Selling
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What Home Improvements Should You Make (or not make) Prior To Selling Your Home? |
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I don't have a master list of what improvements you should, and should not, make before you sell your home... but most improvements you might consider are probably worth discussing before you spend time and money making the improvements. Some of the questions we will be asking ourselves about each improvement will be... [1] What does this improvement cost and how much will it potentially increase the sales price of your home? [2] Will nearly every buyer want to make this improvement and who much will they estimate it would cost compared to the actual cost of the improvement? [3] Will making this improvement elevate your home into a different price bracket? [4] Does every other home comparable to your home already have this improvement completed? [5] Does the lack of making this improvement significantly affect the overall impression a buyer will have of your home? Again... there isn't a universal list of "do this" and "don't do this" -- but before you start making a LOT of improvements and/or before you decide to make ZERO improvements, let's walk through your house together and discuss the best strategy for how to improve your home before selling it. | |
Are Things Slower Now In The Local Real Estate Market? |
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This is the number one question I am asked these days when I am chatting with non-buyers and non-sellers around town. In other words, folks who are not currently buying or selling or trying to buy or trying to sell. Are things slower now? The answer is, as perhaps you might expect... yes and no. Yes, things are slower...
No, things are not slower...
So, things definitely feel slower - the hectic, crazed, frantic pace of 2020-2022 has cooled off. But in many ways (number of sales, price of homes sold) the market is just as strong, brisk, vibrant, as ever... it's just not over the top, unbridled exuberance as it has been for the past few years. | |
Fewer Than 10% Of Buyers Spend Less Than $200K On Single Family Homes In Harrisonburg, Rockingham County |
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If you're hoping to buy a single family home for less than $200,000 in Harrisonburg or Rockingham County, you might find it challenging to do so. Only 8% of the single family homes sold in the past 12 months have sold for less than $200,000. Getting straight to the numbers... Total Detached Home Sales = 1,123 Detached Home Sales Under $200K = 86 | |
The Buyer Pool For Starter Townhouses May Be Smaller For Now |
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Starter townhouses (think two story, 15 - 25 year old) in the City of Harrisonburg used to sell for $150K-ish but have increased in price over the past five years to a range of somewhere between $200K and $240K. Why have prices escalated so quickly? Similar to much of the market, it's largely related to low interest rates... [1] With mortgage interest rates of 3% to 4%, the pool of potential home buyers expanded considerably... lots and lots of potential first time buyers were delighted to find that they qualified to purchase a townhouse. [2] Real estate investors were also happy to scoop up these types of townhouses as they were able to finance those purchases with exceptionally low mortgage interest rates as well. Certainly, the interest rate would be higher for an investment purchase than for an owner occupant, but an interest rate that is higher than "very very low" is perhaps "very low" so plenty of investors were purchasing these properties as well. But now, mortgage interest rates are a bit higher... OK... twice as high. The current average 30 year fixed mortgage interest rate is 6.95%. As such, and as shown on the "not at all based on real numbers or data" graph above... [1] Would be home buyers who could only qualify to buy with a mortgage interest rate of 3% - 4% clearly do not quality any longer and thus are not buying. [2] Investor buyers who were delighted to buy when interest rates were quite low are also likely not buying right now. That just leaves owner occupant home buyers who still qualify with 6.5% to 7.5% mortgage interest rates. What does this actually mean for this segment of our local housing market? [1] There will likely be fewer buyers coming to see your townhouse if you are selling a starter townhouse in the City of Harrisonburg. [2] There will likely be fewer offers on said townhouse, and less competition from other buyers if you are trying to buy such a townhouse. [3] We might see these townhouses take a bit longer to sell. Maybe? [4] Maybe the price of these townhouses won't climb quite as quickly over the next year or two. Maybe? These are my observations about this segment of our local housing market, very unscientifically graphed above. Let me know if you have other observations, thoughts or questions about the market for this type of property moving forward into 2023. | |
Where Do Home Prices Go From Here? |
