SpencerBarron.com

Selling a home has gotten a lot tougher over the last two years. The Denver real estate market has really started to slow down. Buyers are gaining the upper hand in negotiations because there are many more homes to choose from. This means home sellers are going to have to pay attention to the feedback they get from their agents and from the public and make changes that will help them sell the home. I hear all sorts of things when I start calling for feedback. It’s amazing how useless most of it is. I mean, it’s rarely anything the seller and I haven’t realized but I push on waiting, building support for whatever course of action will eventually need to happen. I’ve come to characterize feedback in three types.

The first type of ‘feedback’ are things the homeowner already knows but the homeowner has refused to address. These are usually obvious and just a huge waste of time. These are things that should be addressed prior to sale. Either fix the problems or drop the price until the home you’re trying to sell is similar to the homes in the same price range, the homes your potential buyers are looking at. The huge waste of time comes in because these are things that are so obvious that I pointed them out as I walked through at the listing appointment. How many wasted opportunities to sell will you need before you take my advice and make changes?

1. Didn’t like the finishes. Paint colors, carpet, light fixtures, etc… This is pretty common and highly changeable. The problem is most sellers think that if the buyer doesn’t like it, they can change it. If you’re getting lots of showings and no offers, this could be the culprit. Usually it’s cheaper to make the changes than try to drop your price enough to get an offer. It’s the whole $2 will get you $10.

2. Home needs updating. If you haven’t remodeled recently and don’t have the latest and greatest finishes, you won’t compete anywhere near the same price of similar homes that do. Buyers usually don’t want to do any work. If your competition is nicer, don’t expect they’ll pick your home unless there is a significant price difference. Your only cheap options are staging the property well and making sure that it’s clean and bright for showings. Some paint usually goes a long way to help here too.

3. Home needs serious work - You can’t tell me the seller and the listing agent don’t already know this. Investors are your most likely buyer here and don’t expect to get more than 80% of what your home could be worth if it was fixed. Most savvy investors are looking for homes at about 70% of what they could sell it for fixed up.

4. Horrible smells - Many homeowners have an idea that their home smells but don’t know what to do about it. Others like to pretend they can’t smell anything. I know they know it smells though because they always ask. People whose homes don’t smell never ask visitors when they come in if they could smell the _____ (insert animal of your choice). People whose homes smell, usually do ask that silly question. Of what value is giving the feedback…”Yes, it’s horrible.” when the seller isn’t going to do anything about it. If it smells bad, don’t expect to get a fair price for your home. I’ve seen this knock $20,000 of the value of homes. Animal smells are the worst but food smells can be overpowering too. Suffer from hyposmia? Get professional help.

5. Home is overpriced - If you’re a seller, don’t expect helpful feedback from buyers when it comes to price. This is the most inaccurate feedback you will get. Most buyer’s agents will likely tell you it’s overpriced regardless of what the comparable sales are. Usually, the buyer’s agent has no idea about the home’s value; they only know if their clients liked it or not. Even if they liked it, they might say it’s overpriced. Who knows for sure? The only thing that is certain, the buyers didn’t want to pay the list price for the home. If all buyers that see your place would gladly pay your listing price, you’re probably listed too low. From an agent’s perspective, feedback on price is only useful for helping the seller feel comfortable about a price drop, unfortunate but often necessary. I , personally, don’t go by feedback; I start by looking at the competition and seeing how we compare. This dictates more than anything what your home should be listed at.

The second type of feedback we get are things that the home owner already knows about but can do very little to fix.

6. Poor location - Funny thing is everyone talks about location, location, location as being the most important factor in real estate. But to a seller, he can’t do anything about the location when it’s bad. You can expect that location alone will turn off many potential buyers even before they come in. Repeated canceled showings? They probably discovered the problem before they even went in. A seller can only try to divert attention to the property’s strong points while attempting to downplay the problems with the location. Backing up to a busy street? Play soft music inside and considering adding a water fountain outside. If you’ve got worse problems than road noise, you’re probably going to need to address it in the price of the home. These problems may include close proximity to factories, crack homes, shanty towns, tent cities, train stations, gang hangouts, prisons, public housing, or Rocky Flats; don’t act like your home is anything like the home that backs to a ‘green belt’ or fronts on Washington Park.

7. The home has a funky layout - Staging may help but If your home has a hodgepodge of additions over the last 80 years it’s going to effect the price.

8. Bad Neighbors - There’s very little you can do to get the neighbors to ‘get with the program’. I’ve seen homes where the neighbors had a junk yard in their back yard, rotted out cars and all. As you might guess, this is bad for the neighborhood. I once got a call from an agent that noticed there was an electric fence, the type used for horses, along the top of my client’s fence. The neighbor needed to keep the pit bulls from jumping the fence and getting into everyone else’s yard. Do the only thing you can do, file a complaint with the proper government agency and hope nobody finds out it was you.

Now for actual valuable feedback.

9. Doesn’t show well - This can mean anything really, but if you have dogs barking at the buyers as they walk through the home or they are stepping over underwear, I want to know. Homeowner doesn’t step out for the showing, laundry is everywhere and bread crumbs are all over the counters? I want to know how the seller is doing at keeping the place show-worthy. Trust me, these are things the seller doesn’t want to hear. They are at the root cause of why homes don’t sell even after they really are priced appropriately for what they are.
10. Home doesn’t show at all, the homeowner denied showing - As an agent, nothing is more frustrating than when you’re spending money to market a property and the homeowner turns down a showing.
In most cases, I know exactly why something isn’t selling. Feedback is an exercise to help educate the seller and build the seller’s confidence in what I’ve already said to them. I don’t try to get feedback so I’m better educated about the price or condition of the home. I’m an expert and if I need a second opinion, I’m not going to ask someone who has a motive to not tell me the truth. I get feedback to take to the seller and say ‘See, I’m not the only one that didn’t think blood red with a rag faux finish is a poor color choice for the bathrooms ceiling and walls.’

