The Market for selling your house in America is a lot like riding a roller coaster. There is the long slow buildup to the construction of new homes, both houses and condominiums. There is the exhilarating rush of quick sales, even of homes, which are just blueprints. There is the slow build up out of recession and the sustained highs of booming economic times. This always seems to be followed by sickening downturns into the next consumer dip.
The early part of 2006 brought a very dramatic downturn in the world housing market, led by America’s ‘sub-prime’ crisis. Most homeowners face the steady run of none or little value growth. Some face the white-knuckle outlook of falling home values. Homebuyers can never know the best point at which to get onto the rollercoaster, real estate agents have properties on their books for longer and worst of all, the down slope has the number of foreclosures rising dramatically. It is all very far cry from the previous high level fast paced ride from 2000 through 2004.
During the high ride of those four years the housing rollercoaster was being held back by insufficient skilled construction people. There was also a shortage of materials to keep up with the demand. The ride may have been exciting for sellers who could move home with relative ease, but for buyers the feeling was more than a little nauseating.
The National Association of Home Builders anticipated the sickening downturn for sellers. They reported that some markets had up to a fifth of owners that were purely speculating and who hoped to assign their buying agreements at a profit before they were even complete. This was an accurate prophecy, particularly in Miami and South Florida but also in other areas where many speculators, in a short time, placed their ‘off-plan’ contracts on the market at the same time as developers who were looking to sell their total stock. The effect was to speed up the downturn.
The roller coaster shot downhill as speculative lots remained unsold. The owners held onto their titles rather than lose their deposits. In no time they became landlords with vacancies. Buyers then look over the precipice and hold back to see what the roller coaster will do next and the supply of property exceeds the demand with the predictable effect on price.
Should constructors be allowed to sell off plan lots? Should speculators be allowed to buy them? They all make the roller coaster run faster because the cash allows the builders to get building finance. Only the most cash rich construction companies could afford to discriminate in favor of owner- occupiers.
The Federal Reserve was putting a brake on the housing roller coaster by raising interest rates. This meant that buyers could borrow less and homeowners struggled to meet repayments and had to cut back on spending. Towards the end of 2006 the roller coaster had begun to settle down to something like its normal pace. The National Association of Realtors (NAR), reported their ongoing monitor of the average American resale home values. House inflation was double the norm, at 10%, during the high ride phase of the roller coaster. This was always going to be a short ride.
Overall the American economy is still on the down slope. The picture varies from place to place however. Industrial regions such as Michigan slow down more than the average because there is a net emigration of sellers. Some places and price ranges continue on the up-slope of the ride in favor of sellers. This "buyer’s market" is an exceptional situation however. Much more normal is a steady up gradient where buyers and sellers can negotiate without the former looking over their shoulder for someone coming in with a higher offer. The current roller coaster phase has property sellers and agents looking to innovative ways of bringing buyers to their stock. The ‘lease option’ is one such way with sellers taking installment type financing of house and condo sales.
The roller coaster nature of housing makes timing the most important consideration for sellers. The next most important consideration is location. Even in a buyers market there are a few sellers ‘hot spots’. Perhaps aided by employers hiring and drawing new buyers to the area. This will be the same story in neighborhoods that are very popular or have a good school and or affordable properties.
When trying to time your getting on or off the roller coaster remember that newspaper reports of market status may well be out of date. This is because they use real estate statistics on closed sales while pending sales are still on the ride. The NAR is piloting a ‘pending sales’ statistic but it isn’t yet in a reliable condition and has no proven history of being accurate.
So how can buyers and sellers estimate, where in its ride, the housing roller coaster is. A primary criteria to account for is the number of properties that up for sale and importantly the average number of days that they are on the market before being taken. The ‘Multiple Listing Service’ in any area will have this data. It is an incomplete number however because builders tend not to list their new stock on MLS.
Nine weeks or less, as a general guide, would put the roller coaster on the up slope. Thus a homeowner with a house on offer at a reasonable price can be sure of finding a buyer. If you can’t move your property at this stage of the ride then you need to think again about the price and or get a better selling agent.
