This is another one of those phrases that Realtors hear all the time. It is, quite frankly, a very natural thing to feel and say. You paid good, hard-earned money for your home. You’ve put additional money (and sweat equity) into the house. You’ve lived it in for a period of time and your neighbor who bought at about the same time as you got 120% more than he paid when he sold about 2 years ago.
So why should you give it away? You shouldn’t!
What you have to do is to clearly define what “giving it away” means to you. It’s very subjective. Ask yourself the following questions:
Why do you want to sell in the first place?
What will you do if you don’t sell?
There are a dozen reasons why people want to sell their homes. Answer it honestly. Perhaps selling isn’t really that important to you. If it is, then move on to the second question – what will you do if you don’t sell? There are only 3 possible answers.
You’ll stay in your home
You’ll rent your home to someone
You’ll move and leave the house vacant
The most common answer is that you’ll stay in your home. If that is your answer then ask the following question
How long will you stay before your original reason for moving becomes urgent?
If you think you will stay in your house for “a while – until the market turns and houses appreciate again” you should sit down and do some math.
Here’s an example which is, admittedly based on theory – no one really knows what is going to happen in the market. We’re going to start with the hypothetical assumption that the market will continue to depreciate for another 9 months, level off for 6 months and then begin to appreciate again.
Soooo…. using my favorite $100 house, let’s look at a couple of scenarios. First, where you overprice the home and then at what happens if you try to wait it out.
SCENARIO #1. You paid $90 for your home four years ago. Your neighbor who has a similar house also paid $90 four years ago. He sold his home two years ago for $110.
Your Realtor tells you that a good selling price for your house is between $98 and $102. He suggests listing it for $100. You know that you’ll probably have to negotiate a little and sell for $97 or so. You will then have to pay a real estate fee of about $6 so you’ll end up netting $92 which is only $2 more than you paid.
You feel that that is just “not enough” and constitutes “giving your house away” and you are not going to do that.
You decide on listing it for $108, and will negotiate down to $105 if you have to. After taking out a fee of $6 you will net about $99 which is, in your opinion, “good enough” after all, it’s WAYYYY LESS than your neighbor got. You are being very flexible without giving it away.
What happens next is that your house doesn’t sell quickly. The educated buyers who have been looking at houses for a few months, take a look at your house and they know, while it might be a great house, there are others out there that are better values.
90 days go by.
You then, reluctantly tell your Realtor that you’ll lower the price to $102 – which is the top range of what he originally suggested. Sounds like a plan right? There's one more wrinkle.
Based on a continued depreciation your house is no longer valued at $100. It is now valued at about $98. A new group of educated buyers (the other ones have already bought homes), visit your house and reject it. There are some other similar houses that are selling for $96 and $97.
Your house sits for another 90 days – and the cycle continues. Eventually the market does bottom out. Your house is now worth about $92 or $93. You decide that you simply can’t sell at that price and you pull your house off the market.
SCENARIO #2. You hear your Realtor’s original price suggestion of $100 and decide to wait it out. You do nothing for 9 months. The market then bottoms out and your house is now valued at about $92 or $93. You feel that things are on track and you’ll just wait for things to rise again.
You can see in both scenarios you are sitting there 6 -9 months later with a home that is worth about 7 or 8% less than you could have sold it for when you started the process.
Again I want to reiterate that this is all hypothetical. No one knows what is going to happen. In our little story, the market begins to slowly appreciate and 12 more months go by and your house appreciated in value by about 5%. This now makes your home worth about $97. You are 21 months from when you started. If you then factor in the mortgage payments that you've been continuing to make, your net proceeds from this plan will be far, far less than if you had sold it for $97 at the outset.
So – now go back to those two questions.
Why do you want to move and what will you do if you don’t sell?
This, of course, leads again to the third question – how long can you actually wait before you move.
No one really knows when the market will turn and how quickly it will appreciate when it does. In the best of scenarios, however, you need to understand that in all probability, your house is worth more today than it will be tomorrow or in 6 months to a year- and that it could be 1, 2, 3 or more years until it is worth more than it is today.
