Gregg's Blog

"Can't We Just Try it at This Price for a While?" ...mmmm, No.

Gregg Wysocki (Emporio Casa Real Estate) — Tue, 22 Jan 2008 17:04:43 -0600

If I had a nickel for every time I have been asked this question by a client whose home I was about to market...Well, let's just say I'd have a lot of nickels.

I cannot stress enough the importance of pricing a home correctly (and aggressively) from the moment it hits the market. This is especially true in a market as challenging and diverse as the one we are currently experiencing. I am speaking in particular of the subarban metro-Detroit area of Michigan. And although real estate is indeed local, the situation doesn't differ much across the entire United States. I will elaborate further on why this is essential.

One must remember that when your home is placed on the market, there exists an inventory of buyers for which you and other homes currently on the market are competing. In this day of ever increasing technilogical advancement, that inventory of buyers (at least most of them) have automatic searches set up by their Realtors so they will be alerted to new homes coming on the market that match their buying criteria. Because I represent buyers as well as sellers, I can tell you that nothing gets a buyer's attention quicker than a "New" listing that matches their criteria. I put new in quotes here because I am speaking of a true "New" listing, not a listing that has been removed from the market and then placed back on it so it appears "New". I hate to break the news to those well-intentioned agents/brokers out there who try this, but BUYERS ARE NOT THAT STUPID!

Anyway, I digress. For a period of about 3-5 weeks (not all buyers will react immediately to a new listing), you as a seller will have a captive audience of hundreds of buyers just waiting to judge the saleability of your home. If your home is priced correctly, this is an incredible weapon. If your home is priced incorrectly however, prepare yourself for a long and frustrating road, the end result of which is a home sold for tens of thousands (hundreds of thousands if your home value is over $1 Million) of dollars less than had your home been priced correctly to begin with. It will also take months and, sometimes years, longer than it would have otherwise.

Once this "captive audience" determines that your home is priced too high, a vast majority are not interested in the countless price changes that are about to follow. In a market such as we find ourselves, there is a large enough and a steady enough stream of new properties entering the market to keep home buyers busy. They simply do not have time to bother also keeping up with the properties whose prices are adjusting. Thus, once the initial 3-5 weeks passes, as a seller, you must rely on the slow influx of new buyers entering the market while your home is for sale. This number of prospects pales in comparison to that initial captive audience that was present when your lawn sign first went up. It is a fraction of the number that were at a seller's fingertips initially. Again, this will make for a painstaking and frustrating process. In short, you can never recreate the first 3-5 weeks of the marketing of your home. Don't make that mistake.

There is another reason that makes it paramount to price a home realistically and aggressively from the start. That reason is the appraisal. Because of the current nature of the mortgage industry (I don't believe that crisis is too strong a word), lenders are being extremely cautious and conservative. If the lending institution is being cautious and conservative, then the underwriters of the lending institution are being cautious and conservative. If the underwriters are being cautious and conservative, you can bet that appraisers are being equally defensive, if not moreso. Couple the mortgage crisis with the proponderance of appraisal fraud present in the last five years and one gets the picture - residential appraisers are walking on eggshells, making a surprisingly (or even realistically) high appraisal very unlikely. One of the most unpleasant situations a seller can find themselves is finding out a day prior to closing that their home must go back on the market because the buyer did not qualify for the mortgage for which they had applied. Unfortunately, this scenario is happening with increasing frequency. Not only do you as a seller have to go through the entire marketing process again, but you have also lost approximately 4-6 weeks of valuable marketing time processing the sale that never happened.

So one may ask, how do I price my home realistically? Firstly, as a seller, you should rely on your licensed Realtor to put together a comprehensive Market Analysis. If I were selling my home, I would be sure to ask my Realtor to please keep the future appraisal in mind when they put together the CMA. In other words, I would ask my Realtor to look through the eyes of an appraiser (It is important to realize that Realtors are NOT appraisers however) when performing the CMA.

In addition, with the climate of the current residential housing market, I would recommend to sellers that they hire an appraiser to perform a "Fee Appraisal". A fee appraisal is an most accurate and dependable measure of the value of a home. This is because the fee appraisal is independent of anthing other than the value of the home. It is not tied to or dependent on a mortgage or a home equity line credit or anything else. Depending on the market, this will cost less than $500 and is well worth the cost. In addition to the level of confidence that it provides, a fee appraisal can be a wonderful marketing tool for the seller of a home. The words, "Home Priced $$$ Below Fee Appraisal Price" can be extremely powerful in the marketing campaign of a home.

