How Real Estate Sales Work: Dirty Little Secrets Revealed
By Janet Fetterman, Royal Shell Realtor®
You hear all the pitches of what agents are going to “do for your listing” and you have to make a judgement call. You must make a decision of who to list with and, of course, you are doing this with limited knowledge. After all, if you had the time, training and resources, you’d sell it yourself. I’m going to explain how real estate sales work.
Houses sell due to a perfect mix: Location, condition and price.
So, let’s take these one by one.
Location: you can’t change it. Wherever a house is located – desirable community or a location within a community – impacts that home among its competition both inside and outside of the community.
Reality Check: What some buyers see as a positive, others will see as a negative. Remember as Dr. Phil would say: “There are two sides to a pancake. There always is and there are no exceptions.”
Example: Close proximity to a community’s fitness center may be a convenience to some while other buyers will not want to be located within the flow of traffic to that center. Location cannot be changed. At best, an agent is only able to answer objections by pointing out benefits from the other side of that pancake. Sometimes this works when this objection is not a high priority in the buyer’s mind.
Condition: Outside of deferred maintenance issues, this also has some subjectivity involved. Perhaps the seller has the home painted in designer colors that work perfectly with their furnishings. A buyer will likely view this as not in the best condition for their needs as they will need to immediately do work. It has been my experience that in the buyer’s mind, the cost to have the work performed is most often inflated by at least 50 percent of true costs and often imagined up to twice the real hard-cost figures to get the work done. This is why agents are always singing the praises of neutrality.
Reality Check: Not everyone likes to decorate. Many times buyers want move-in ready homes.
Price Is The Top Factor
Price: Ahhh, here is where the single most important factor comes in! This is the area where you have total control. A properly priced home in today’s sophisticated and informed buyers’ market must properly be positioned in the competition as follows:
- Sold/closed comps drive the selling price of all offers. This is what is meant by: “The market determines your home’s value.” We all remember those days of rocketing home values and we have experienced the market adjustments’ return to earth. Even during that meteoric rise, lenders were requiring 30-day updates on values to keep abreast of the rising tide.
- Your home needs to be priced so that offers will be eligible for financing, unless you wish to limit your home to strictly cash buyers. The luxury market in Marion County homes is at the $500,000 price point and higher. Our statistics reveal that 50 percent of the buyers for luxury homes in Marion County pay cash. If your home is priced too high to qualify for a mortgage (without an appraisal cut), then you are effectively limiting an already small, small piece of the available buyer pool by half.
- A dirty little secret is that some agents will take the listing at an inflated price so that they have your high-end listing in their inventory. When you “own the listings, you own the market.” Translation, it is easier to get more luxury listings when you already have some. Taking that over-priced listing will do more for the listing agent than it will for the seller.
- In a normal market I have always used the rule of thumb that if you’ve had your home shown five to seven times in 30-60 days and you have not received an offer, you need to review the competition and evaluate how your home stacks up. Other homes sold in that timeframe and yours did not. Was it price? If so, adjust it accordingly. There have been many times that I took sellers out to preview their competition. If you decide to do this though, you must look at the competitive homes through the eyes of buyers and you must be completely objective. This can be difficult to do when it comes to your personal home as sellers have memories and emotions tied to their nests.
- Every 30 days during peak season (here in Ocala: November-March), a home’s price and position in the For Sale line up should be reviewed. All Pending and Pending Continue to Show need to be reviewed as well to see if any conclusions can be drawn as to how your home is stacking up within the current buyer pool.
- Another dirty little secret is that Realtor®.com, Zillow, Trulia and their opinions of your home values are based on some very generalized data. The computer analytics that are used in these platforms can work “fairly” well for trends in giving ballpark values in 95-98 percent of the market (translation, under $500k in Marion County). In the luxury market, their “information” will do as much harm as good for your home since buyers use this misinformation to create their offers.
- Days on Market: the dirty little secret that few agents discuss is the ongoing costs associated with market time. If your over-priced home is sitting on the market, perhaps even empty, you are still incurring carrying costs. Mortgage, taxes, utilities, lawn care and HOA dues will all impact your bottom line. The art is to price your listing tight, for minimum days on market at the best sale price.
If you really want to see how the luxury market is performing regarding closed sales and market depth, I’d be happy to share this information with you. It is real data, pulled from the OMCAR MLS sales data. Just give me a call or send me a request anytime. My email is firstname.lastname@example.org and my office phone is (352)369-6969. This information is available and updated quarterly.
Stay tuned for more on how real estate sales work. More dirty little secrets are coming.