The Truths of Selling a Home The Truths of Selling a Home We understand your needs. Most home owners share three major objectives: 1. Obtaining top market dollar. 2. Selling within a reasonable amount of time. 3. With the least amount of inconvenience. Buyers have a different objective: They want to pay the least amount possible for a property. Understanding the potential buyer 1. They have many homes to choose from. 2. They are fearful about making a wrong decision about: • The price they pay. • The home they select. • The community they choose. • The long term affordability. 3. It is easy for them to postpone a decision today because maybe tomorrow will provide an easier choice. The Marketability of homes. Based on several factors: 1. The location. 2. The home itself, style, size and its condition. 3. The asking price. 4. The purchase terms offered, or, those required. Professional appraisal methods: 1. Cost replacement. 2. Income approach. 3. The market data approach. Obstacles to pricing property, mistakes that homeowners make when pricing a home: 1. Word of mouth. Hearsay about what other homes in the neighborhoods have sold for. This information is generally overstated and inaccurate when we compare the properties to deed transfer information and other market research. 2. Overstated or overvalued improvement costs made to the property. Major improvements to a property generally add appeal but may take time for the improvements to catch up to the perceived value. Maintenance projects add to the appeal but not value of the home. 3. The improper application of points 1 and 2. 4. Setting a price based upon asking prices or advertised prices of homes in the neighborhood. 5. Comparing the home to similar homes in dissimilar neighborhoods. Market Value: …”What the people (buyers) are willing to pay for this type of property, in this neighborhood, at this particular time”. In short, the Market Place not the homeowners and not the brokers, determine the value of a home. 1. An additional obstacle to proper pricing is the financial NEED of the seller. Unfortunately, the need of the seller to obtain a particular sum of equity from the property is of no concern of the potential buyers and has no bearing on the eventual sale price of a property. 2. On occasion the real estate profession may have an adverse effect on pricing a property. A broker that is unfamiliar with local pricing or, a broker that does not use market data facts in assisting to establish a price may complicate and hinder the sale of a property. If the price exceeds the acceptable limits of the price range it will impede showing activity and possibly eliminate the property in the minds of the brokers working with ready buyers. This may lead to a distressed sale or, the seller accepting price lower months later, than what may be obtained during a normal time of market exposure. Note: A professional broker is not looking for a “low” price for a fast sale. Homes priced correctly sell quickly. A broker should assist a homeowner in meeting their goals: 1. Top selling price. 2. Get it sold in a reasonable amount of time and, 3. Get the property sold with the least amount of inconvenience to the seller. Are there alternatives to proper pricing ? There may be a few, but not all are attractive to active sellers. 1. Time on market may be an alternative. This option depends on market conditions and the overall economic factors that exist in the marketplace. If home values are appreciating at a fast rate then it may be possible that by keeping the home on the market for a time that exceeds the average time on market that the asking price can “catch up” to selling prices in the community. 2. Terms of sale can affect the value. Overly attractive terms such as homeowner financing with a low down payment and low interest rate may compensate for a higher price. Paying for the buyers closing costs or by giving a “credit” for paying real estate taxes for a period of time are examples of offering attractive terms that may motivate the buyer to overlook the higher price of the property. 3. Improving the condition of he home. A homeowner can improve the condition of the home or make improvements that are superior to average conditions of similar homes on the market in the same community. A) NOTE: Superior condition normally allows the home to sell at the higher end of the CMA range, not exceed the upper limits of value. B) “Improvements” meant to boost value may be risky to invest for a homeowner who plans on selling the property without having the time for the market to “catch up” in value in relation to the improvement cost invested. Symptoms of an overpriced property: 1. Little or no activity. Buyer will eliminate a property by not wanting to spend time looking at a property that exceeds the asking price of others in the same community. Brokers will not show the property to serious buyers in fear of loosing credibility and may not want to even spend their time pre-inspecting the property or attending a broker’s open house. Inactivity of either buyer traffic or broker interest is the first sign a property needs an adjustment in price, condition or terms. 2. No interest after viewing the property. Buyers that do view the property do not request a return visit. They offer no feedback or show any interest and offers are not forth coming. This indicates that buyers do not consider the property within “striking” range to the perceived value. Unfortunately this property may actually help to sell another property similar in features with less of an asking price in the same neighborhood. 3. The sale of other properties in the community. When other homes in the same community are selling and the subject property remains on the market, it is a clear indicator that the marketability of the property is below the “competing” homes in the market. Price, conditions or terms need to be adjusted to make the property as attractive to buyers as the other properties that have recently sold. The Solutions to Marketability and making the home the most attractive to home buyers in the marketplace: 1. Begin to see the home as a product. Unemotionally it is necessary to see how this home compares with the other offerings in the community. 2. Detach emotion from the process. The property is not yet a HOME to the buyer as it is for the seller. 3. Look rationally at market date of home sales and competing homes on the market. The market data approach will lead a homeowner to the proper pricing of a property and will allow for the greatest return within a reasonable time frame. 4. Establish a range of pricing with a high and an acceptable low. 5. Leave room for bargaining. Pricing the home slightly above the CMA established value would allow for negotiating and insure the seller they are receiving fair value for the property. 6. Use facts not hearsay to establish price. Word of mouth, opinions of neighbors, or even brokers without facts cloud the issue. Use market data and apply it to the subject property in a rational analysis. 7. Make suggested adjustments. Your broker will give suggested improvements for the property to show its best. Make the improvements immediately so the property will be able to sell itself and meet its fullest potential right from the start. Remember, your property is competing with all the other properties on the market. 8. Make the property available for showing. Remember, if the property cannot be shown when a buyer wants to see it, the property, is in effect, off the market. 9. Work with your broker. Do not shoot the messenger. Make the adjustments in price, conditions and terms. The broker is working with you to help meet your objectives of getting the home sold for the best price, in a brief time frame and with the least amount of inconvenience to you.