BOTTOM LINE :
1. Overpricing your home will not help you net more from the sale.
2. Overpricing will probably delay the sale of your home and you will end up selling for less.
3. Holding off until the market turns will not help you net more unless you can wait a very long time.
4. What you WANT for your house is irrelevant to the current value.
5. What you NEED for your house is irrelevant to the current value.
6. What you PAID for your house is irrelevant to the current value.
7. What you OWE on your house is irrelevant to the current value.
8. What your next house will cost is irrelevant to the current value.
9. What your neighbor sold for a year or two ago is irrelevant the current value.
Ultimately, you have no voice in the current value - you only have a voice setting the asking price.
BOTTOM BOTTOM LINE:
The question is not how much you want to net for your house.The question is whether or not you want to move.
If you do, then you must price the house based on what people are willing to pay.
Roger Miller had a hit song in the 1960s called England Swings Like a Pendulum Do. I know I'm dating myself with this reference but if I'm getting old it's fine. Better than the alternative.
Well most things swing like pendulums, don't they? Right now the ability to get a mortgage has swung as far away from a few years ago as it can.
Allegedly, not too long ago, the primary qualification for a consumer being approved for a loan, it seems, was a mirror test. If you held a mirror up to the face of the borrower and steam formed, they got the loan.
OK - that's a little extreme but let's face it, getting credit was a breeze. There was in fact, a loan known as NINA which stood for No Income No Asset.
As far as the house they were buying, there are folks claiming today, whether it's true or not it is being said, that appraisals were, for the most part matching the negotiated selling price.
Neither of those points is meant to be a knock to lenders or appraisers. My point is not so much whether loans should have been granted or not, but the perception that has driven the pendulum.
So, given the media coverage of sub-prime loans and "over zealous" appraisals, the lending industry has swung completely in the opposite direction.
There are some folks today who will have a more difficult time getting a mortgage. For example, in some areas, the new "rule of thumb" for minimum FICO scores on a loan up to $417,000 is 660. It goes even higher on bigger loans.
Every possible precaution that can be taken to insure credit-worthiness is being taken. This will, without a doubt eliminate some borrowers who might have been included a few years ago.
Even if the house appraises as you hope and even if the borrower gets approved, the fact is that the typical time for completing this process is likely to be longer than we may be used to. What once took 4 - 6 weeks might, in some cases take 8 - 10 weeks or more. Maybe not - sometimes the stars align and things go quickly and smoothly - but be prepared.
One of the things that causes agita in Real Estate transactions is an unexpected delay. Trust me, there's nothing quite as aggravating for a seller or a buyer, than getting a phone call 5 weeks into the process that this or that hasn't been done, or more information is needed or that there's a backlog in processing. There's a dozen different reasons but the end result is the same - you can't move when you thought you could.
These factors will vary from region to region and from specific transaction to specific transaction - talk to your Realtor and your Mortgage Professional to find out how things are going in your area.
My advice is to go into a home transaction - as a buyer or a seller - with the idea that it is NOT going to be as quick or as smooth as you want it to be - or what you might have experienced the last time around.
As a Realtor, my responsibility is to to stay in close touch with all the various players on an ongoing basis until the moment that we all walk out of the closing room smiling. The most important thing I can do for you, is to help you set accurate expectations. Disappointment, is always caused by inaccurate expectations.
A lot of people shopping for houses today are moving very cautiously towards making a purchase as they keep their eye on the depreciating prices of houses. Everyone wants to buy at the "bottom" of the market - which is a natural feeling - who wants to buy something today and have it be worth less in 6 months.
One of the challenges with this is that we are not going to know when the bottom hits until we can look back and point at it in our rear-view mirrors. Once prices start to rise at some point, we will know, for sure, when the bottom was. Until then, we're all just guessing - and gambling.
The second thing to consider is really a math exercise. If, for example, there is a home that you like that you can currently buy for, let's say, $250,000. If you wait 3 more months, the price might drop to, let's say $230,000 giving you a "savings" of $20,000.