From a practical standpoint, I would also recommend the following. With your Realtor, print all of the homes currently for sale in your price range within one square mile of your home. I would define "price range" as a range equal to ten percent of the value of your home. In other words, if your home is worth approximately $500,000, use a $50,000 price range. If your home is worth $1 Million, use a $100,000 price range. And so on. Now let's take a look at this list. Can you honestly and objectively say that your home is in the top 1% - 2% of values on that list? If you cannot...you need to lower your price. If you are not willing to lower your price, I would suggest you go out and get yourself a comfortable chair...because it's going to be a long ride!

To summarize, I have one thing to add...
Can we just try this price for a while? "No. We can't.

Open Houses - Customer Service...or Self-Serving?

Gregg Wysocki (Emporio Casa Real Estate) — Sun, 25 Nov 2007 08:31:08 -0600

When asked by my potential or current clients, or just anyone in general, what my feelings are about Open Houses, I have a tough time keeping a straight face. The following can take a seat for now: All you agents who are anxious to jump up and down about how you sold this or that home to a person that just happened to stroll into your Open House and "absolutely fell in love with the place". I have a few comments about that situation:

1. If the buyers were that seriously in the market for a home, do you honestly believe that in this era of technology and bombardment of information that going to Open Houses is their main way of searching for the right home?

2. Do you really believe that these buyers would not have discovered this house had you not parked your butt there on Sunday (or Saturday, or Tuesday - because you know that's when the "rich" housewives will stop by) for three hours?

3. Oh, please!

Open Houses serve one purpose and one purpose only...to get potential buying clients for the poor sap that is sitting in the house. Oops, did I let our little secret out?

If you, as an agent (or assistant), look at this as a productive way to prospect for buyers then I have but one thing to say. "How much floor time can I get?"

If your a passive prospector and wait for the leads to fall into your lap, what kind of advocate are you going to be for your listing clients? Are you going to think while at the Christmas party, "hmmm, Sally just mentioned that her niece was looking for a home. Boy what she is looking for sounds an awful lot like my listing on Beautiful Lane. I'm going to get Sally's niece's number and give her a call"? No, you're going to be at the Christmas party waiting for someone to chase you down, tell you what a great person you are, how much confidence they have in you and "will you put your sign in my yard (because you are my neighbor you know)?".

Why don't we save everyone a bit of time and nix the Open Houses. As a listing client, you will be saved from:

1. Cleaning your home on Saturday night or Sunday morning so it looks perfect.

2. Figuring out what to do for three hours on a Sunday (Isn't the typical NFL game three hours? Can you say, "Some stranger is sitting in my lazy-boy right now"?)

3. Your neighbors finally finding out what kind of prescription medication you are taking.

4. Your neighbors teenage son realizing that you are on vicodin and putting the bottle in his pocket.

And on, and on, and on...

As a buying client, you're not really spending $3.15/gallon shopping for a home are you? Use your Realtor's gas, not yours! We can go see these homes anytime and you don't have to worry about bumping into 10 other people in the "lavish master suite walk-in closet". You also don't have to worry about the listing agent (or his assistant) hounding you throughout the house showing you how great it is.

As a Realtor or Broker or assistant - Give up the passive prospecting. Pick up the phone, get in your car and make yourself a star...and a heck of a lot of cash!

Phew. I feel better now. Thanks.

"We are going to wait to sell until after this Buyer’s Market" Part II

Gregg Wysocki (Emporio Casa Real Estate) — Sun, 30 Sep 2007 11:12:52 -0500

As I posted in the previous article, the conventional wisdom is not always so wise. I spoke of a situation in which selling in a "Buyer's Market" is the perfect thing to do. That scenario is when you are moving to a home that is more expensive than your current home.

Another situation when the same is true is when one is making a lateral move in the same general geographic location. That is, if the home you will purchase is of approximately the same value as the home in which you currently live and are selling, a "Buyer's Market" is not a bad time to sell. For that matter, a "Seller's Market" is also not a bad time to sell.

One must remember that in all but a few instances, a home seller is not only a home seller. A home seller is a home buyer in waiting. Again, there are cases in which this is not the case (sellers moving to an apartment, sellers moving to assisted living, etc.), however I will address what happens in the vast majority of situations.

As I discussed in the last article, in a "Buyer's Market" such as we are experiencing in Rochester Hills and Oakland Township (as in the entire Metropolitan Detroit area), your home will not command the price that it would have commanded last year. If you purchased your home in the current century, it may not command the price that you originally paid. I know this is a depressing thought. However, it is only a depressing thought if you are thinking in a short-term manner. Remember, the home seller from whom you will be purchasing shortly is in the same situation as you are in currently. If you are making a lateral move (spending about the same amount of money as your sale brought you), the worst case scenario is that what you "lose" on the sale of your home, you "gain" on the purchase of your new home. I say the "worst case" scenario because the situation can and should be much more optimistic.

