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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 first came across this Picasso legend a few years back with regards to valuing someone’s time. I believe the moral also applies to the valuing of services in real estate. After all, real estate is a business.

Legend has it that Pablo Picasso was sketching in the park when a bold woman approached him.

“It’s you — Picasso, the great artist! Oh, you must sketch my portrait! I insist.”

So Picasso agreed to sketch her. After studying her for a moment, he used a single pencil stroke to create her portrait. He handed the women his work of art.

“It’s perfect!” she gushed. “You managed to capture my essence with one stroke, in one moment. Thank you! How much do I owe you?”

“Five thousand dollars,” the artist replied.

“B-b-but, what?” the woman sputtered. “How could you want so much money for this picture? It only took you a second to draw it!”

To which Picasso responded, “Madame, this took me my entire life.”

It’s always amazing how the public views what you get paid strictly by the amount of time you spend on something. Truth is, it’s not that simple. There are costs and risks that are above and beyond the time itself that you spend. Not to mention that nothing can replace the experience you gain going to more closings in a month than most people do in their entire life. There is definitely a line you have to draw with clients when it comes to valuing your time. The public wants a Realtor’s opinion, access to people’s homes, and access to the database that Realtors have been maintaining for years. But few want to pay you for it. I’m not here to argue the point of how much an agent should make. Should it be flat fee or a percentage? I don’t care. But when it comes up, each agent needs to decide what the best long term approach should be for his or her business. There are still good agents out there that bring real value to their clients. I’m sure every Realtor who reads this will feel that statement applies to them. We aren’t offering a free public service. Sooner or later you need to decide what your time is worth and let those that want to ‘go it alone’ do just that.

Technorati Tags: Realtor, commissions, picasso, real_estate, buying, selling, home

What should be in a comparative market analysis (CMA)? A CMA shouldn’t be just a list of solds or actives. It should reflect the current conditions of the market. I was recently asked how long I felt a CMA was accurate and personally, in this market, I don’t think I would want to blindly price a home off a CMA I completed even two months ago. In most cases, my paranoia leads me to double-check solds and similar active listings even an hour before driving over to take a listing. There is a huge disparity in home pricing mainly because brokers use a wide range of largely ineffective models to determine pricing.

What I would look for in a Comparative Market Analysis (CMA).

1. New Sold Comps - This one is obvious but probably one of the most overrated when it comes to pricing. I don’t think this is the most important factor in pricing, but it’s important because once buyers have found that they liked your home more than the competition, this is where they will look to see if you’re worth it. You don’t have to be priced less if you can justify it, but both the initial offer and the appraisal will be based on this. Because of this, and to make sure you will appeal to the buyers in the market, you need to be priced in the ballpark that your buyer is looking in. Be prepared with a list of sold comparable homes and a justification of the price based on the homes’ differences. Sold data will likely not show a significant change over a short time frame and usually one low or high sale isn’t enough to support pricing.
2. New Competition - How many similar homes are you competing against? What does it cost to buy the other home? How do you compare to what is currently for sale? Lots of competition? It can have a huge effect on time on market and how much you’ll get for your home. If another seller comes on the market and prices below your home it will reduce your ability to compete at a higher price. Unless, of course, your home is truly different in a substantial way, this is not very likely when your home was a new construction home in a subdivision full of homes just like yours. How you compare to other homes that your potential buyers will be looking at is the most important factor in determining price.
3. Changing Absorption rates - This is a measure of how long the current inventory would take to sell if no new homes were added to the mix. Demand varies seasonally and as the result of the weather (super obvious) and the school year, as well as economic pressures and even poor media coverage of the market. Supply also varies greatly, peaking in the summer in most cities. It’s a great indicator, especially when applied directly to the homes of similar type.
4. Change in Days on Market before a sale - It’s also much easier for most people to grasp when compared to other indicators, but it’s one of those pieces of information that gets abused. Unfortunately, just because something sells quickly doesn’t mean it was under-priced. It could have just been the best home that the buyer was able to get an offer accepted on when they were looking. (see #2) There are too many variables to use the fast sale of a recently-sold property to support the idea that your home should sell for more. I find that of the homes that sell quickly, they usually don’t sell to some new buyer that just wandered by. Most new listings sell quickly when they are priced right when compared to what’s available. Buyers usually look around before they’re ready to buy. The homes that sell quickly likely sold to someone who was looking for a while already and recognized that the home was priced appropriately.

