Saturday, August 8, 2009

Real Estate Secrets for Home Sellers

Did you ever wonder why your home didn’t sell when you listed it – why it just expired? Or why, as a “for sale by owner” you couldn’t sell your home?

Did you have an agent that listed your home and then you never heard from them again?

Did you think that your agent should have done more advertising?

Here are some facts about selling real estate.

First – the biggest two things about getting your home sold are Price and Condition. Sure, location is important, and some areas move faster than other areas. Right now in the Phoenix market, homes in nice areas are not selling as well as homes in less expensive areas. You can get a great deal on what used to be a million dollar home, perhaps as little as one half of the original price. But the homes that are moving right now are in the below $200,000 range, and the ones below $100,000 are on the market less than a week in most cases, with multiple offers.

What about condition? Almost everyone wants to buy a home that is move-in ready, and looks like a model home. Investors often like to look at homes in poor shape, needing lots of repairs or carpet or paint. Why? Because they know they can buy these homes for much less than a “move in ready” home.

Finally, price. Price is the most important factor in selling your home. Any house will sell for a bargain price; similarly, an overpriced house will never sell.

As a real estate investor and agent, I generally have a good idea of an appropriate selling price for a home – I sell a very high percentage of my listings. Why? Because if I think the seller has an unreasonable expectation in terms of price, I don’t want the listing. There are many agents who think that if they just get the listing, then they can sell the house. The truth is, I don’t want your listing unless I am certain I can sell your house. Having a bunch of overpriced listings costs me money and frustrates the sellers.

Having said that, I do have one program where I will give a seller a listing when I think the home is overpriced. And I charge an up-front fee for it. More about that later.

What about advertising? Won’t more advertising get my house sold faster? Generally not. Real estate agents advertise to get more business. Agents hold open houses to get more business. Agents run magazine ads to get more business. Agents put a sign in the yard – you guessed it – to get more business, not to sell your house. The primary, #1 way homes are sold is through the multiple listing services. The typical homebuyer, these days, starts their search for a home on the Internet. They have an idea of the area they like, and they go to sites like Zillow, or, or Trulia, or any of the home sites and they look at the homes for sale. Where does the information on these sites originate? The multiple listing service.

Sometimes people drive around on Saturday and Sunday, and they go in open houses. They are not usually looking for the house that is open – they are looking for a house in the area. So when I hold an open house, I always, always have with me a list of all the homes for sale in that area. And I have, from time to time, sold a home to someone who came to an open house. But never the home I was holding open.

Most people who look at open houses are the neighbors and other looky-loos, with no intent whatsoever to buy a home anytime soon. These people are great leads – I insist on contact information before I will let anyone see an open house. If you won’t part with your business card, or email address, or phone number, then you don’t get to see my open house. Because I know you won’t be buying it; and at some point in the future, I want to sell you a home, or sell your home. It isn’t about selling this home.

What about signs? I put signs up on most all my listings, and I have an 800 number you can call for information about my listings, right on the sign. Most people who call my signs – again – have no interest in buying the home with the sign, but they are looking for something. More often than not, they want information about what the neighbor is going to get for their home, so they can think about what their home might be worth. The sign is to get me more business, not to sell your home!

Magazine ads are expensive, and work sometimes. I have run many magazine ads, and I never sold any home I had advertised in a magazine, to someone who saw it in the magazine. But I have sold other homes to them. When I run ads, I often put the most attractive homes my office (not just me) has listed, so the ad looks good. It is to get my phone to ring, not to sell the homes I’m advertising. And, it works.

The phalanx of marketing techniques other than the MLS listing – magazine ads, the sign, the 800 number, open houses, home tours, and especially networking with other agents – all help get my phone to ring – to bring me buyers. I know I have succeeded when I get both sides of a transaction; ie. I represent both the buyer and the seller. This means that the buyer actually bought something I was advertising. And it happens, for me about 2%-5% of the time. I don’t go out of my way looking for transactions like this; there are agents who list homes exclusively and use other methods to improve their “double siding”. I take what comes.

So the number one way we sell homes is through the multiple listing service. It is because the information there is syndicated out to multiple sites on the Internet, and because most homebuyers have a friend who is a real estate agent who finds them a home through the multiple listing service.

Pricing – many people use Zillow or another similar online information service to try and get an idea of what their home is worth. My experience is that these services are a great way to see price trends, in that they always use the same, objective method to determine a home price. As for the specific value of a home, you are probably better off using an appraiser or at least an experienced real estate agent who has access to the tax records and multiple listing service to see recent sales and homes under contract. Agents can sometimes also call listing agents with “pending” homes (or AWC – Active With Contingencies) and get a feel for the offer price. Ultimately, though, it is very hard to determine an accurate value without actually obtaining an offer. As agents, we strive to price homes fairly, and start with a price slightly higher than our opinion of the market value. Then, if no offer appears in the first few weeks, we lower the price. I typically lower the price about 3% every two weeks.

For short sale listings (listings in which the seller has no opportunity to get anything out of the transaction because they owe more than the home is worth) I specifically require that the seller agree to lower the price on this basis, as it is generally what the banks like to see – start a little high and lower the price systematically until someone makes an offer.

People attempting to sell their home themselves are usually trying to save money – namely, the commission. Without help from a real estate agent, though, they seem to have trouble setting the price. Here is an example from recent FSBO ads in Phoenix:
A seller is advertising their home, as a FSBO, for around $240,000 in the East Valley. This property was purchased for around $140,000 before the market bubble. Looking at the various comparable properties, the owner will be lucky to sell it for more than they paid! An agent has listed it now (the owner perhaps got tired of not selling) for more than $200,000! What do you think the likelihood that anyone using a competent agent, who can see the comps, would pay that much for the home? Either they will have to reduce the price at least $30,000 - $40,000 or they probably won’t get an offer.

This is going to frustrate the seller and his agent, and gives other agents a bad name. What if the agent had done their job and educated the seller as to the real, current market value of the home? The seller might be able to make a better decision about what to do. Instead, the seller is faced with some questions and anxiety: (Note: I have no idea what the seller owes on the home) “But I have to sell it for what I owe the bank, at least, right?”, and “What if it doesn’t sell, I can’t keep making the payments”, or “I have to move to Zimbabwe to take care of my great uncle” – we can’t know what is in the mind of this seller. What is clear (at least from what I can find from looking at the FSBO ad, the tax records, and the MLS system) is that the home was way, way overpriced as a FSBO and now is only “way” overpriced as an agent listing.

So here is my offer:

If you want me to list your home, either we have to agree on price, or you can pay my up-front listing fee with no guarantees. If we agree on price, I will list your home for a 6% commission. If you want my “39 day” guarantee, then you must pay 7% and there are other requirements including (but not limited to) staging, inspection, and appraisal.

If you want me to just list your home so you get MLS exposure and you (for whatever reason) choose to ignore my pricing expertise, then I will list your home in the MLS for $500 plus a 3% commission.
The choice is yours.

Patrick Harvey
Associate Broker
Certified Short Sale Negotiator
Move On Real Estate Group
(480) 390-7369 Direct

1 comment:

  1. Excellent read. Thank you for taking the time out to write this article. It appears you've left out another advertising spot for realtors: blog posts (meaning, your article was an effective advertisement for me).