A seasoned and astute Realtor will take advantage of the market and your situation to assist you in making an incredibly attractive purchase after your home sells. This can be done because once you sell your home, you become a commodity in great demand...you become a ready, willing and able buyer. You become a buyer with no strings (i.e., contingencies) attached. A good Realtor will use this fact to its fullest potential. Just as in a "Seller's Market" in which Realtors have buyers bidding on properties, in a "Buyer's Market" an experienced and effective Realtor will create a situation in which home sellers are bidding on YOU! That's right, home sellers will be standing in line to "purchase" what you are selling. And what you are selling is a clean, hassle-free, easy and quick purchase of their home. Your Realtor should make it very well known to brokers of homes in which you have an interest just how ready, willing and able you are to purchase their home. But because you are such a desirable "product", you are not cheap. It will cost the home seller a little bit extra to "buy" you. If enough patience is exercised on your part as a buyer, you will be very pleased with the quality of deal that you consummate.

As in the previous article's scenario, the success of this strategy relies heavily on one thing...SELL BEFORE YOU BUY!. In negotiations, you always want "the upper hand" or to "hold the cards". Selling before you buy will assure you that you are "holding the cards in your upper hand"!

Now start cleaning the basement, polishing the floors, freshening up the paint, etc. We have a house to sell!

"We are going to wait to sell until after this Buyer’s Market"

Gregg Wysocki (Emporio Casa Real Estate) — Sun, 30 Sep 2007 11:11:35 -0500

I hear this time and again from potential home sellers. It seems the overriding sentiment among sellers is that it is best to sell in a "Seller's Market". In some cases this may be true. However, in more cases than one would think, a "Buyer's Market" is the perfect time to sell your home. I will elaborate on what I mean in the following paragraphs. In today's article I will look at one example of a situation in which now (epitome of the "Buyer's Market") is the ideal time to sell your home.

If you are considering moving to a larger, more expensive home, the ideal time to buy, especially in Rochester Hills and Oakland Township (as in most of the metro Detroit region) is now. Sure, you will not get for your home what you think it is worth. You may not even get what you paid for it. However, if you have the resources available, and you can price your house realistically (with your head and not your heart), now can be the perfect time to make that move to a more expensive and larger home. I will explain why I say this.

Imagine you own a home that last year was worth $400,000. In today's market, it is not uncommon for that home to be worth ten percent less. Thus if you were to sell, you would "lose" $40,000. I put lose in quotes because it is really a paper loss. What you are actually losing is not money but equity or purchasing power. To this you may say, "No way. I'm staying put!". Suppose however that your income and liquid cash would support the dream of yours of owning a 4,000 square foot, 4 bedroom home with a finished walk-out lower level on a large, beautifully landscaped lot. Last year this home may have been priced at $650,000. Given that the market for this home has decreased by that same ten percent, the home today could sell for as little as $585,000. This price may even be lower as the higher end markets are being hit harder than the lower valued homes. For example's sake, let's say that you are able to purchase the home for $585,000. That's a difference of $65,000 from last year's prices. As you can see, you stand to make a net gain of $25,000 ($65,000 - $40,000). Not a bad deal. Do you still think you should wait for a "Seller's Market" to place your home for sale?

One very important key to remember in this scenario is to SELL YOUR HOME FIRST! I know it can be an unsettling feeling selling your home and not knowing where your next residence will be. However, as long as you sell your home before purchasing, you are in the prime negotiating position...because you don't HAVE to make a move. Should you purchase a home first, the negotiating power is put into the hands of the potential buyers of your home. This is because now you have a deadline for selling. You HAVE to sell your home. That is, unless you plan on carrying and paying for two mortgages.

If you are working with a Realtor, he or she will put a plan in place while your home is being marketed that makes it unlikely you will be caught not knowing where you will live. As your home is marketed, you will begin your search for your next home. The object is to always have a list of two or three houses that you would consider purchasing when your home sells. And remember, once you accept an offer on your home, you will have 30 - 45 days until closing. Your Realtor can also negotiate a period of time in which you can stay in your home and pay the buyers rent while you continue your search. Realistically, you could have a period of as much as two - three months to locate your next home.

Remember, things aren't always what they seem...and the conventional wisdom is sometimes not so wise. A "Buyer's Market" may be your market. It may be your chance to find that home of which you have always been dreaming.