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This is a question very much on the mind of potential home buyers and potential home sellers in the local real estate market in late 2022... Where DO home prices go from here? As per the illustration above, do we see... 1. Home prices keep in rising, perhaps another 10% in 2023. 2. Home prices plateau in 2023, with similar prices as in 2022. 3. Home prices correct, drop, droop, decline by 10% in 2023. It's hard to imagine won't keep increasing (scenario one) given that they have through the first nine months of 2022 even in the context of quickly rising mortgage interest rates. But yet at the same time, it's hard to imagine that prices won't level out or decline some given those quickly rising mortgage interest rates. I can be convinced by those that I talk to (buyers, sellers, agents, bankers, appraisers) that prices will keep on rising in Harrisonburg and Rockingham County... and I can be convinced by those same folks (or a different set of them) that home prices will flatten out or decline slightly in 2023. So, I have absolutely zero answers as to what we should expect in 2023, but interestingly, even if home prices dropped by 10% in 2023... that would take us ALLLLL the way back to 2021 sales prices. ;-) | |
October 2022 Contract Activity Has Dropped Significantly, Sort Of |
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Has the local real estate market slowed down? Oh yes, quite a bit! How so? Last October 156 homes went under contract in the first 27 days of the month... and this year only 81 homes have gone under contract in that time frame. Wow. Quite a bit slower! Indeed. -- So, yes, contract activity this month is much lower than it was last year during October... but as the graph above reveals, there may be more to the story. First of all, the orange and green bars represent 2020 and 2021 and I think we'll eventually look back and conclude that they were abnormal years, with buying activity super-charge by a worldwide pandemic, as unexpected as that was. So, the bright orange and bright green bars that tower above the rest of the months on the chart might be outliers. Looking for a moment, then, just at the blue bars... This August (2022) we saw a 13% increase in August contracts compared to August 2019. This September (2022) we saw a 10% increase in September contracts compared to September 2019. And...in October... we are dragging ever so slightly behind October 2019, but things aren't looking overly different from where things were three years ago, just before Covid. -- So... is this October slower than last October when it comes to contracts being signed? Yes, absolutely! Much slower! Is this October slower than the last pre-Covid October we have seen in this market? It's slower, but just barely. Is the pace of home buying slowing down in Harrisonburg and Rockingham County? Yes, it seems so... but by how much depends on whether we compare the present times to Covid times or pre-Covid times. | |
Good Reasons To Allow And Disallow Showings Before Your House Is Listed For Sale |
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In almost all cases, I do not recommend having showings of your home before it is listed for sale. But, as with most things in life, there are some exceptions. Here are some of the reasons NOT to allow showings before your house is listed for sale... [1] Buyers who view your home before you list it for sale are not likely to feel much urgency to make a decision about an offer. They don't have any competition, after all, so they can just think about it. Once your house is on the market and lots of buyers know it is for sale, each and every buyer who views your home will feel the urgency of making a decision about whether to make an offer. That felt buyer urgency works in your favor when selling your home - and you miss out on it for any individual buyers who view your home before it is on the market. [2] If you receive an offer from a buyer who views your home before it is listed for sale you will be considering that offer without the market context of how much interest your house would have if listed for sale and how many offers you might have if it were listed for sale. You might list your home and have 2 showings and 1 offer, or you might have 20 showings and 10 offers... but you won't know when you are considering the singular offer from the buyer who viewed your home before it hit the market. [3] Since you only have one offer, you are at least somewhat likely to sell your house for less favorable terms than if you had listed it for sale. Certainly, you might list it for sale and only have one offer - but if there were multiple offers when you listed it for sale, you could then select from multiple offers with different prices (possibly escalated), different contingencies and from buyers with different financial capabilities. Letting a buyer see your house before it is listed for sale opens the door to having only one offer to consider, which might not result in the best possible terms for you. Here are some of the reasons you might ALLOW showings before your house is listed for sale... [1] It's a lot of work to get your house ready for photos and showings, and even more so if you have kids or pets. ;-) Some sellers would