Makes sense to wait, doesn't it?
Let's look closer at that $20,000. You have to consider what it is costing you NOT to buy for another 3 months. If you are a first time buyer and you are currently renting, that means that you'll be paying rent for 3 more months and not enjoying a tax deduction on the interest you'll be paying in your new mortgage.The earlier in the year you make a purchase, the bigger your deduction will be on April 15, 2010.
If you currently own a home, compare your current interest rate to what you would be paying if you made a move sooner than later. If you're current rate is, let's say, 7% and you can get a mortgage on your new home for 5%, how much will you be saving on your monthly payment.
Of course, the biggest math issue you need to look at it you currently own a home and are waiting is this. How much less will your house sell for if you wait? Will you net $20,000 less by waiting for a $20,000 savings on the buy-side?
Everyone's situation is going to be unique but you should take the time and do the math to figure out how much it will cost you to wait for "the bottom." You might be surprised.
OK - I admit it. I'm an American Idol addict. From late January until mid May don't bother calling my house on Tuesday or Wednesday nights. My wife and I, (along with our two dogs) are deeply entranced with Simon, Kara, Paula, Randy, Ryan and a plethora of (mostly) bad --->mediocre singers all wanting to have a chance to record the next over-produced, synthesized, homogenized pop hit.
Even the really good singers who win (or come in close) typically are given silly, formulaic songs to record - have you heard Bo Bice's THE REAL THING? Anyway - I digress.
Recently I was having a conversation with a client about pricing his house which we were about to put on the market. I was going through my rhetoric (which you've heard if you've ever read this blog before) about how you have to let the buyers decide what your house is worth - and it hit me that I had heard this dialogue before - from Simon Cowell - albeit in a different context.
If you've ever seen the show, you'll know that one of the best parts is watching Simon interact with the bad singers in the early auditions. Yes - I do know that they exaggerate the whole William Hung thing a bit, picking the worst auditions to put on the show, strictly in the name of ratings - but I really do find it entertaining - but more importantly it provides some real insight into how people's perceptions of themselves are different than reality.
People tend to believe what they want - they come to a conclusion first and then try to justify it based purely on emotion. Here's how the dialogue usually unfolds.
A really awful singer will belt out a tune - something very loud and dramatic - like a guy singing "GIRLS JUST WANNA HAVE FUN" in a bass voice while gyrating around the mini-stage in what appears, sometimes, to be a seizure of some sort. Simon or Randy will try, sometimes in vain, to stop them mid-gyration, but they carry on as long as they can, even in the face of the judges sometimes laughing or holding their ears. Then Simon will say "How do you think you did?"
Invariably the contestant will say they thought they did well. Simon will assure them they didn't. OK - we're finally up to the relevant part.
The singer, will then try and explain that even though all four judges hated their performance, he or she, was actually very good. Their mother, father, sister, brother, uncle or VOICE TEACHER has told them for years how good they were. They may sound terrible here in the audition room, but if they "could have a chance to go to Hollywood" they will show the judges exactly how good they really are.
Think about that for a minute. They are trying to override how bad they sound - not by singing well, but by explaining that in spite of the judge's perception - they really are good.
The simple fact is, that they are, (for the most part) truly convinced that they are good. They are often in shock that the judges don't like the performance. They don't seem to get that it doesn't matter a bit what THEY think.
Truth be told - at this stage of the competition, it only matters what the judges think. They (the contestant) are there, simply to present what they have to offer. Their success or lack thereof is 100% in the hands of the judges - and as the weeks go by - in the hands of the voting public. Same thing with the value of your house.
You sincerely believe that your house is worth $100.
The market, however, says that it's worth $90.
The "comps" support $90.
The offers that you are getting are in the high $80s.
No one wants to buy your house for $100.