Six to ten weeks listing on MLS could best be described as a flat line time for the roller coaster. Neither buyers nor sellers are too exhilarated or too depressed. Beyond ten weeks and it’s a down slope ride where buyers can be pushy in making lower bids to sellers who cannot be too stubborn as to price and terms of sale.
A secondary criterion for assessing the roller coaster state as up, down or flat, is to review the number of weeks supply of homes for sale at the rate prevailing when you are at the front of the queue. It’s an easy estimate to make by dividing the number of finished sales over the previous four weeks for which you have the numbers into the number for properties advertised for sale. It’s a down slope, as now, if the figure is twenty-six weeks or more. Supply is greater than demand and prices are coming down. Conversely, it’s an up-slope if the number is twelve weeks or less. Sellers will be enjoying this ride and can look forward to rapid closures.
Real estate professionals work with a third criterion. This one is the volume of house listings paid for by construction companies and real estate firms. On the down slope this figure goes up considerably and vice versa for the up-slope. So keep an eye out for whole and half page advertisements by homebuilders and selling agents. It is an indicator that the local market is sickening the sellers as these companies are forced to work harder to maintain their sales at down-slope rates.
Watch out too for what is actually in the advertisings. On the down-slope many houses are doing deals on their offerings with advantageous terms for buyers. Such inducements for buyers include free administration, low or zero deposits, a whole half-year free of mortgage repayments, and additions to the homes themselves such as white goods, designer gardens or carpets. For previously owned property the inducements are all about ‘seller mortgage carryback’ and leasing type options. All of which mean the selling team are finding the roller coaster ride tough going.
So in conclusion; the time at which you get on the housing market roller coaster will determine your experience for good bad or indifferent. The thing is that no person or company on the ride has a say in the direction it takes. To the homeowners selling their property a better analogy is that they are a football coach. They must focus exclusively on how they can get the maximum return possible on their ‘most valuable property’ or MVP.
There are five surefire plays for the home seller head coach. Let’s look at these five surefire sale plays for doing a deal on your MVP at any stage of the house market roller coaster. Focus only on what you can do and disregard ‘buyers markets’, ‘sellers markets’, or ‘tough markets’. It’s like a game of pro-football and the selling team has to go on the attacking side of the ball. Unlike football however the most valuable player will not change from game to game. Your asset is always the MVP and the game plan is to get it into peak condition and allow it to perform to the best of its ability at all times until it gets to the ‘end zone’ of a completed sale and maximum return touchdown.
The prevailing opinion in the real estate sector today is that homebuyers are not in hurry to buy. They much prefer to negotiate in a tough way and take the plunge only when the deal is good. The selling team cannot affect this, so they must look to their own game plan. They must do everything within their power to maximize the value and sale-ability of their MVP.
SUREFIRE SALE PLAY No1:
BE CERTAIN THAT YOU WANT TO SELL YOUR MVP
Do not waste your own or your selling teams time. Go into this process with a half-hearted approach or just out of interest to compare your MVP to your neighbors will not get you the best price. You must be certain of your reasons for selling and resolute in your desire to move on. Just like football this game is won in the mind of the players before a ball has even been kicked.
Homeowners that are less than 100% committed to selling will communicate their reticence to their selling team and it will be reflected in their efforts on the behalf of the MVP. People with good reasons to sell will always pass this on to their chosen teammates. The strongest reasons are often a job in another area, a loss of employment, a family break up, an addition to the family or loss from it.
If you are a serious game player and not simply dabbling then you will ensure that your MVP is in the best possible condition for viewing. This means cleaning and redecorating if necessary and keeping your MVP always at the ready for potential buyers to see. Most buyers are looking to move right in and not start by repairing or renovating. Scrub down; fix up, and repaint will be the first actions of the committed selling team. You the homeowner are the team coach and this is your main role. Sprucing up is the best value-adding thing the coach can do in order to help the MVP perform in any situation, while getting the best possible price for it. However, draw the line at major renovations that you will never get to appreciate and your buyers may not like!