gladly show their house once, before it hits the market, and have it under contract shortly thereafter, rather than going through the process of completely preparing the house for photos and showings. Certainly, you'll still want your house to look good for that one buyers... but preparing for their showing likely won't be as intensive as preparing for fully putting your house on the market. [2] Some sellers have a friend, neighbor or co-worker that has already expressed interest in buying their house and they (the seller) would be delighted to sell the house to that person or persons. If you want to give some known potential buyer a leg up in the buying process, letting them see your house before it is listed for sale, and potentially make an offer without having to compete with other buyers, then you can certainly choose to do so. It does create the downsides described above, but you might still elect to go this route because of those relationships. [3] I tried to come up with a third reason. I didn't. Feel free to send me your suggestions. ;-) As you can see, there are plenty of reasons to allow or disallow showings of your house before it is listed for sale. Generally speaking, I don't recommend it - but there can certainly be situations where it makes sense to pursue that path. | |
If You Are Hoping To Sell Your Home In 2022, List It Very Soon, Or Adjust The List Price Very Soon! |
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Summer just ended, right? It's just barely fall, right? There's plenty of time remaining in 2022, right? Well, sort of. Most real estate transactions take around 45 days to get from contract to closing. Certainly, some of them are happening in 30 days, but it's good to plan on a 45 day window between contract and closing. Thus, if you do not yet have your house on the market for sale, here's a potential timeframe that you might experience if you wanted to sell in 2022...
Don't forget, after all, that the Thanksgiving and Christmas holidays can often slow things down with lenders, title companies, etc., during November and December. If you have your house on the market for sale now, and it is not under contract, this is also an ideal time to consider making a price change to try to secure a contract with a buyer within the next week or two if you are aiming to have the closing take place before the end of the year. It can seem like there is plenty of 2022 left to go (there is) but when it comes to the timing of a real estate transaction, if you want to close on the sale of your home in 2022, you should likely be getting started soon! | |
Contract Activity Seems To Be Slowing Down (Quite A Bit) In October 2022 |
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It's best not to get your face too close to the data. The closer we look at the data, at a smaller and smaller data set, the more likely we can find ourselves concluding one thing when another is actually true. So, as you ponder the meaning of the graph above, keep in mind that the last set of data (October 1 - 15) is a rather small set of data... from just two weeks in our local market... so it may or may not be indicative of an overall trend. But... with that length disclaimer having been thrown out there... After seeing modest declines in contract activity in August (-13%) and September (-15%) it seems that contract activity might be REALLY slowing down (-51%) in October. Last October, in the first half of the month, a total of 81 contracts were signed for buyers to buy and sellers to sell houses in Harrisonburg and Rockingham County. This year in those same 15 days, only 40 contracts have been signed. It's hard to say if this significant decline in contract activity will continue as we move through October and into November, but if things were slowing down slightly in August and September, they seem to be slowing down more quickly in October. | |
Price Reductions Will Likely Make Lots Of Sense To Some Home Sellers |
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Fictional Seller Sally bought her home about eight years ago for $190K. Three years ago, Sally realized her home was worth $240K and was pretty happy about that. Last year, Sally was astonished to conclude that her home was likely worth $290K. Wow! Sally just landed a new job out of state and is getting ready to sell and the most recent comparable sales indicate that her home is likely worth $310K in the current market. Sally is elated! Sally lists her home for $309,500 and has had quite a few showings during the first three weeks on the market, but has not received any offers. Would it surprise you that Sally decides to go ahead and reduce her list price to $299K? Would it surprise you if three weeks later Sally reduces the price again to $289K? It wouldn't surprise me. While some sellers might think about $299K and $289K relative to the possible current value of $310K, Sally is thinking about $299K and $289K relative to... [1] Her original purchase price of $190K. [2] Her conclusion a year ago that her home was likely worth $290K. Certainly, Sally would be delighted if she could sell her home for $310K, but she will also be very happy to sell it for $299K or $289K. Moving forward through the balance of 2022 and in 2023 I suspect there will be some sellers who will happily sell for a bit less than the market might indicate their house is worth, as that "lower" price is still much, much higher than they could have imagined their home was worth for most of the time that they have owned it. This likely won't be all sellers, and perhaps not even most sellers, so it might not cause an overall shift in home values... but some sellers will likely be quite willing to reduce their price if their home does not sell in a timely fashion. | |