What is most disturbing though is the vast majority of sellers already have a price in their head that they want. Of course, I’m usually willing to hear why the seller thinks his home is worth the pie-in-the-sky price. They are usually trying to compare their home to homes with extra bathrooms, a finished basement, or more square footage. Even worse, many work backwards from how much they want to walk away from the closing table with or what they owe to arrive at their number.

For me though, I believe that the CMA’s should give you a range of what pricing will be acceptable to the market. It should also indicate where offers are being accepted when compared to the list price and what concessions (if any) are common. For Denver, as a general rule, most Denver homes homes sell within 2-3% of their current list price and buyers get less than 1% in concessions. Most also sell within 10% of their original list price of the current listing period. That means most homes priced more than 10% higher than what comparable homes would sell for usually end up expiring without a sale. In case you missed it, most Denver Homes are overpriced on average of 20% when compared to the average list price of the solds.

In the end, it comes down to the feeling you get walking in the door. The same feeling the buyer will get. Look at the competition and know what price can be justified. That’s the only way you can nail down the real value.

Also see: How to sell your home quickly for top dollar.

Technorati Tags: Denver, Real, Estate, CMA, Selling_A_Home, Pricing

Happiness in homebuying for most people is not about whether they got a great deal. It’s about their perception of how great of a deal they got. The best deal in town will be passed over because of a buyer’s inability to get the seller to come down slightly in his price. Ego gets in the way of happiness. Sometimes though, even when you “win” in getting a home for the price you want, you’re still not happy. Buyer’s remorse can set in, causing the buyer to second-guess their decision. I see this most often when you have your first offer accepted.

Psychology calls this counterfactual thinking. For example, bronze medalists at the Olympics are usually happier than silver medalists. Bronze medalists are happy just to get a medal while silver medalists will forever ponder what might have been. Studies (Dissatisfaction of having your first offer accepted - PDF) have been done that accurately predict that if the first offer is accepted, the buyer will be less likely to be happy with the outcome. They feel they left something on the table. Read the rest of this entry »

You can learn as much about a home’s value by looking at active listings as you can by looking at solds, if you know what to look at. Keep track of showing data to get a rough idea of how the public is perceiving your listing. It’s reasonable to expect that if you’re getting alot of showings, you’re priced appropriately. At least on paper, you look pretty good. Few showings or even no showings could be an indicator that the public and Realtors view your home as being overpriced.

Fix the problem or drop the price.

In Denver, 80% of homes listed sell because of the efforts of a cooperating buyer’s agent. With this type of exposure on the MLS, the reaction to an MLS listing can certainly be an indicator of the interest in the house and the likelihood of an eventual sale. Read the rest of this entry »

That’s not new though. Buyer’s market, seller’s market, blah blah blah. What does it mean really? Homes are always overpriced. Always have been.

Most homes are overpriced. Through good and bad, sellers usually overprice their homes. The average active list price for a single family home in Denver for 2006 was 20% higher than the average list price of the homes that sell. That’s why in a typical month between 5% and 10% of all listings on the market expire without selling.

Sellers need time to soften up. Most sellers don’t let their home go for much less than the asking price in Denver. A typical Denver home sells for 2% less than the list price.

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You know that creepy home you’ve always wanted? It’s for sale.

This “gem” is from a recent Craigslist post by an owner trying to FSBO his home. I’m always on the lookout for a fix-n-flip, but I think I’m going to pass on this one.

It’s important in real estate investing to know your limits. Figure out the type and size of project that you would be willing to take on before you start looking. Otherwise, you’ll rush yourself and overlook obvious things just because you’re so anxious to get started.

I bought a creepy home once. It sent chills down my spine every time I walked through the door. I would buy a lot of different homes, homes that need work, homes with structural damage, homes with bad neighbors or even backing to a busy street. But from now on, I’m going to draw the line at creepy.

Technorati Tags: Real, Estate, FSBO, Creepy, home

“How do I sell my home quickly for top dollar?” I often talk to people who aren’t sure whether they want to use a broker or not. They’re not sure if a broker can get them any higher of a value than if they sold it themselves. Personally, I think you can get a slightly higher price using a broker because of the exposure you gain from the MLS. Not to mention you make the process easier on yourself. But if you’re hell-bent on selling it yourself here’s a few tips that will help you get top dollar.

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