Many people resolve to sell their MVPs and run garage sales in order to ‘dejunk.’ This is a good start but only partly successful since the worst of the stuff invariably remains unsold, and the coach fails to follow through by throwing it out. They repair the roof but fail to repaint the interior before putting it up for sale. Needless to say they take up to a year to get a buyer and when they do the price will be well below even a ‘fixer upper’ price. Luckily they don’t go as far as putting in the new kitchen and other renovations, which they were thinking of. This is really not a sensible way to get your MVP in shape and performing to the best of its ability.
A new coat of paint, inside and out is, the best value MVP improvement a coach can do. The other really impressive improvements include new light fixtures and replacing worn floor coverings where they need it. Neat and tidy yard plantings will give that all-important ‘WOW’ factor for potential buyers first sight of your property. Be sure to keep the lawn trimmed and neat!
SUREFIRE SALE PLAY No2:
GET ONLY THE BEST TEAM ON YOUR SIDE
Many coaches, prior to the 2005 down turn had success and saved realtor costs, by selling their own home. Such coaches had a game plan called FSBO selling, ‘for sale by owner’. But in a downward phase, when experienced real estate experts are struggling to move stock, the FSBO person stands little chance. A "buyer’s market" for property is really not the time to be a ‘go it alone’ coach because of the glut of unsold property. In truth no time is a good one for the lone coach because selling your MVP is a team effort.
Comparing 2005 with the current market it is estimated that there are around one million more American MVPs on the market. The bottom line is that coaches should take all available support. Being an FSBO is a big drag in today’s market.
So before going all out for the FSBO game plans consider all of the things a real estate teammate can bring to your play execution. First and foremost is the multiple listing service. More than half of MVP sales nowadays are ‘coop sales’. This is where the selling and the buying teams are brought together by the MLS agent. Sales just do not happen without this service.
More than 70% of today’s homebuyers start the process with reference to the Internet and probably at www.Realtor.com . Go it alone coaches do not have this major benefit. (If you need a recommendation of a realtor, give me a call) .
It is true that you can get a placement in the MLS and on the ‘Web’ by paying an MLS participating firm $500 to place it there. However, that’s just not enough. These minimum service deals on the MLS are simply put you MVP out there and nothing more. So there it sits passively waiting for the buyer to act. There is no support when it comes to guiding buyers to your MVP, holding weekend open MVPs, out of hours availability for phone calls, and trying to negotiate a final catch if you are lucky enough to get even close to the touchdown zone.
A further big headache for FSBO coaches is drawing up a legally acceptable sales contract. Are you sure you have all the documents such as disclosure forms that are needed by local bylaw? If so, do you have the expertise to properly complete them? With today’s bewildering ‘small print’ sales contracts, it’s a challenge for even the most knowledgeable selling team to get these contracts in perfect shape for a faultless touchdown. They have computers and specialist administrator back up to be certain that all play details are executed flawlessly.
As an FSBO coach, you may imagine that you are cleverly gaining yards and avoiding payment to the agent, but think again. The buying team is very savvy too. When a buyer comes across an FSBO home, that buyer asks for their share of the sales commission savings!
Professional selling team members, real estate brokers, would not dream of selling their own MVPs but rather they always place them with the top team in the area. This is because they know that they have all the sales tools including the MLS. They know the particular MVP sales market situation and have a network of other successful agents who have access to buyers, as well as spending all their working time marketing MVP just as if they were their own.
Be sure to interview a minimum of 3 real estate players before recruiting the one that is right for you. Smart MVP coaches know what they want and go about finding it. Consider only agents that specialize in selling the category of MVP that matches yours and especially ones who have sold some MVPs like yours within the last quarter. Their mailing lists of potential buyers will be hot.
