In today’s highly competitive market your home has to stand out – especially to get the greatest return on your investment. Dollars spent on prepping for market will result in better showings, more realistic offers, and a larger final sales price
Basically, you must:
Who Sets the Listing Price? Very simply – the seller does. Hopefully that decision is made with input from a real estate agent using legitimate data. The agent will provide an analysis of that data along with insights on the local market and both parties – the seller and the agent – will arrive at a realistic listing price.
Comparative Market Analysis: In a CMA the agent searches the multiple listing service (MLS) to find useful comparable sales. These comps should be similar in age, type, square footage, etc. to provide useful data. Also, an appraiser is going to do the same thing so it’s a good idea to see what the market really looks like.
Tax Records: We also use Courthouse Retrieval to access tax records. In this system the software will do an automatic search of comps and give some other projected sales prices based on different formulas. This is useful as a check tool against the CMA.
Appraisal: A licensed appraiser has the training and tools to dig deeper and arrive at an appraised value that a mortgage underwriter would accept. An appraisal is still just an opinion – but an opinion based in historical fact.
All of these tools are useful at showing past values and guessing at present value – but how do you price to actually sell? Sometimes we are tempted to price it high and if it doesn’t sell we can always reduce it. The problem with this is you will miss many potential buyers who may have looked at your house but passed it by because of price. There is always a pool of buyers in the market for a given price range at a given time. Our goal in pricing is to capture them as soon as we hit the market.
Sometimes we are tempted to price low just to get the house sold. This may be useful in a distress situation – divorce, imminent foreclosure, illness – but you still should price at a realistic price for your particular market. Pricing too low brings up as questions in the buyer’s mind about what may be wrong with the property. It also leaves no room to negotiate.
Pricing is part science, part gut. It is important to listen to the agent who is actually working the market. And it is just as important to price your home right, right from the start.
“I may not be the agent who sells your home, but I will be the reason your home sells!”
The primary function of your listing agent is to market your home – to fully expose it in the best light to as many potential buyers as possible. To do that the agent must understand how buyers find a home. Fortunately, the National Association of Realtors (NAR) has spent decades collecting and analyzing data to provide reliable information for agents.
How Buyers Found Their Home
Source: 2009 NAR Buyer’s Report
If the data is accurate then it would appear many agents are aiming at the wrong target – buyers are NOT buying homes from Open Houses, Newspapers, Magazines. They are using the internet. In 1995 less than 2% of buyers used the internet to look for homes. In 2009 it is up to an astounding 90%!
So the agent’s marketing focus needs to be on Agents and Consumers using the most powerful internet tools and resources available. When we list your home I will show you specifically how we will accomplish that.
Realtor.com is the single most searched home site in America. It is worth a look to see how agents market your home to this valuable resource. Go to Realtor.com and search a ZIP – say, 37379, and notice the differences in how listings are showcased, how many pictures are available, how virtual tours are presented, how well the write up was done. That is what home buyers are seeing.
You prepared your home to show, priced it correctly, we’ve had showings with good feedback… and now we have an offer! What happens next?
The Net Sheet: The first thing I do as your agent – remember, I’m on your side – is take the specifics of the offer and translate them to a cost breakdown on an Excel spreadsheet. We call this Seller’s Net. Typically I will also add several columns to show “what ifs” of a potential counter. The net sheet shows you were you will be if you accept the offer as presented. This step also helps us keep emotion out of the transaction – this is business. Let’s not get insulted but instead try to turn their offer into a closeable transaction.
Choices: You have three choices with an offer:
1) Accept – take it like it is written. If the terms are close enough this action turns their offer into a contract and we start heading towards closing. In a perfect world of reasonable heads all around this would be the simplest scenario.
2) Counter – send back a counter-offer. Here we can tweak all aspects of the transaction and counter any of the terms of the offer. That includes price, closing costs, repairs, “gimme’s” (the fridge, the porch swing) closing date, etc. This helps you protect your net – the bottom line. It also gives the buyer a chance to walk away because they do not have to accept your counter. Ideally they take the counter as a chance to reassess the situation and perhaps make a more reasonable counter offer. There is not a limit to the number of counters as long as both sides stay in the game.
3) Reject – say no to the entire offer. This should be rare. Even in a low-ball scenario we should still counter back towards a more reasonable solution. I do not like to reject as some buyers feel the need to see how much they can get away with and then settle close to sales price. I have seen buyers come up nearly $100,000 and in the end all parties were happy.
Under Contract: Assuming we were able to counter our way to an agreeable deal we are now under contract and start working our way through the contingencies. Contingencies include:
1) Inspection – the buyer hires an inspector to check out your home. This is usually the first step. After inspection the buyer can walk away or make a Repair Proposal. Just like the offer, we can counter that proposal. Of course, the buyer can actually accept the home in its current state.
2) Wood Destroying Pests – the buyer hires a licensed pest inspector to check out the home for termites and fungus. If evidence is found the transaction cannot close and it will fall to the seller to remedy the problem. If you choose not to, the deal will fall-through and you (and I) will be obligated to disclose that information to future buyers.
3) Financial – the buyer applies for a loan and produces evidence that they believe the loan can be closed. At any time the loan may fail. The buyer may have new information come up, they may lose their job, and their funds to close may not be adequate.
4) Sale of Existing Home – the buyer may need to sell their home in order to close. In that case we continue to market the property and have the right to offer the buyer a “first right of refusal” (we will have established this in the offer phase). If they cannot sell theirs or close without selling theirs we can sell to another buyer.
5) Final Inspection – the buyer gets one last chance to make sure the property hasn’t changed negatively since the contract. As long as you have kept the home in “the same or better condition” this is a very simple contingency.
There may be other things spelled out in the offer and I, along with the selling agent, will coordinate them and keep the transaction heading to close.
Title Search: As outlined in the contract a title company that we have mutually agreed on will conduct a search, prepare the deed, coordinate with the buyer’s lender and get the transaction ready to close. As long there are no defects in title (very rare) this step is usually smooth sailing. The title company will be in contact with you to obtain loan payoff information.
Prepare to Move: Once all contingencies are met you can get ready to move. In most contracts the seller is expected to be out of the house on the day of closing. After all at that point the home belongs to the new owner. I will coordinate with the selling agent the transfer of utilities and other details that need to be done for an orderly transfer of title.
Close: This is the Big Day. All parties show up at the title company and do stretching exercises for your signing hand – there are plenty of signatures needed all around. You will need a photo ID and that’s about it. The title company will distribute the HUD-1, the closing document, and we will compare the figures with the contract and make sure that both sides are getting what they agreed on in the contract. After all forms are signed and we get final clearance from the bank they will distribute the checks and we are closed!
My responsibilities in all this are diverse and many. Basically I keep the offer moving to a contract and the contract moving to a closing.