Therefore, in spite of your own perception - your house is not worth $100. In a free market something is worth exactly what someone is willing to pay for it - not a penny more. So work closely with your Realtor and come up with a reasonable number to put on as a listing price. if you overprice it, you might not even get showings. Or you will get showings but no offers that even come close to the price you've asked.
If it happens once - it might be someone looking to lowball with the hopes of stealing the house. If it happens twice or more, then the price they are offering is very much like Simon's opinion - it's the only thing that matters.
As part the American Recovery and Reinvestment Act (Obama’s Stimulus Bill) put into place certain tax credits and rebates for homeowners and builders who take implement energy efficiency components into their homes.
In order to take advantage of these incentives it’s important for you to have a clear understanding of how they work. Some of the things you can install to qualify include certain types of windows, skylights, “cool” roofs, insulation, duct-sealing and weatherization and much more.
This article from HGTV provides a detailed look at what you can do to get involved.
Updated 1:30 EDT to fix broken link. Should work now.
Again, this article is built on the premise that the number of Realtors to choose from is staggering. Most people have one or more acquaintances that are “in the business” – or they know someone who has a sibling, spouse or parent who sells Real Estate. It’s great to know the Realtor’s name, but what else does your friend or relative know about them? A name and a business card don’t tell you all that you need to know.
No matter how you come across the name of a Realtor, you owe it to yourself to do your due diligence and learn about their business practices before choosing one. Here are some of the things that you should expect from a Realtor when they are acting as your Buyer’s agent.
A Buyer’s agent is a Realtor who you choose to represent you in your search for a new home. In most states you will likely have to sign an agreement with that agent in order for him to represent you. This is known as “Buyer Agency”. While it is an overstatement to say that you’ll be “stuck” with the agent once your engage them (there are always ways to get out of most agreements), remember that you are making a commitment to work with that Realtor throughout the entire process of your home search – so choose carefully.
So – what are the things that a Buyer’s agent should be doing to make your search and transaction a great experience?
BUYER COUNSELING: Your first meeting with your Realtor should include more than just looking at houses. This first meeting, must include you getting a clear understanding of the entire home buying process and your Realtor should be learning as much as he can about your specific needs and plans.
SEARCHING FOR LISTINGS: There are dozens, maybe hundreds of sources to search for listings. Every day these resources are becoming more and more elegant and sophisticated. On my own website I offer three separate options. The fact that there are so many resources available can make it difficult to decide which one to use. After getting to know you, your Realtor should be able to recommend certain avenues for listing searches that will fit your needs and your style.
Search on your own: Some home shoppers prefer to spend a great deal of time on the internet and seek out matching listings themselves. I have one client who has logged into a particular search site 2015 times since I set up his account last fall. He communicates with me about things that pique his interest and I dig for further data to help him make a decision about whether to look at the home.
Realtor searches for you: Some home shoppers don’t even own computers – or they have neither the time nor the inclination to use their computer to search for home. If this is you, then you need a Realtor who will spend time and get a very clear profile of what you want, pull listings and provide you with the details in whatever format you want.
Most folks fall somewhere in between those two extremes. Make sure that you choose a Realtor who is comfortable and competent working the way you want to work.
QUALIFYING LISTINGS: This is the next step after you have found prospective homes that fall within your stated search parameters. The information in a Real Estate listing can only tell you so much. One example: A listing, for example might say “Great access to highway”.
That might be a plus to some buyers but it might not matter to you – however – you might be very concerned with the noise level in the neighborhood. If noise is a very important factor for you then you probably want to know if having great highway access also means that you are going to hear traffic noise. It might not – but you aren’t going to find out from the listing. So, your agent can research it for you. Perhaps he knows the street already and can tell you off the bat – or perhaps he needs to call the other Realtor or take a drive by the house and check it out.
There are lots of other examples. The point here is that simply finding the listing may or may not tell you about all the things that are crucial to you. Once your Realtor knows your likes and dislikes he can dig deeper and give you the additional information before you waste your time looking at places that aren’t going to work for you.
