Three critical factors required to sell property at the highest price in a reasonable time

    Price

Properly pricing a home for sale is one of the most critical points that a seller must get right in order to obtain the highest sales price in a reasonable period of time.

We have seen homes priced too high when they were first placed on the market in an attempt to “test the market”. The intent is to slowly lower the price until the home sells. On the surface, this appears to be a logical approach but there is a subtitle danger in this plan of action.

A new listing receives the most attention and showings in the first few weeks that it is on the market.

When the home first hits the Multiple Listing Service, realtors and buyers who have been watching the MLS take note of the property. Savvy Realtors and buyers will recognize that a home is overpriced and pass it over.

The same applies as printed, Internet, television and direct mail advertising of the property goes into play; buyers will take note of the new listing on the market but, if the house is priced too high, buyers will pass over the house and move to the next listing.

Later, when the price is lowered, the peak period for getting attention and showings has passed and the number of potential buyers drops substantially.

In our experience and in industry studies, showings tend to peak about three to six weeks after first placing the property on the market. From there, showings drop off slowly to a trickle.

I recall a great example of this mistake when I was working with an international buyer from Asia. The husband made the off hand comment that someday he would like to own a home on a lake. He didn’t think they could afford such a home but we began to search for one for them.

I found a gorgeous home in a lake community that been on market for several months. The seller was not in a hurry to sell at the time he put the house on the market and priced the house too high to “test the market”. The house did not sell during the peak attention / showing period.

After a few months on the market the owner dropped the asking price to what it should have been when it was first listed. Since the peak period had passed, showings and potential buyers were few and the house did not sell.

At this point the owner had moved out of state and was maintaining another household. He was still making mortgage payments, paying homeowner association fees and keeping utilities on at the house he was trying to sell. The Seller began to experience some financial stress and lowered the price again, this time to actually lower than the home’s market value.

This is the point where my clients and I arrived. The house was however, still priced above my client’s limit. We researched the homes’ listing history and saw how long the property had been on the market and noted the steady progression of price reductions. We learned what the seller’s situation was and developed a plan.

We made an initial offer, a good bit lower than what my client could afford and asked for more seller paid closing costs than we really expected to get. The seller countered and our negotiations began. During negotiations, we learned the Seller was experiencing sever financial stress and his insurance was being cancelled because the home had been vacant and knew we could negotiate very hard.

The result was that my clients purchased their dream home at a price that amazed even me. I felt sympathy for the Seller but my first responsibility is of course to my client.

Had the seller properly priced the home when he first put it on the market. I am certain the house would have sold in a reasonable time and at a much higher price.

HOW WE PROPERLY PRICE PROPERTY

When we perform our due diligence prior to pricing a home, we first visit the property and take note of its condition and amenities.

We then search the Multiple Listings Service’s sales history for recent sales of similar homes in the same area. Since market values in some neighborhoods are very fluid, more recent sales are a much better indicator of market value than sales even just a few months old.

We review both what the comparable homes sold for and the number of days they took to sell. These factors provide a good indicator of the neighborhood’s current market value.

If a home sold faster than the average for the neighborhood and area, it may have been priced too low. If it took longer to sell than the average, it may have been priced to high.

Care must be taken to research each comparable sale as carefully as possible to determine its condition and amenities. We have called the listing and selling agents on comparable sales to ask them about details of the property. 

We must also take into account that larger homes and two story homes often sell for less per square foot than do smaller and single story homes. While this was once a common trend, it is now less seen in our market.

The comparables will provide a range of sales prices. In general, we use the highest and best comparable sale as a starting point.

We also search for active listings that are comparables. By doing so, we can see what competition exists in a neighborhood and area. We must consider the competition but not be overly influenced by what a home is listed for. As illustrated in the tale of the lake house, homes are not always correctly priced.

We then research the neighborhoods recent appreciation trend. If we find that a neighborhood is increasing in value at about 6% annually. We may take the highest and best recent sale, add about 6% and use that figures as a benchmark.

We must also take into account any future event that can affect property values. Examples can be new schools or streets that are planned for the area. We have recently seen neighborhoods take a 10% jump in values because of new schools.

We also must factor in the owner’s urgency to sell, the homes curb appeal and what I call a home’s “wow factor”, do buyers say wow and get excited when they walk in the door or do they sigh in disappointment. We also consider what competition is in the area and how fast homes are selling.

In pricing a home we must set emotions aside. We all develop affection for a home that we have worked hard to purchase, improve and customize to fit our tastes. Often there are memories and emotions associated with a home. One must set those emotions aside and realize that a buyer will not have those attachments and memories.

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How to Sell Your Home                    Video Presentation 

Getting the Highest Price

What Projects Increase Resale

Free Help Selling Yourself 

Why FSBOs Fail

Safety Tips

Presentation

A recent listing we sold is one of the best examples of presentation that I have ever had. We sold an older home that was about 1,400 square feet for almost $180,000, and sold it in three days. We had a backup offer in hand in case the first offer fell apart.

