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Marketing Your Home
Price, Presentation,
Price
Of all of our
prized material possessions, nothing can quite compare to our homes.
Perhaps a close second might be our cars, so let's take a look at how we go
about making that purchase decision.
The initial
research is done by talking to people, reading reviews, checking consumer
reports, and finally getting the courage up to endure the trip to the
dealerships and the inevitable hard closing salespeople.
Car dealers
know from years of experience that buyers are attracted to deals. The
entire sales process is set up to make us believe that we are getting a deal.
From the moment that your salesperson runs in to his manager's office to see if
they will accept your offer to the signing of the paperwork we, the buyers, are
being made to believe that we got a great deal.
Look in your
garage. Did you get a deal on your car? Most people will say yes, or they
wouldn't have bought it.
Now, look at
the garage, yes.... the one attached to the house. Did you get a deal on
your house?
Chances are
you bought the house you are in because it was the best home at the best price
that was on the market at that time. Price is far and away the number one
reason buyers decide to make an offer on your home. The location and condition
are factors, but it is the asking price that is the most important. Why? There
are several reasons:
The asking
price reveals the motivation of the seller. For example, let's look at
three similar houses: one at $265,000, another at $262,000 and a third at
$250,000. Let's say for the sake of the example that comparable houses are
worth about $250,000. Given similar square footage, bedrooms, baths, lot size
etc. which house would most people offer on? (OK- this isn't rocket
science!)
Most people,
sensing the weakness of the seller, will then offer $240,000 in the hopes
of getting a great deal. Makes sense. The other houses at this point are nice,
but wow, look at this opportunity.
Now here is
an important point:
The
buyer, by writing an offer on your home, has made an emotional commitment
to buy it, which is the most important hurdle to overcome in a transaction.
Think about it. When you have made up your mind that you want something, what
will stand in your way? Will it be the $10,000? Is it likely that the buyer,
who now has real hope of getting the deal of the century, is measuring rooms
for furniture, and has mentally planted fuchsias along the walkway will switch
gears to go through the process with the $262,000 house? Doubtful.
Don't think
as a seller that you can't counter offer at the asking price. Seller
counters at $250,000 and basically says to the buyer: "look, I know what the
house is worth, I know what the competition is, either you buy it or somebody
else will". Pretty strong counter offer, but also a very compelling one. The
buyer will probably go back to the $262,000 house, the $265,000 house and come
back agreeing with the seller that the house is worth $250,000. Done
deal.
The next day
the seller of the $262,000 house, seeing the agent place the sold sign on
his neighbor's house calls his agent and says, "what gives? I have a better
view, a nicer kitchen, tile instead of linoleum--heck you know I would have
come down on my price if I had just gotten an offer."
Unfortunately this seller really never had an opportunity to play--all
because of the asking price. Which brings up another point.
Is it truly
worth a few thousand dollars to have strangers parading through your home for 3
or 4 months only to then be forced to lower your price anyway after the
market has perceived you to be over priced?
The best
time to get your home sold is the first 10 days on the market. This is when
you should have ads run, open houses, mailings, etc. and when you will generate
the most traffic. It is also your best opportunity to get top dollar because
you will have a lot of traffic which you can use as a basis for your high
counter offer. If you have 20 buyers walk through your home in that first month
and no offers have come, then your price is too high.
It's not the
orange shag carpet, or the harvest gold appliances, or the clutter of
Martha Stewart projects--these things all get overlooked when the price is
right. It bears repeating: 20 buyers, no offers, the price is too
high.
You will
also have feedback from those 20 buyers and if you are smart either you or
your agent will keep track of those 20 buyers for the price reduction that you
will need to implement if no offers have come.
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Presentation
Presentation
is a distant second to price in the grand scheme of things but is
nevertheless a key factor in the offer decision. I have represented clients on
numerous occasions that have chosen to offer on the "cleanest" home given
similar choices.
First let's
discuss the negatives. Having worked with hundreds of buyers, my experience
has been that carpeting is probably the number one potential negative. A new
carpet will always draw a favorable reaction as long as the colors are neutral.
Avoid rainbow colors, stick to earth tones. The best carpet is what we call
"Realtor® beige", a very light honey, brown to cream color that doesn't
offend.
Probably
equal to bad carpet on the negative side is a home that has an unpleasant odor
such as major dog /cat smell. It is sometimes hard for owners to even
realize the smell problems because they have become so accustomed to them.
Finally, try
and put away as many of your personal belongings as you can possibly stand.
Buyers can get distracted by "too much information", like the craft merchant's
home I showed 2 years ago with price tags on every item in every room. Like a
fine wine, let the buyers breathe!
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Price
Yep...back to
price. It is of the utmost importance. Let's talk about how to set
it.
Setting the
correct asking price for your home is part science, part intuition, and a
little luck. Mostly science.
Most real
estate agents will go to great lengths to dissect "the comps", which are
homes that have sold within the last 6 months that are closest to yours. By
looking at comps in different ways, you can justify the listing price by
pointing to this historical data.
Much more
important to me is what is happening in the neighborhood now. Now means up
to today, what is currently for sale and what is currently pending? How many
days on the market have these homes been for sale? Do any back up to busy
streets? Power lines? (Keep in mind that, believe it or not, most buyers like
the same things: clean, well kept homes with nice floor plans!)
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Justify the Purchase Price
The
"Comps"
How does it
"comp"? is a typical question heard daily in real estate offices here in
Arizona or anywhere else for that matter. The "comps" refer to comparable
houses that have sold within the last 6 months. The 6 month timetable is what
lenders use as a cutoff because houses sold prior to that time do not represent
the current market value.
An appraiser
will justify the purchase price based on the comps by using what is called
the market value approach. Three homes, in addition to yours, that are close in
proximity, that have sold within the last three months, and are close to yours
in terms of square footage, bedrooms, baths, lot size, etc. will be used as a
source of comparison. Of course no two homes are alike so an appraiser will
make adjustments like deducting $5000 because your home has no pool or adding
$2000 because you have an oversized lot.
What is
interesting is how often homes that the buyer and seller have wrestled over in
negotiating price seem to appraise at the purchase price time and time
again. The fact is that appraisers rely on lenders for their business, and
lenders rely on real estate agents for their business and real estate agents
don't recommend lenders that can't get the values. To suggest that the system
is flawed is missing the point: property values are subjective.
Buyers need
to be aware that the "comps" are only an indication of what has happened
and may not reflect the current market conditions. You can't buy a house that
is sold, you can only choose from the available supply.
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| REAL ESTATE TRIVIA |
| Q |
During what months of the year do most people move from one home to another?
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| A |
Most moves occur between the months of May and September. |
| More Real Estate Trivia |
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