westchester Modular Homes in Wingdale, N.Y. “We are not only paying top dollar for materials, but the lead times have created a slowdown. That being said, modular is still faster than stick building since we managed to keep our labor. We are all so busy, but some would-be customers are sitting on the sidelines,” he said.

Factors Home Buyers Should Weigh Before Proceeding How much will a house cost? Buyers must be realistic—they should budget 15% to 20% more than they expect the house to cost, especially as COVID-19 has increased costs of materials, appliances, and labor, Bakke said. When a mortgage is needed, Bakke said, it’s wise to remind buyers to consider the rule of not spending more than 28% of their monthly gross income. Others think the percentage should be based on overall life goals, which is why consulting a financial planner is wise. New construction requires a construction or bridge loan that converts to a traditional mortgage when the house is completed. How much square footage is needed? Figuring out size can be tough in the abstract. Some 2,500-squarefoot homes, for example, seem larger than others, which 22 | Salt Lake Realtor ® | October 2021

often depends on the amount of hallway space, height of ceilings, windows, and light. It’s best for buyers to walk through existing homes to get an idea and list which rooms they want and dimensions. Architect and author Sarah Susanka started her “not-so-big house” movement decades ago to emphasize the importance of having every inch count and spaces do double duty, which may help cut costs. Homeowners should also bear in mind that square footage is the single biggest driver in determining building costs, said Bakke. The cost varies widely in different parts of the country. According to 2019 U.S. Census Bureau data, the median price per square foot for a contractor-built single-family home was $114, but these days many cite higher prices of $300 to $400, and in certain cities like San Francisco and Boston they may rise to $600, said Madison, Conn.–based architect Duo Dickinson. Finishes also affect pricing. How much detailing is included in a plan? After interviewing two or three architects or builders to design the house, home buyers should check references (like from a local American Institute of Architects list), licenses, insurance, and referrals and decide—or go with a design from a plan company. It’s critical to read the plan to be sure everything is included and in the right place, including windows, electrical outlets, roofing trusses, stairs, doors, and plumbing. A bank may need detailed construction drawings and a site plan, according to Bakke. If a buyer doesn’t understand how to read a plan, suggest they learn from sites such as The Basics: How to Read Architectural Plans. Why is the site key? The spec house builder will have vetted the land choice, but a custom house requires a buyer find a suitable lot. Not all lots—even those that are the same size—meet that criterion. Some require trees to be removed, septic systems and power lines

SELL YOUR HOME YOURSELF THEY SAID. IT’LL BE EASY THEY SAID. #ShouldHaveUsedARealtor

to be added, and soil to be tested, said Dickinson. Body-Lawson said the geological makeup should be studied because it may cost more to excavate a rocky or wetlands site, if allowed. Information about the area’s broadband capability is important, particularly as many people work from home. A professional on the team also needs to check town rules about land records to be certain there are no outstanding liens and to know the setback limits. These days, some information can be gleaned from aerial photographs and mapping systems that a building department usually has, said Dickinson.

Take Time to Draft a Detailed Contract With so many details to consider, and so many different work crews involved in the process—including subcontractors and landscapers—it’s critical that a homeowner have contracts with all those involved, which a real estate attorney should review. Los Angeles–based attorney Robin Finch of Greenberg Glusker suggests bringing in an attorney early in the process, even before land is bought.

To curtail costs, Body-Lawson recommends that homeowners try to buy undervalued land, which may mean a site farther from town or with fewer features on buyers’ wish lists—such as a chance of forgoing mountain views. They should also avoid overbuilding for their area, since prices may not continue to rise.

The contract should specify the amount of the down payment, how much to pay at specified time periods, how to handle change orders, the amount to hold back until everything on the punch list is completed satisfactorily, for what reasons a contract can be cancelled, and for how long a warranty guarantees work such as a house settling, said Ann O’Connell, an attorney and legal editor at Nolo, a legal publisher of books and software based in Berkeley, Calif.

Why secure multiple bids? For the actual design, the buyer should secure three bids that compare apples with apples. Bakke said any contractor or builder hired should have experience in the homeowner’s area, so they understand the topography and local building codes. Sometimes, a bank may ask a builder to complete a review application to be sure the person is licensed and insured and has a history of successfully completing projects, Bakke said.

At the same time, these tough COVID-19 times require flexibility, said architect Katy Flammia, design director of the Hudson, N.Y., office of New York City–based Spacesmith, an architecture and interior design firm. “We’re finding with construction that it’s almost impossible now to establish construction costs, which we used to keep the design within our client’s budget. What our clients could buy a year ago is different than what it costs now, and we’re seeing almost weekly price

24 | Salt Lake Realtor ® | October 2021

THOUGHT I COULD DO ALL THE PAPERWORK. I WAS WRONG. #ShouldHaveUsedARealtor

increases,” she said. Furthermore, she cautions clients to be flexible. “They may want to have a list of alternates in materials and scope, and even construction method alternates such as prefab components,” she said. Some of the former ways that homeowners could protect themselves in their contract may no longer be included. Because of COVID-19 work delays, shutdowns, and price increases, it may be impossible to convince an architect and general contractor to agree to include financial penalties, known as liquidated or punitive damages, if someone gets sick and is off the job for a while or if prices rise higher than they expected, Finch said. So much is market driven, she adds. To resolve any potential problems on either side, it’s best if mediation can be stipulated as a recourse rather than litigation, due to lawyer and court costs and time, said O’Connell.

