Ways to Lose Your Client's Trust

This is a short but accurate article from Realtor.org outlining 3 mistakes a Realtor can make to quickly lose their client's trust.

I can relate to Rule #3:

Saying what your client wants to hear. When I hired the father of one of my son’s friends to sell my last home, I asked him if we could get a very ambitious price for it. He said what I wanted to hear: "No problem." Well, he got the listing but couldn’t sell the house.

So I brought in the top salesperson in town, and she promptly told me what I didn’t want to hear: "Replace these windows and lower the price by $125,000." She sold the house in less than a week. I recommend her to everyone.

I know for a fact I have lost listings to competing Realtors because I told the clients what they didn't want to hear. But I also admit that I try and educate the client and can forget that building repoire is also an important part of earning someone's trust.

Anyone out there have similar stories? Like when you hired your friend only to fire them 6 months later, hired a top producing agent, they show you statistically why you need to reduce your price by $100,000 and the house sells 30 days later?

I'd love to hear them.

$100,000 Price Reduction on Beverly Drive

Remember this little incident I caused over at Overheard? Apparently the ruckus even made its way on to a real estate blog in San Diego. To summarize, a FSBO at Beverly Dr. and Preston Rd. in Highland Park was asking $2,250,000. After 2 months and no sale they listed with an agent and increased the asking price by $200K to cover the commissions. I called shenanigans saying buyers would see right through their ruse. It stirred up some serious emotions to say the least.

Today the MLS shows the property reduced $100,000 off their original $2,495,000 asking price and it has been on the market for roughly 2 months. So they are now at $2,395,000 which is still $145,000 more than what they were asking during their FSBO days. It didn't sell then after 60 days on the market and now they have been on the market for 2 more ,months at a higher price and have just reduced $100,000.

Some of you might be waiting for the "I told you so" but it's not coming. All sellers in this market can learn from this example. In both good and bad markets, Dallas will never be a real estate market where you can test the buyers and hope a hedge fund daddy will simply pay you what you're asking, just 'cuz. Most buyers in the Park Cities are smart and their Realtors should be even smarter.

Now we'll just have to wait and see how my $1.9 to $2 million dollar sales price prediction holds up.

$2 Million Dollar Price Reduction

This home was listed on 9/26/06. Yes, as in 2006. It's been on the market for 520 days and recently reduced again. This is how the pricing history breaks down.

9/06: $11,995,000

9/07: $10,999,000

2/08: $9,999,000

I've seen this house and it's fabulous. You'd be hard pressed to find a better location in all of Texas. But did they really miss the mark by $2,000,000? Is this a prime example of how overpricing will kill a listing and cause it to end up selling below it's true market value?

I realize many of you are saying, "Jeff. Don't be silly. Pricing rules are completely different when it comes to ultra high end real estate." And I would say you are somewhat correct. But if this home had come on the market at $10.5 million in the beginning, would it have stayed on the market for 520 days? As it is now, they probably stand to end up taking far less than what they could have had they been priced competitvely in the beginning. Pricing strategies work for high and low end real estate regardless of what market Steve Brown thinks we're in.

"Golden Hour" or "Honeymoon Period"

I really like what this article has to say to sellers about pricing their homes in today's market. Instead of using my term, "The Golden Hour", which represents the first 14 days of the listing period, this person uses "Honeymoon Period" or "New Kid on the Block" which represents the first 21 days of the listing period.

It doesn't matter to me which one you agree with more but the lesson is still the same. If you don't price your home correctly in the beginning you end up losing money when all is said and done.

FSBO Takes Me to Task on Pricing Strategy

Seems I caused quite a stir over at Park Cities People blog Overheard. I may have been a little cheeky with my thoughts on the pricing strategy of a home on Beverly Dr. in Highland Park but I certainly didn't expect this type of reaction from one of the homeowners and their friends. You see, they had their home for sale by owner for 2 months at $2.25 million and recently listed with a Realtor for $2.495 million to cover their closing costs and commissions. Am I stupid for thinking a buyer will see right through this?

Check out the post. But more specifically, pay attention to the comments section. Did I really need to respond to their ranting? No. But you should know by now I can't resist a good argument.

"The Golden Hour" When Selling Your House

The Golden Hour is a term used in emergency medicine where it is "widely believed that the victim's chances of survival are greatest if they receive definitive care in the operating room within the first hour." In real estate we have our own version of "The Golden Hour" but we should call it the "Golden Fortnight", or the first 14 days after a listing goes on the market. When a home goes on the market it immediately attracts all of the qualified buyers that have been looking for homes in that area and in that price range. If 2 weeks pass and buyers have gone through the home and you have no offers, you have missed your Golden Hour and may end up chasing the market unless you take immediate action.

You haven't had 10 people look at the home in the first 14 days? Then you are probably over priced. Buyers don't look at over priced listings. And yes, that even applies to homes over $1 million dollars.

After the first 14 days you start getting those buyers that have been looking around but are probably 60 to 90 days out from buying a home.