If you want to try the ‘go it alone’ game plan, try to overcome your independent streak and do talk to a minimum of 3 agents anyway. They won’t be offended in the least because they know that most lone MVP coaches will turn to a professional to list their MVPs within the following three months. This will almost certainly be with a professional agent who they interviewed at the start. A further rationale for talking to several likely agents is to pick up tips on how they work and what deals they do in order to get MVPs like yours to the end zone.
Each realtor interviewed will leave you with CMA “comparative market analysis”, and this is a very useful document because it shows three things. 1) Sale prices of nearby similar MVPs that have been bought very recently. The deals closed in the preceding quarter are the most informative. 2) Asking prices of rival properties currently on the market, your competition, and checking out the prices of local marketing attempts that have been withdrawn. Typically they were withdrawn because of unrealistic pricing. 3) The realtors best knowledgeable guess of your MVPs market worth.
You will of course put each recommended sale price side by side and you need to be aware of two key things. Firstly look out for any agent who recommends either an extra high or an extra low sales price for your MVP. If it’s well above the norm, without just cause based on similar, recent sales prices, that’s a malpractice known as "buying the listing."
It is more than likely that such a non team player probably won’t find anyone willing to pay the inflated recommendation. They will certainly be back within a few weeks to call for a new lower price. This is bad because by this time your MVP has a reputation for not delivering on its promise in real estate circles. They will be less than willing to show it to their people on their buyers list, even after a downward price adjustment to a more appropriate level. The reputation and perception of your MVP is a all-important.
The second key thing to look for, in a teammate agent, is the one who gives you too low a valuation for your property. These guys are either genuinely ignorant of the state of the local playing conditions or they are deliberately conservative in the hope making a good quick and easy touchdown. This however will not be maximum value to you for your MVP. Spotting the talented agent among the others who give inflated or deflated valuations will be easy as long as you do enough interviews.
In your search for the best selling teammate you are establishing a professional relationship much like taking on a new offensive coordinator. It is not necessarily the best qualified one that you select but rather the one with whom you establish rapport. Always check references and ask around recent clients of your short listed agents.
All good agents will make a short pitch to you following your interview. A good teammate will give you all the advice that will help you get to the end zone sale, and the reasons why you should engage them as your sole selling coordinator. It will certainly include an explanation of their CMA. If you as the coach don’t get answers to all of the following questions in their pitch then be sure to ask them to fill the gaps. You need to know. Firstly the location and contact details of their five most recent successful MVP sales, secondly the price they will get for your MVP in the current big game situation. Thirdly what is the shortest length of time for them to work with you? Fourthly how long they have been in the selling team business in this area? Rookies can be OK but experience is what you need on your MVPs team. Fifthly, do they sell MVPs fulltime and what professional training and awards have they received? Sixth, how many MVPs are they working with at this time? Seventh, what is their written marketing game plan for your particular MVP? Eighth, what percentage of the MVP sale price will they charge? Ninth and lastly do they advise, "staging" your MVP?
All good agents will recommend a twelve-week listing to begin with. This is a sign that they believe in their own ability to get your MVP touchdown within an acceptable time period. If you take on a selling teammate with more than 12 weeks in the first place, a good tip is to make sure there is a get out clause, in your contract, after the first 12 weeks, in the event you want to get a different and better selling coordinator.
As for the cost of sales listing 5.1% commission is the countrywide norm as reported by ‘Real Trends’. However your game plan needs to be flexible and adjust to conditions. Where your MVP is one of many similar ones it is worth considering increasing the sales commission. This will attract more attention and good will from the buyer’s agents.
You will undoubtedly be able to bargain down the commission you pay. Possibly even as low as 3% but be aware of the true cost of your saving. Coop sales will be less likely and your MVP will not stand out for agents amongst others that are paying the usual rate.
It is important to get frank and realistic advice from agents as to how the buyer may perceive your MVP and what needs to be done in order to make it desirable. They work for you and you pay them so they may be unwilling to criticize your taste in fixtures and fittings. So be sure to insist that they really recommend to make your home look its best. Ask if the agent wants to do "staging" of your MVP to give it the ‘WOW’ factor. Staging a home means handing it over to a professional decorator to transform the place into a more attractive one for buyers.