Should You List Your Home Now Or Wait Until Spring? |
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Now or Later? Now! :-) I mean... don't get all panicky about it... but I would definitely recommend listing your home now, rather than waiting until the spring. Oftentimes homeowners who might sell in fall or might sell in the spring decide that they might as well wait until spring. I think this year is or should be different for homeowners who aren't sure whether to sell now or wait until spring. Yes, interest rates are high right now, but inventory levels are still low, homes are selling quickly, and at great prices. [1] Interest rates might have come down some, but they may also be just as high or higher. [2] Inventory levels could quite possibly be higher (more competition) if the market slows over the next six months. [3] Homes may not be selling as quickly. [4] Home prices might be even higher in six months, but they could also have flattened out or declined a touch. I am not predicting a major change in the state of our local housing market... and I am not saying that the sky is falling... and I don't think the local housing market is going to be much worse six months from now... ...but, I think the calculus on whether to sell in the fall or to wait until spring is a bit different this year, and some homeowners that might have normally waited until spring should probably consider listing their homes this fall instead. Just a thought. What are your thoughts? | |
As You Might Imagine, It Is Still A Pretty Swell Time To Sell A House |
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Lots of homes are still selling, relatively quickly, at high prices. Yes, mortgage interest rates are higher, which limits the housing budget for some buyers, but thus far we are not seeing higher mortgage interest rates affect the prices for which homes are selling. Thus, home sellers are still enjoying the current market as a great time to sell... Lots of homes selling = YAY Low inventory levels = YAY Homes selling quickly = YAY Sales prices remaining high = YAY Higher mortgage interest rates = Yeah, so what? Certainly, if a home seller needs to turn back around and be a home buyer, the mortgage interest rates will impact their housing transition. But if you are just selling a home... it is still a very enjoyable time to sell... | |
I Was Going To Upgrade To A Larger Home Until I Saw That Larger Mortgage Payment!?! |
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In more than a few conversations over the past week I have been chatting with friends and past clients who have shared that they had been recently toying with the idea of upgrading to a larger home. In each of these instances, they bought their home three to eight years ago and are now finding it to be a bit tight in various areas. A new kid (or two) stretching the bedroom usage... working from home part of the time with limited space in which to do so... older kids with friends coming over to hang out and wanting room to lounge, etc., etc. These various "life is changing and house needs are changing" situations prompted each of these homeowners to think about whether they ought to upgrade to a larger home. But... then they started running the numbers. At first, things look good... They bought their current home for $300K, have a mortgage payment of around $1600/month, they still owe $250K and could sell for $415K. Thus, they could walk away with about $140K after settlement. But then, things turn a bit... The larger home would cost them around $540K. They'd put $140K down, so they'd be financing about $400K. At current mortgage rates of around 6%, their monthly payment would be... $2900/month. As you can see from this rough math for this one homeowner's situation, even though their $300K home is now worth $415K, and even though they would be walking away with $140K after selling, and even though they'd only be upgrading from a $415K home to a $540K home... their mortgage payment would be jumping up from $1600/month to $2900/month. The big change here is, of course, the mortgage interest rate. Paying off that 3.25% mortgage and taking out a new 6% mortgage is going to cost ya! What does this mean for homeowners and our local market? I suspect there will be fewer elective home upgrades over the next few years if interest rates remain this high... which has the potential to further limit resale inventory of homes for sale. This story is not everyone's story... so if you're considering an upgrade (or a downgrade) let me know if you'd like to do some rough math together to evaluate the overall financial impact of making the change. | |