After 30+ days you begin to attract those buyers just entering the market and could be more than 90 days out from making an offer on a home.

If you do not receive an offer on your home after 14 days on the market you need to reduce your asking price substantially. $5,000 isn't going bring buyers back in your home. With these types of reductions you will end up chasing the market and will end up selling below market value when all is said and done. Don't believe me? You know that house that has been on the market for 268 days at $299,000? What is they reduced to $289,000? No buyer is going to give them any where near that price.It's a stale listing now and they will eventually pay the price for not positioning itself correctly when it was first listed.

Buyer's Market Myth

In many markets across North Texas there have been less sales so that must mean the buyers are hibernating, right? Wrong. I heard this a lot in the latter months of 2007 from seller clients and even other Realtors saying showings have died down on their properties and the buyers had all but disappeared. Please allow to me to squash this myth for you. Pay attention students.

The orange triangle above represents the buyer pool (according to this myth) and how the pool shrinks during a buyers market which is why there is so much inventory on the market. With all those listings on the market there can't possibly be enough buyers to go around, right? Not if the price is right. This is tough news to swallow for many sellers but reality is that the buyer pool never changes. Buyers are always willing to buy IF they perceive the home's price as valuable. If buyers feel the home is over priced they will simply pass. And we've already learned that buyers don't " just make offers" willy nilly because you, the seller, over priced your home to leave room for negotiation.

Think about it. If I listed a single family home in good condition in University Park for $400,000 I will receive 5 to 10 offers within the first 5 hours on the market guaranteed. This example shows there are always many buyers ready and able to buy, thus, the buyer pool size never changes. They just need to perceive the home as valuable in order to make an offer.

So what does this tell us about our current market which admittedly has more inventory than last year? (But certainly at very healthy levels) It means most of the listings currently on the market are not priced correctly and thus buyers are not willing to make an offer.

To summarize, the buyer pool never changes. Every listing currently on the market has an "energy price" that will cause buyer's to act. Your Realtor should be able to help you find this price which will, in turn, allow you to maximize your sales price while minimizing your time on the market. And when homes are priced attractively and sell quickly, you end up with less inventory and an appreciating market.

How To Sell Your House in Today's Market

I taught a class yesterday morning which prompted a nice little debate between a newer agent and myself. I was explaining the importance of pricing listings in today's market. My platform was basically if your home is not priced competitively in the beginning, which means sometimes pricing it lower than the competition to make it look attractive to buyers, then plan on being on the market a long time. She said she has a listing that is priced correctly but is still not selling. This listing has been reduced 3 times and has been on the market for over 6 months. She says that the home is priced right and is in line with the other homes currently on the market. I told her it's obvious the market is telling her the asking price is still too high. She responded with, "But the other other homes are priced just as high as well." My response, "And they're not selling either so you need to drop the price to where buyers will perceive your listing as valuable." This new agent asked if we are truly representing our clients' best interests if we recommend a "low price" just to get the home sold. That's a great point and here is my answer. If an agent does their research and can accurately communicate market stats with their client then a real asking price will present itself and that price might be lower than what they are wanting for the home. But remember the goal is the sell the home for the highest price in the quickest amount of time. For example, if there are 5 similar homes on the market priced from $230K to $265K and they are comparable to your home and you want to get $275K for yours what is your initial reaction? They have no chance. If it's priced any higher than $249,000 then that listing is probably going to be on the market for a while. This is the Realtor's job to explain to their clients this is not a time to test the market. Buyers are tentative to pay market value for a home much less overpay. And if a home has been on the market for 8 months vs. 30 days which home will probably get closer to their asking price? This is what Realtors need to be telling their sellers.

If a buyer does not see your asking price as a good value they will simply pass it buy without a second look. I don't care if you have the nicest updates in the neighborhood. If you are not priced correctly they will not "make an offer". This is the hardest thing for sellers to understand. They say to themselves, "Yeah I know we're priced a little high but we want some room for negotiations. Why don't they just make an offer?" I know this sounds familiar to many of you. So what's the answer? Why don't buyers just "make an offer"? The answer is because they are smarter than sellers give them credit for. They haven't just seen your home. They've probably seen 15 to 20 homes in your general area and your home is being judged just as harshly as the others. If most of the homes in your area are selling around $250,000 and you are priced at $275,000 or $299,000 then buyers see you as an unrealistic seller and why waste their time?

This article reiterates this new philosophy in pricing your home to maximize dollar value and minimize time on the market.

“I show them the neighborhood and we look at what other houses are for sale,” said Page, a Realtor for REMAX Property Source in Rockford. “Then we would sit down and look at the prices those homes are listed for and I’d tell them, ‘Yours has to be better.'...With so many houses on the market, you have to price it aggressively so that yours is the one that jumps out at them.”

So make sure your Realtor shows you in depth sales statistics for your neighborhood and also make sure you're not the highest priced house in the neighborhood unless you are willing to have your house on the market for the long term. But in the end you won't sell your home for what you might have sold it for had you priced it right in the beginning.