Stagers will often advise taking out the out-dated furniture and ‘clutter’ during the viewing period and possibly even leasing more fashionable home accessories. This writer recommends a book on this subject called ‘Home Staging’ by Barb Schwarz,
SUREFIRE SALE PLAY No3:
GET YOUR HOME CHECKED OUT BY PROFESSIONALS
So you have interviewed a number of real estate agents. Then you have verified their references and made your choice. You may think you are ready to put your MVP into the game but not just yet. It really impresses potential buyer to provide a pack of the usual inspection reports to hand for them to read and take away with them. This means things such as termite certificates, an energy efficiency statement and certification of building control compliance. Your agent will be a good offensive coordinator in making sure you have ALL of the local requirements as well as pointing you in the direction of good inspectors.
It’s not compulsory but a pre-sale MVP inspection by recognized experts will help you head off any problems that may arise post sale. In fact most buyers expect and demand a professional inspection and you are, more often than not responding to their needs. The more you can accomplish before listing the quicker your sale will be. With the report, the choice is yours as to whether you correct the problems or reduce your price to allow the buyer to do it.
You can’t do better than engage an inspector from the American Society of Home Inspectors (ASHI). This will cost around $300 and will take up to three hours. Be sure to be home for this inspection to get a first hand account of any defects found. Things in black and white can sound more serious when they are really "no big deal" when talked out with the inspector in your home.
Relatively inexpensive repair jobs should be carried out by the homeowner and forestall any complaints from a buyer. Local ASHI representatives can be contacted via www.ashi.com or 800-743-2744.
Professional inspection is becoming increasingly necessary for condominiums too. The professional home assessor will always look at the condo unit in itself, but they will also note condition of the communal areas of the building complex. They will also talk with the on-site caretaker to ask about any future demands on the condo association funds and special assessments.
Many MVP coaches are tempted to take it or leave it approach to their sale. Having got all the obligatory home inspection reports and a lengthy list of items to work, they do not spend money on the repairs prior to listing their home. Rather they put the house on the market as an "as is" in need of improvement.
An "as is" home listing requires that the seller pre-warn in a document, prospective buyers of all known issues, but the seller will not undertake to do the repairs out of their own pocket. An "as is" sale cannot be used to hide the house problems from the buyer. If known of but not revealed defects exist, your buyer can take you to court for redress post sale closure. The buyer will certainly later find those ‘hidden’ (latent) repairs. Your current neighbors are a good source of evidence of your knowledge around the nasty surprises.
The worst thing about an "as is" type play is the negative impression it gives to buyer’s from the outset. "Look out there’s some major difficulties with this place!" It may or may not be true but perception is everything in house buying. If your MVP is an older one in a sought after neighborhood where lots of houses are either being demolished for rebuild, or are having big improvement money spent on them, then selling "as is" could be your best choice. In this way you can put on a reduced asking price in order to allow the buyer to make their own individual modernizing choices. But do not underestimate the shadow that hangs over a home offered for sale "as is". Be prepared to take a modest price purchase offer.
SUREFIRE SALE PLAY No4
ASK ONLY A PRICE THAT REFLECTS THE TRUE WORTH OF YOUR PROPERTY
So your MVP is all set to get in the game. You have engaged a real estate agent for your team. You’ve had the professional inspections done. You are up to date and so you can share the MVPs strengths and weaknesses. The moment of truth has arrived because it’s time to fix a price that is going to attract attention and an early offer to buy.
It’s not true, in the housing market at least, that ‘there is one born every minute’. A down slope market is no time to hope that you will find a rich fool who will fall for your exaggerated house price. You are whistling in the dark! Likewise a down slope time is not the situation in which to put an extra low asking price. You may intend to play one off against another in a bidding war that you win. That game plan may have worked in some places at some times in the past, but those times and opportunities are long gone.
Be guided by your agent and the other CMAs you had with surefire sale factor 2. Assess whether your local housing rollercoaster is on the up down or flat-lining.