NEGOTIATING: I covered a lot about this in a previous post – the key here is to make sure that you are in sync with the Realtor – there should be no surprises. Once you find a house, the Realtor should pull “comps” and go over them with you so you can have an idea if the listing price is somewhat in range of market value or if it is overpriced. Well before you reach this point, your Realtor should sit with you and map out various scenarios and explain the options. A few examples:
What if a house is significantly overpriced? Do you make a single bid that is at market value and stand with it, or are you going to make an offer well below, which may be perceived as a “lowball” by the seller?
What if your opening bid is very reasonable and the seller refuses to make a counter offer? Are you going to make a second offer?
What if you go through several rounds of bidding then find that you and the seller are deadlocked a few thousand dollars apart?
It isn’t necessary that you make firm decisions on these and other scenarios in advance – but your Realtor should have laid the possibilities out for you early in the game so you can consider your options. In the heat of a negotiation you should be executing your well thought out strategy – not developing one.When it comes to the actual skills needed by the Realtor, it boils down to be able to work "The Three Fs". He should negotiate:
FIRMLY
FAIRLY
FEROCIOUSLY
POST SALE: Once you make a successful bid on a house, you will be dealing with lots of other people: Home Inspector, Septic Inspector, Attorney, Loan Originator, and Loan Processor – to name some of them. Your Realtor’s “official” role is ending. Having said that, however he can and should assume the role of “expeditor”, staying in touch with everyone and keeping track of who is where in the process so that you have an advocate should there be an unexpected wrinkle.
SUMMARY: Generally speaking, you should choose someone you feel comfortable with but that comfort should come from you knowing that your Realtor has a plan to work with you from beginning to end at your pace; following your style and helping you make the most of your home shopping experience.
With so many Realtors to choose from, this is intended to help you look at some of the things you might want to clarify with an agent when selecting the one to sell your house. Realtors, like any group of people, have many different styles, work ethics, and philosophies. There are a lot of homes on the market today - some sell, some don't. Working with the right Realtor can definitely have an impact on which group your home falls in to.
Every Realtor should have the same objective when listing your home. The objective, put simply, is this: To help you sell for the highest possible price, in the shortest amount of time, with the least amount of inconvenience for you.
This objective should be the basis for everything else in the Realtor's Strategy: Highest - Shortest - Least or HSL.Every plan and every action should be geared towards one of those three components.
PRICING: A Realtor's first responsibility to you is to help you decide the right asking price. You agent should perform a detailed analysis for you of your local market, including sold properties, active listings, properties that did not sell, as well as information on how many homes have sold in your areas recently and the pricing trends. Once you know the right price, it is the responsibility of the Realtor to advise you not to overprice your house. Why you should not overprice your home is covered in another post.
The subject at hand today is that your Realtor should not be telling you what they think you want to hear. Brutal honesty should get high marks. The tendency for many sellers is to ask about listing above market value for "a while" and then lower it if doesn't sell. Doing this is rarely in the best interest of the seller and usually ends up with months of anxiety and ultimately nets the seller less money for their home. Look for a Realtor who will stand by his analysis and work with you towards HSL. It may be the path of least resistance for a Realtor to simply go along with the client on this issue - but it may not be the best thing for the client.
MARKETING: I've heard it said that no one "sells" a house - people look at at and choose to buy it. If that's true then the key to finding that buyer is to get as many people to look at the house as possible. Not everyone that views your home is going to want to buy it - that's OK. You only need one buyer. The odds of finding that buyer are greatly increased by the Realtor's ability to generate interest. Ask your Realtor for his Marketing Plan.
What are the specifics thing he'll be doing? What will be done in the first few days, the first week, the second week. What will be done on an ongoing basis. How will he be promoting the home to the other Realtors in the area? Remember, it's the other Realtors who have the buyers. So while advertising your home to consumers is important, it is equally important to know the specifics of how your Realtor will be communicating with the other area Realtors - or even Realtors not in your area.
Your buyer may live down the street or thousands of miles away. In our area of Northern Fairfield county, there are multitudes of folks who move across the state line from NY. How will your Realtor approach the NY Realtors with information about your listing?