When I first saw the house, I recognized what a gem it was. The house wasn’t bad at all but it didn’t make one say, “wow” when stepping inside. The owner and I walked through the house, around the house and looked at the house from the street. I then made several recommendations.

The landscaping man I recommend spent three days weeding, edging, putting in fresh mulch and trimming landscaping and trees. We had a carpenter come in and do some minor repairs and improvements. We painted, cleaned and moved out most of the owner’s furniture. We had an interior designer come in and stage the house. The house was beautiful and looked as if it were right out of homes and garden magazine. It was a showplace with lots of character and unique architectural features that we had accented.

After all the work was done, we ordered our advertising, put up a sign and placed the home on the Multiple Listing Service. Bam! We had several showings the first two days. We had realtors asking me not to put the house under contract until they could get their buyers in to see the house. We had caused a Seller’s market for the property. We negotiated hard, to the point that the buyer and the buyer’s realtor actually became emotional and got mad at us. We had other buyers clamoring for the house and knew we were negotiating from a position of strength. We netted substantially more for the seller than what we had expected.

Another example of a listing I recently worked on was just the opposite. The owner had years and years of stuff and enough furniture for two families crammed into their house. I went through the same process as the success story but the difference was that the owner only made a halfhearted effort.

Granted, the owner was busy as we all are but the result was that the house didn’t sell. The owner was upset at us and we tried again as tactfully as possible to get them to properly prepare the house to show. We were not successful in convincing them to take corrective action.

They blamed me personally for the house not selling. We released them from the listing agreement so they could “try another realtor”. After following the listing in the MLS for several months, I saw they finally sold the house by lowering the price several times until they found a buyer. I felt bad for the seller. Just a little work and a few hundred dollars would have made the difference between setting a new high in sales price for the neighborhood and just getting out from under a house that wouldn’t sell.

The links below are to information on preparing a home to sell. The recommendations, if followed, can be worth thousands in higher sales price.

Curb Appeal List

Free Evaluation Curb Appeal and Staging     

Flowers Add Curb Appeal! 

The Back Yard 

The Kitchen 

Plumbing and Fixtures 

Staging Your Home

Staging Checklist

 Staging

 Exposure

Exposure is the third major factor in selling a home for the best price possible in a reasonable period of time.

Internet

Industry research indicates that the Internet is the single most important source of information for most homebuyers in the beginning stages of looking for a home.

Just having a real estate website with some listings on it is useless however unless a buyer finds the website and the site grabs their attention within three to eight seconds.

Research by marketing experts and search engine giants such a Google, Yahoo and MSN show that unless a website comes up on the first page of a search, it is rarely even viewed by searchers. The studies also indicate that a high-ranking  “natural” search result as opposed to paid position advertising is greatly preferred by experienced Internet users.

The crux of the matter is that if a website doesn’t rank at or near the top on keyword searches, it will receive very few viewers.

We are very proud of what we have done with our website’s ranking. It took over three years of consistent work and research not to mention a substantial financial investment but our site now ranks in top positions on all of the major search engines for all commonly used key word searches that real estate buyers looking in our area use to search the Internet.

We still consistently invest a relatively large amount of time and money into search engine placement.

Not only must a buyer find a website, the site must grab their attention and then allow them to quickly find what they are looking for.

Lots of sites have flashy and really cool animations, music, photos fading in and out and a huge amount of information on the homepage. All of those things hurt a website’s effectiveness as a marketing tool.

All the research we have done indicates that website visitors want to be able to quickly find what they are looking for. Having a site that is attractive is a bonus but visitors are in general, task oriented and not looking for entertainment.

Virtual Tours

Virtual tours get mixed reviews from buyers. Often the v tours consist of just standard photos that software pans from side to side to give the illusion of looking back and fourth inside the house. Other v tours use a curved lens or a reflective cone to provide the illusion of a wide view.

The v tour that we use is the most comprehensive that we have been able to find. We can take several photos of a homes interior and exterior. Software then “stitches” the photos together, matching a refrence point on one photo with the same point on the next. Variations in lighting and color are automatically compensated for and the result is a true 360-degree view. A few buyers find the v tour to be an important tool but as buyers become more informed they are less impressed and the novelty wears off. 

We find a better method is to provide relevant and numerous still photos to our website and to the Multiple Listing Service.

The Multiple Listing Service

The Multiple Listing Service is by far the most important tool available to Realtors in marketing a property.

Most real estate transactions involve both a listing broker and a buyer’s agent. About 97% of all transactions involve two Realtors and in only about 3% of transactions does one Realtor represent both the buyer and the seller.

It’s a matter of probabilities; At most, a Realtor can effectively work with about five to eight buyers at once. The probability of one of those buyers purchasing one of the Realtor’s listings is relatively low.

When there are a several hundred realtors working with several thousand buyers, the probability of matching a buyer with a home is much greater.

Our percentage in representing both parties in the transaction is a bit higher than the industry average. 