The Second Best Way To Know If Your House Will REALLY Sell For THAT Much!?! |
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Home values have increased QUITE a bit over the past few years. The median sales price this year is 36% higher than it was three years ago in Harrisonburg and Rockingham County. That can leave a homeowner wondering... will my house REALLY sell for THAT much!? The best way to know if your house will sell for $____ is to put it on the market for sale and see what type of market response we have over the first few weeks. :-) The second best way to know if your house will sell for $____ is to see how quickly your neighbor's similar house sells and at what price. Very frequently, though not always, we can find a house that is relatively similar to your home that has sold in recent months that can provide concrete guidance on how you might price your home if you were to sell. If you are thinking about selling your home soon, let's start digging into the data now to see if it will REALLY sell for THAT much! ;-) | |
The Value Of The Smallest House In The Neighborhood |
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How much should you be willing to pay for the smallest house in a neighborhood? Especially if it is a good bit smaller than all the other houses in the neighborhood? Let's imagine a neighborhood in Harrisonburg or Rockingham County where homes typically sell for $450K - $500K, with an occasional sale above $500K. All of these homes, however, are 3000 SF homes. There might be a 2800 SF homes that sells from time to time, but almost all are at, above, or well above 3000 SF. So -- when a 2300 SF home comes on the market in the neighborhood, how much should you be willing to pay? A seller might say $440K. After all, you have to pay $450K+ to buy any house in this amazing neighborhood, so even if my house is smaller than most, you'll need to pay pretty close to that floor of $450K. A buyer might say $400K. After all, the 2300 SF home is markedly smaller than just about every other home in the neighborhood, so the sales price should be quite a bit lower as well. If a 3000 SF home sells for $450K, I don't want to pay more than $400K for a 2300 SF home. I might say $420K. I think there is merit in both of the perspectives above, and a blending of those two concepts gets us close to what a buyer should be willing to pay. Keep in mind -- it is also possible that a buyer will come along who just LOVES the neighborhood and doesn't need much space at all. This buyer might just be willing to pay closer to that $440K - $450K price, especially if they are a cash buyer, or moving from a more expensive market, etc. | |
Which Comes First? Buying Your Next Home Or Selling Your Current Home? |
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If you are getting ready to sell your home AND buy a home, it can sometimes be difficult to determine where to start... Do you start by finding a house you want to purchase? Or do you start by listing your home for sale? I would suggest that you start with whichever you anticipate will be the most difficult part of the two step process. If it will be difficult to sell your home (because of price, location, layout, features, age, etc.) and it will be at least slight easier to buy the next one (plenty of viable options are listed for sale) then you are likely best off starting with listing your home for sale. Work to get the more difficult half of the transition underway by getting your current home under contract, and then work on the easier side of the transition. If it will be more difficult to buy the next house (because of the specificity of your housing goals, or because of low inventory levels, etc.) and it will be at least slightly easier to sell your current home (because the property type, location or price are in high demand) then you are likely best off focusing first on finding the home to buy -- and then listing your home for sale. There are plenty of nuances we can discuss further to formulate a plan for attempting to simultaneously sell and buy -- but as a general rule of thumb, you'll be best off to start with the harder half of the transaction. | |
As Time On The Market Increases, Contingencies In Offers Often Increase |
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Day 1 - If a buyer is interested enough to make on Day 1, and potentially be competing against other highly motivated buyers, there is a good chance they will waive some or many or all contingencies. They might not be proposing a home inspection, a radon test, or an appraisal contingency. Day 7 - If a listing is still available on Day 7, a buyer will likely tentatively feel comfortable proposing some contingencies (home inspection, radon test, appraisal, etc.) but perhaps not all of the above. Day 30 - If a listing is still available on Day 30, a buyer will likely feel comfortable proposing any and all contingencies, including a home inspection, radon test and an appraisal. Home Buyers -- Do you want to wait to make an offer to potentially be in a position to include contingencies that you'd prefer to have as a part of your purchase contract? Even knowing that waiting to make the offer might mean someone else buys the house before you make an offer? | |
