More Urban Legends in Real Estate
When I got my real estate license, it was early 2001. This was at the tail end of the strongest sellers market that the state of Michigan has ever seen. True, across the country, the real estate market has remained brisk until very recently. But our market correction began late in my first year in the business. I’m actually glad of that, because it has helped me to develop skills that I may not have if things had been easier.
The conventional wisdom at that time was “list high, and get the best deal you can.” That’s all well and good when there are tons of buyers breaking down the doors of a handful of homes for sale. But not now, market times and listing inventories are up and buyers think they are in the driver’s seat (arguably, in a lot of cases they are). Yet, I still see lots of agents that are using this philosophy. And they are wondering why they can’t sell their listings. Owner sellers are notorious for this as well, but they have an excuse at least. The typical owner seller is not in the real estate business and their best knowledge of market conditions may only be the last experience they had, five or ten years ago. But, real estate professionals should know better. Often, I think they do know better, but some guys will say just about anything to get a listing. I call this “buying the listing.” All you have to do is tell the seller the highest number they could ever imagine getting for their home and the listing is yours. Then you spend the next six months begging for a price reduction. This is seller’s market thinking. For the time being, the sellers market is gone.
Let’s talk about a real world strategy for combating the real world challenges we face. In a buyers market, when you’re selling, the best value wins. Notice I said best value, not best price. The best price is that pig house down the street with livestock and ants crawling through the living room. It has to be the cheapest, it has no choice. You as a smart seller are going to give the best value. First, get the house ready to show; everything clean, smelling sweet like a petunia, with fresh, neutral paint on the walls, make sure to eliminate all clutter, on the walls (get rid of your daughters eminem posters, get most of the calendars and to-do lists off of the refrigerator) on the floors (get rid of furniture that doesn’t make sense and clogs walkways). Keep reading for other hints, I’ll post more later on; I don’t want to get off subject for now. After the house is ready, talk to your Realtor® and have him or her do a Comparative Market Analysis. If you haven’t had a lot of time to do tons of research, ask about a Total Market Analysis. The latter is going to be more of a conversation as opposed to a written report, but it will give you the information you need to know what to expect after the sign goes up. Look at the prices of your direct competition, and the historical information on the homes that have sold of similar size and shape to yours recently. Then, and this is the hardest part, be honest with yourself as you choose your price. Don’t assume that yours is the nicest, prettiest, most welcoming home in the entire neighborhood and therefore should be priced 10 to 20% higher than the highest sold price. Instead, use the average sold price as your baseline and choose your price based upon how soon you would like to move. The end result, if you use the strongest marketing possible, will be a quick sale for close to or at asking price.
Yes, the market cycle that we are in right now could be categorized as a buyers market. But that’s not the end of the world. People are still buying and selling houses all the time. But you have to be smart about it, asking for the moon will not get you there. The market that we are working with today is actually very normal. Selling a house shouldn’t be super easy; it’s the most expensive transaction most people make in their lifetime. It should take a little time and effort. But, if you choose the right professional, and are smart about the process, it will be a positive experience.
The conventional wisdom at that time was “list high, and get the best deal you can.” That’s all well and good when there are tons of buyers breaking down the doors of a handful of homes for sale. But not now, market times and listing inventories are up and buyers think they are in the driver’s seat (arguably, in a lot of cases they are). Yet, I still see lots of agents that are using this philosophy. And they are wondering why they can’t sell their listings. Owner sellers are notorious for this as well, but they have an excuse at least. The typical owner seller is not in the real estate business and their best knowledge of market conditions may only be the last experience they had, five or ten years ago. But, real estate professionals should know better. Often, I think they do know better, but some guys will say just about anything to get a listing. I call this “buying the listing.” All you have to do is tell the seller the highest number they could ever imagine getting for their home and the listing is yours. Then you spend the next six months begging for a price reduction. This is seller’s market thinking. For the time being, the sellers market is gone.
Let’s talk about a real world strategy for combating the real world challenges we face. In a buyers market, when you’re selling, the best value wins. Notice I said best value, not best price. The best price is that pig house down the street with livestock and ants crawling through the living room. It has to be the cheapest, it has no choice. You as a smart seller are going to give the best value. First, get the house ready to show; everything clean, smelling sweet like a petunia, with fresh, neutral paint on the walls, make sure to eliminate all clutter, on the walls (get rid of your daughters eminem posters, get most of the calendars and to-do lists off of the refrigerator) on the floors (get rid of furniture that doesn’t make sense and clogs walkways). Keep reading for other hints, I’ll post more later on; I don’t want to get off subject for now. After the house is ready, talk to your Realtor® and have him or her do a Comparative Market Analysis. If you haven’t had a lot of time to do tons of research, ask about a Total Market Analysis. The latter is going to be more of a conversation as opposed to a written report, but it will give you the information you need to know what to expect after the sign goes up. Look at the prices of your direct competition, and the historical information on the homes that have sold of similar size and shape to yours recently. Then, and this is the hardest part, be honest with yourself as you choose your price. Don’t assume that yours is the nicest, prettiest, most welcoming home in the entire neighborhood and therefore should be priced 10 to 20% higher than the highest sold price. Instead, use the average sold price as your baseline and choose your price based upon how soon you would like to move. The end result, if you use the strongest marketing possible, will be a quick sale for close to or at asking price.
Yes, the market cycle that we are in right now could be categorized as a buyers market. But that’s not the end of the world. People are still buying and selling houses all the time. But you have to be smart about it, asking for the moon will not get you there. The market that we are working with today is actually very normal. Selling a house shouldn’t be super easy; it’s the most expensive transaction most people make in their lifetime. It should take a little time and effort. But, if you choose the right professional, and are smart about the process, it will be a positive experience.
posted by Tim Hall | Wednesday, September 20, 2006
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