Often, we use alternatives to a conventional sale to move slow properties. Since we have an active property management department we, are able to offer our sellers the option of offering their property as a Lease-Purchase or a Lease-Option. Doing so sets the property apart from the other three to four thousand active listings and generates additional buyer interest.

While there is a roughly 20% failure rate with Lease-Purchase and Lease-Options they are an effective marketing tool.

Often, we are able to produce a positive cash flow for sellers and they decide to retain the property as an investment.

We have business relationships with over two hundred renters. Of those renters, a number would like to purchase a home at some point. We set up automatic reminders of when our tenant’s lease is nearing expiration. We contact the tenant to review their situation and often help them purchase a home.

The MLS has some other effective but underutilized tools. One of the most efficient is automatic email notification of new listings and changes to existing listings.

We can enter a buyer’s data in the system along with any number of variables regarding the type of property they are looking for. When a new listing is entered in the MLS that matches a buyer’s requirements, the system sends emails of the new listing to both the buyer and the Realtor.

We can do the same for price changes and for properties that were under contract but came back on the market. At any given time we have several dozen buyers receiving new listings without us having to try to manually search the MLS every day for every buyer that we are working with.

Role of the MLS

Signs

Signs remain a staple of the industry and an effective tool. Often buyers will drive a neighborhood that they like, looking for available homes. If they are not working with a Realtor, they will call us directly for more information. If they are working with a realtor, they will often call their agent to arrange a showing. Neighbors sometimes see a sign and call acquaintances that are home shopping.

Flyers

In the first few weeks of a listing, it’s almost impossible to keep a flyer box full. Neighbors are generally the reason. Everyone is curious about the list price and relate it to what their home might be worth. After the initial rush, it is easier to keep the box full.

Most realtors put a photo of the exterior of the house on their flyers. A person standing at the curb can lift their eyes and see the house exterior so why not give them some additional information. A few key interior photos, a list of features, the web page where the listing is posted and our contact information are the key items we include.

Printed advertising

REAL ESTATE MAGAZINES

We have three real estate publications in our area and we use all three. One of the publications has a strong Internet presence as well as a large circulation. We do receive a modest number of buyers from the magazines.

There are a few negatives to these real estate magazines. There is a lag time of up to four weeks in the publications and often a property is sold by the time the magazine goes to press.

Some of the publications do not include address of the properties or enough information to quickly know which property a caller is asking about.

This is a holdover from back in the day when the conventional wisdom was that realtors didn’t want to give too much information to buyers. The goal was to give just enough information to have the buyer come into the office. Soon after, the buyer would be asked to sign an agency agreement and be tied to that realtor for a set period of time.

The times have changed and the free flow information is the key to helping educate and assist buyers.

Another benefit of print is name and face recognition. The more a realtors name and face are seen, the more likely that they will be remembered and perceived to be successful in the business.

I recall a transaction I had once with a brand new realtor. He was really likeable, honest and earnest but he was not able to follow and understand the closing paperwork. Both he and his client were confused and hadn’t caught errors that were to their disadvantage. I walked around the table and we went through the paperwork together until it was correct and everyone understood the figures.

A few days later I saw him on several huge billboards all around town. He had a professional photo taken and spent who knows how much to put his face and name in front of thousands of people. The advertising made him appear distinguished, experienced and successful. I still chuckle to myself when I think about it.

I wish him the best in his new career and admire him for his aggressive action. He knew enough about the importance of name and face recognition to invest several thousand dollars.

NEWSPAPER

Newspaper advertising is still considered a mainstay in real estate advertising. It is however one of the least cost effective methods of advertising to generate a sale of a specific property. One of the chief advantages to a Realtor in advertising on newspapers is name and face recognition.

DIRECT MAIL

Direct Mail is similar in effectiveness and cost as newspaper advertising. We use direct mail often but not always. When we get a new listing we often send out “Just Listed” postcards with a photo and some details of the property to a few hundred homes in the immediate neighborhood. When the home sells, we sent out “ Philip just sold another” postcards to the same people.

We have had a few buyer leads from direct mail. I can’t ever recall making a sale of the specific property however from direct mail. The effectiveness of direct mail is in name and face recognition. Almost every time we do a direct mailing, we eventually get another listing in the neighborhood as a direct result of the mailing.

Television

Television advertising is also mostly about name and face recognition for the Realtor as opposed to selling property. We have received a modest number of buyer leads through our television advertising but I know of one sale of a televised property as a result of the advertising.

Open Houses

It’s very rare that a home is sold as a result of a buyer visiting an open house. An open house is much more effective in generating buyer leads for the Realtor holding the open house. Often new realtors with few clients will hold open houses for more experienced and busy realtors in order to obtain buyer leads.

Another function of an open house is to stroke a nervous or dissatisfied seller. By holding an open house the realtor is “doing something” even if it is not effective.

SUMMARY

We hope that this information is helpful and are happy to answer any questions that you may have.

We know that some of the information does go against conventional wisdom and opinion but we prefer to be open and frank.

Our goal is to achieve the highest possible sale for our clients and use whatever methods have proven to be efficient and cost effective.

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