Alex Hickey in her “Morning Brew” report. Most recently, prices started to fall, though what will happen over the long term is anybody’s guess. Homeowners and the professionals working on their homes are wise to keep an eye on prices and anticipate a possible seesaw effect, especially as COVID-19 numbers ramp back up. Barbara Ballinger is a freelance writer and the author of several books on real estate, architecture, and remodeling, including The Kitchen Bible: Designing the Perfect Culinary Space (Images Publishing, 2014). Reprinted from Realtor® Magazine Online, July 2021, with permission of the National Association of Realtors®. Copyright 2021. All rights reserved.

What About Those Rising Lumber Prices? Lumber prices—plywood, hardwood, and softwood— have soared across the board. In fact, costs are up 130% since the start of the COVID-19 pandemic more than a year ago, adding $30,000 to the price of a new home, according to the National Association of Home Builders. Because of the prices, as well as significant shortages, many architects, builders, and home buyers are asking two key questions: How long will the surge continue and why did it happen in the first place? Tony Uphoff, president and CEO of Thomas, which provides analysis and tools that reflect the buying process, said his company data shows a steady surge in sourcing activity for lumber over the last year. “The situation,” he said, “has been long in the making. As a country, we have relied on Canadian forest lumber whose supply has diminished in recent years.” Part of the problem is also due to tariffs going up, which resulted in further withering demand in the U.S. due to the increased prices. As a result, Canadian mills began to shut down locations to protect themselves against lost revenue, he said, adding, “This initial step was magnified as we entered the early stage of the pandemic. Then, with many working from home, they began to evaluate their living quarters. Some sought more space, which drove a spike in residential housing prices and new construction. And many already owning a home spent more time and took on more projects.” The upshot, he explains, was “exacerbated demand on an already fragile lumber supply chain, which drove prices to an all-time high.” And there’s more, he said. “The continued result is that some builders are pausing their work on new construction projects due to the high lumber prices. Other construction companies report that even at high prices, they are having difficulty sourcing supply through their established supply chains.” But some good news has been emerging for several weeks. Sawmills have increased output over the last year and another increase is expected, according to 26 | Salt Lake Realtor ® | October 2021

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9,677

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1. Mailed Outside-County Paid Subscriptions

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3. Paid Distribution Outside the Mails, including Sales Through Dealers and Carriers, Street Vendors, Counter Sales, and Other Paid Distribution Outside USPS

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252

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8. I certify that all statements above are correct and complete. 10/5/2021 Dan Miller, President of Mills Publishing, Inc.

ALL I CAN SAY IS THAT FSBO IS A FOURLETTER WORD. #ShouldHaveUsedARealtor

AUGUST HOUSING WATCH Three Months of Falling Home Sales, but 2021 Could Be the Second-Best Year for Home Sales Home sales in Salt Lake County in August fell 17% compared to sales in August 2020, according to UtahRealEstate.com. It was the third consecutive month of falling sales year over year. Sales in July were down 25%. In June they fell 8%. Despite the recent slowdown, sales from January through August are only 3% lower than in the same eight-month period in 2020. More homes were sold in 2020 in Salt Lake County than in any other previous year. This year is on track to be the second highest sales year. The median sold price of all homes in August climbed to $475,000, up 23% compared to the median sold price of $385,000 in August 2020. The median price of a single-family home was $546,000, up 26% year over year. Multifamily home prices increased to $390,002, up 31% year over year. “Competition to purchase a home remains fierce for buyers,” said Matt Ulrich, president of the Salt Lake Board of Realtors®. “While sales have recently slowed, multiple offers are commonplace on most properties. Home prices continue to rise.” A typical home in Salt Lake County sold in just 15 days in August, down from 30 days in August 2020. Total sales volume in August increased to $870 million, up 4% from $833 million in August 2020. New listings for the month fell to 1,867, down 12% compared to 2,130 listings in August 2020. Under contract listings – listings where a seller has accepted an offer on the property, but the sale is not final – dropped to 1,526 in August, down 24% from 2,009 under contract listings the same month last year. Nationally, sales in August dropped 1.5% from a year ago (5.97 million in August 2020). “Sales slipped a bit in August as prices rose nationwide,” said Lawrence Yun, NAR’s chief economist. “Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory.” The U.S. median existing-home price for all housing types in August was $356,700, up 14.9% from August 2020 ($310,400), as prices increased in each region. This marks 114 straight months of year-over-year gains. “Securing a home is still a major challenge for many prospective buyers,” said Yun. “A number of potential buyers have merely paused their search, but their desire and need for a home remain.” Moreover, a recent study from NAR found that student loan debt is preventing the majority of non-owner millennials and those making over $100,000 from buying a home. Individual investors or second-home buyers, who account for many cash sales, purchased 15% of homes in August, even with July but up from 14% in August 2020. All-cash sales accounted for 22% of transactions in August, down from 23% in July and up from 18% in August 2020.

28 | Salt Lake Realtor ® | October 2021

October 2021 | Salt Lake Realtor ® | 29

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