Technorati Tags: Denver, Real_Estate, Marketing, Feedback, Agents, Home_Repairs, Home_Value

I’ve always been interested in sustainable business models and have noticed that there are very few in the real estate industry. Except for that of the brokerage. The business model of the brokerage is not the same as that of the agent. Brokerages make money from agents, agents make their money from transacting real estate.

Before I made the decision to pursue real estate full time, I had considered getting into the mortgage business. What I found was just about anyone would ‘hire’ you on as a mortgage broker. Why? Because they would provide almost no support for you but take half of what was made on a loan. They knew that in most cases, a mortgage broker would come on, refinance their friend and family then wash out of the business. So they attempt to capture a larger share of the market with a networking through expansion method.

I can’t help but think many large real estate brokerages are doing the same. For example, I recently talked to an agent in a large brokerage who said that they shared an office with less than 20 desks with over 300 agents. This office represents a small area of Denver, so I would assume that there is alot of overlap between the agents. Most businesses in sales don’t have that many agents for a small area. It wouldn’t be fair to the salespeople. They would limit the number of agents so their agents would be as busy as they would like to be while still achieving saturation. But the truth about real estate is that brokerages make a lot of money off the agents themselves through various fees. They also know that the new agent will immediately go after their friends and family who might not otherwise use their company. So on top of the fees, there is perhaps another $10,000 to $20,000 to be made simply by bringing on another agent who may even be paying you to be there. Of course, most agents won’t be successful but the brokerage doesn’t really care. Most brokerages provide general training and services to make it appear that they want an agent to succeed but the truth is their business model is at odds with that premise.

To establish yourself in real estate requires time. If you’ve been in the business long enough, you have made the contacts and have the client base to pull from to sustain yourself. If you’re new to the business, you need to build your business in the face of a vast and entrenched competition. But the brokerages tell you you shouldn’t drop your commissions. They then proceed to charge you enough or split the commission in such a way that you agree, “There’s no way I could work for less.” There is no way that these agents that have no momentum will ever gain a foothold against the entrenched agents who are actively marketing in a neighborhood. So the new agents are left to help their friends and family (assuming there are not more agents in the family) then slowly fade away, back into the careers they came from.

Technorati Tags: Denver, Real, Estate, Brokerage, Business_Models

When I read this, I had to laugh. I’m always interested in how agents try to justify their commissions. This one’s pretty funny.

The settlement sheet shows that I’m going to receive ___% of the sale price of the home. But I don’t get to KEEP all of that. I take out a dollar bill and hold it up as a visual example. If another agent listed/sold the home, I have to split my money in half with them. RII-IIIIIP! (Ripping money, even just a dollar, gets people’s attention.) Then there’s my split with my broker (riiip!), my franchise fee (riiip!), my split with my partner, my E&O insurance, Uncle Sam’s portion, and all the money that I put in up front in gas, marketing and so on. Gentle reminder: my job does not have insurance or a 401K, so for those I’m on my own. We end our discussion looking at my little confetti pile and the tiny scrap of dollar that I’m still holding. It’s very small, if I’m lucky about the size of a postage stamp, but usually less than that. I do not earn what the public thinks I earn. Educating my clients keeps them from feeling rippped off at the successful end of our quest, more likely (I hope!) to use me again or refer me to friends and family. A quote from Sarah Cooper’s Blog

Here’s why I don’t think you can justify high commissions selling a home in Denver. (and probably just about anywhere with a good MLS)

1. Nobody cares. All businesses have costs and overhead. There are thousands of people out there who are self-employed in the same position as a Realtor is. You don’t see them tearing up money just to make a point. Most business owners manage business costs closely. Realtors, as a whole, do not.
2. As home values go up, so do commissions. 10 years ago in most parts of Denver, the cost of a home may have been $150,000. Your commission at 6%? $9000. Today, it still takes the same amount of work to sell the same home. Home value? $350,000. Today’s commission, $21,000. Even after splits and co-ops this is a lot for the amount of work that’s involved. Even after calculating in cost of living adjustments, you’re still in pretty good shape.

3. It’s easier than ever to sell a home. Especially for a listing agent. When you look back at the time spent it’s typically much less than that spent with buyers. Denver has a very cooperative MLS. If you offer a co-op, all those agents out there spending money to find buyers will come with their buyers to the house. In the end, 80% of homes on the MLS sell with the help a a buyer’s agent.

It’s pretty short-sighted to gouge consumers for more than you need to in order to make a good living. I’m not saying it’s not expensive to be a Realtor. There is definitely a point where you can’t go any lower without operating at a loss or cutting service. Most discounters go straight to cutting service. That’s why not all discount agents are successful. They believe that they really are worth those high commissions so they cut their services proportionate to their fees. Bad idea. Work a little harder for a change.

I like being busy. I sell homes for less because it makes me more money. That may seem funny to other Realtors but not to the rest of the world. If I offer the same service for less, who do you think they’re going to go with? It’s amazing how easy it is to get listings when you are telling people what they already believe. Just wait until they tell their friends.

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Technorati Tags: Denver, Real, Estate, Marketing, Commission, Realtor