Draw in your expectations if you are serious about selling your home at the best price possible in a downward market. Asking for notably less money than your rivals in the neighborhood can result in your house selling while theirs doesn’t. Holding out for a better offer for several months can cost you thousands of dollars more than asking a price to move your property. Be sure to put your asking price below ‘threshold amounts’.
To illustrate this neat pricing game plan; imagine that your MVP is valued at about $250,000 according to the CMAs. If you ask for a price of say $248,000 or $249,000 as opposed to the full value amount, buyers who specify that they can pay up to $250,000 will definitely get to look at your listing in the local MLS computer search or on the Internet at www.Realtor.com . However prices set at or above the threshold amount will not even get your place in front of a whole raft of potential buyers.
One last point on this surefire sale factor is the choice of using a professional appraiser to take the decision on price off your hands. Doing this will add around $400 to your sale cost. Appraisers also tend to use closed sales prices when evaluating. These are of course the real prices that houses are moving at but they may also be out of date, anything up to six months old in fact. Having up-to-date CMAs from your interviewed listing agents will allow you to set a more current asking price.
SUREFIRE SALE PLAY No5
NEVER IGNORE ANY OFFER
There is no room for sentimentality on the housing rollercoaster. Do not get upset by a very low offer for your newly painted, problem free property, even if it is substantially below your realistic asking price. Always make a counter offer though your agent.
It is a bad misjudgment, on a down slope market, to ignore any offer. This is an important bargaining situation and any and all offers are worthy of consideration. Making a written counteroffer gives the potential buyer more reason to think about your property. It keeps the lines of communication open with a person who really has been thinking seriously about your MVP. Negotiations can go back and forth in hours, days or weeks before finding the common ground where a sale will close. Or maybe the gap between the parties will prove to be just too wide in price or terms to close the sale.
Unless you as the MVP coach counteroffer every time, even the ‘trying it on’ type offers, you can never tell whether a sale can be closed. There is an extensive range of plays in the real estate playbook. Work with them to find the one that will work for you.
To illustrate this counter offer play; imagine you are selling a $1 million house for which you get a purchase offer of $850 thousand. You are not outraged and do not snub that possible buyer. Instead you counter offer at say $950 thousand. Even if a sale doesn’t close to that buyer you now have more price information on what buyers might accept.
The sale agreement, signed by both parties to the sale is just the opening play of the last quarter of the game. Many things can still prevent you reaching the end zone. This stage can be very frustrating. You and your team must work hard to meet the deadlines. Especially be sure the buyer keeps on track and on time with getting the mortgage appraisal as well as all the other vital steps.
Good professional listing agents will watch out for any backsliding by the buyer. Maintain regular contact with the buying team to be sure that everything is on schedule as it should be and the target date for closure is not moving away from you.
Beware of the blocking type buyer who wants to continuously renegotiate the price, as the contract signing time comes closer. Of course buyers have a right to a "walk through inspection" on the preceding day or even on the final day of the deal. This is to ensure the MVP is as advertised. Electric fittings are the favourite item for removal by unscrupulous sellers. Any other occasion when the buyer is on the property in advance of that walkthrough is possible bad tackle for the seller.
Such a tackle might come as buyers ask to visit the MVP in order to visualize how their furniture will fit. Get your block in early and rather, give them photos, sizes and a scale drawing of your living spaces. Every time the buyer is in the property they may come across problems or begin to have doubts and will want to go back on the agreed price or the terms.
To allow your buyer to move in to your property, even if it is vacant, before the i’s are dotted and the t’s crossed is the equivalent of a fumble in the end zone in the last minute of the Super Bowl. Just do not do it.
Your insurance company would certainly take issue with a non-owner in residence. It is almost certain that your policy is invalidated in the event of any loss that occurs during such an occupancy period.
The last word: Selling your MVP on the housing rollercoaster for its best possible price is vastly different according to which direction the ride is taking. However, the selling team that executes the five surefire sales plays will get the best possible return for your investment.
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