Part of the marketing plan includes preparing your home for showings. This may include staging advice, which again calls for brutal honesty. For certain homes, it might be appropriate to bring in a professional home stager, but even without that there will be things that your Realtor will likely notice that will make your house more appealing to buyers. Again, what you want here is for the Realtor to look beyond saying what's comfortable - he needs to point out anything he notices to you that will help reach the prime objective.
In addition your Realtor should make a point of preparing marketing materials for your home that will point out "the high points" to visitors. Remember - neither you nor your Realtor will likely be present during showings and the buyer's Realtor does not know as much about your home as you or your own Realtor. "Call outs" which are small signs can be placed throughout the house to draw attention to certain features. If there's a cedar closet for example, buyers will only see it if they open and look inside - so a small sign on the outside of the closet can help.
There are a variety of other materials that can be placed in the house, co-located with the agent sign-in sheets. Property and subdivision maps, neighborhood information and transportation options are just a few.
FEEDBACK: Ask yourself how often you want updates from your Realtor about "what's going on". Will your Realtor provide weekly written summaries of all showings and re-showings of your house? What is the Realtor's plan for following up with the agents who bring buyers for showings? With today's electronic key boxes, your Realtor can have the capability of knowing very quickly what other Realtors showed your home. Does he have a systematic plan to get feedback and follow up with them?
NEGOTIATION: Your Realtor should have a negotiation strategy which he goes over with you before the house is ever shown. While he will bring you all offers and you will ultimately decide, he should be discussing likely contingencies and options with you before you're home is even presented for sale.
When an offer comes in, it begins a series of fast paced back and forth telephone conversations that should lead you to a successful sale. This is not the time for you to first start to think about your options. If you've discussed the strategy in advance, you'll be prepared for and can come up with well thought out positions on a variety of possibilities - some of these are:
What will you do if you get a full priced offer on the first day of the listing - before you've had an open house?
What are your options if you get multiple offers?
How should you respond to "lowball" offers?
What if you get an offer from someone who has a healthy down-payment but needs an extended closing date?
None of those things should be surprises if and when they come up.
POST SALE: Once an offer is accepted, the primary point of contact will likely be your attorney but that, by no means, says that your Realtor's responsibility is over. Your agent should be prepared to follow up with all the various parties to make sure that everyone else is doing everything they are supposed to. There is an old adage among sales people that applies here: "A salesperson's job begins when the buyer says yes". Everything that happened prior to your finding a buyer will mean nothing if the deal falls through. There are many things over which you or your Realtor have no control, but he can stay informed and at least try to avert any one of the many things that can go wrong.
SUMMARY: Generally speaking, you should choose someone you feel comfortable with but that comfort should come from you knowing that your Realtor has a plan which involved more than taking the listing and waiting for the buyers to come.
I heard an interesting parabolic riddle (I always wanted to say that) by an author on one of the morning television shows the other day. I was also on the phone, tripping over the dog's water bowl and trying to make breakfast at the same time so I didn't catch the name of the man who was talking. When my brain processed it a little later on it really struck me though.
If there are four seagulls sitting on piece of driftwood and one of them decides to fly away, how many are left on the driftwood?
The answer is four.
DECIDING to fly away is not the same as actually making the flight. It's really the same with a lot of folks today who are looking at houses. We all know this is a buyer's market and a lot of people are taking advantage of it to get some of the great bargains that are out there. There are lot of folks I talk to though, who have made the decision to buy but they are waiting: for prices to bottom out, mortgage rates to drop below the historic lows that we have right now, or they keep hoping that the next new listing that comes on the market will be the perfect home.
The fact is that it is only a buyer's market for those folks who actually buy a house. At some point, prices will go flat and then rise, mortgage rates will go up, and there will be fewer houses on the market to choose from. Nobody knows when these things will happen. The simple truth is that the stars are aligned pretty nicely - right now - for qualified home buyers. So if you've made a decision to partake in the buyer's market, there's no time like the present.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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