Are Home Buyers Walking Away From Contracts In Harrisonburg? |
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You may have read in recent news headlines that home buyers are cancelling their contracts to buy homes left and right. Here is one such news story... Homebuyers are backing out of more deals as high mortgage rates persist and recession fears linger (CNBC) This would cause plenty of people in our local area whether this is also happening locally. Are home buyers walking away from contracts in Harrisonburg? I'm going to say, anecdotally, a strong NO. That phenomenon does not seem to be happening in any significant way in the Harrisonburg and Rockingham County real estate market. Buyers generally seem to know what their mortgage interest rate is going to be before they make an offer (via a conversation with their lender) and are then locking in their interest rate once they are under contract. So, should sellers now wonder if their buyer will really make it to closing or if they might decide to back out of the deal? That does not seem to be a concern a buyer needs to have any more than at other times in the past 10+ years... at least in Harrisonburg and Rockingham County. | |
The Strength Of The Local Housing Market Is Likely To Start Varying By Price Range, Location And More! |
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For the past few years the market has been moving so quickly, with such an excess of buyers in nearly every price range, that just about every house would sell very quickly - regardless of the price range and location. But... as interest rates have been rising over the past six months, there seems to be some variation in how strong different segments of the market are, based on price range, location, property type and more. If you are planning to sell your home this fall we need to look carefully at homes in your particular neighborhood, price range, etc. to see how quickly they are selling... and to compare the prices for which they are selling now compared to three or six months ago. | |
Plenty Of Properties Likely Sold Above Appraised Value Over The Past Few Years But Fewer Are Likely To Do So Moving Forward |
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Home buyer attitude towards appraisals has certainly shifted over the past few years! PRE-COVID... Most buyers would include appraisal contingencies in their offers to reserve the right to have a conversation with the seller about the sales price if the appraised value ended up being lower than the contract price. Most sellers were comfortable with these appraisal contingencies and found them to be reasonable. EARLY COVID... Some buyers started to leave appraisal contingencies out of their offers to compete in multiple offer scenarios. These offers were no longer contingent on the property appraising at or above the contract price. IN THE THICK OF COVID... The market just kept heating up over the past few years, during Covid, and eventually, home buyers almost always found themselves competing with multiple (or many, or multitudes) of other offers. Home buyers started adding in specific language to their offers agreeing to proceed with the purchase so long as the appraised value wasn't any lower than $____ below the sales price, or agreeing to proceed with the purchase regardless of the appraised value. These offers would significantly reduce (or eliminate) the possibility of an appraisal disrupting the home sale. Home buyers were willing to go this route to try to compete to secure a contract on a house... and home sellers were delighted! NOW... Some new listings are still having 5+ offers within a few days, but plenty are only having one or two offers. With fewer competing offers, and with a feeling that the market might be slowing a bit, more home buyers are revisiting the topic of whether to include an appraisal contingency. Some buyers are now including appraisal contingencies in their offers once again. Buyers should likely decide whether to include an appraisal contingency based on whether they are competing with other offers, and based on how much they like a particular property. Some sellers find the return of the appraisal contingency to be quite reasonable. Some sellers think it is a terrible thing, and are insistent that they should be able to sell their home for more than an appraised value. Sellers should likely decide whether to accept an appraisal contingency based on how much interest exists in their home, how many offers they have, how long it has been on the market, etc. A shift in the way that home buyers and sellers see appraisal contingencies is normal as we start to see some early signs that the local housing market might be slowing down from a sprint to a fast run. As with all things housing market related right now, the dynamics described above to not equally apply to all property types, price ranges and locations. :-) | |
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Scott Rogers
Funkhouser Real
Estate Group
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scott@funkhousergroup.com
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