I’ve seen a few sellers lately make some bad decisions.
I get it. Selling your home is something you only do so often and I don’t expect them to understand the market and all the obstacles between sticking the sign in the yard and the closing. All they know is that the market is hot and selling your house is easy.
What they don’t know is that keeping it sold can sometimes be a lot of work.
I recently had a friend decide to list with some less experienced agent who was going to reduce the commission. I was going to reduce my commission to ZERO since this person was a friend and they had some circumstances that required them to move, guess I should have told them that sooner. I had been giving advice and working towards getting this done for close to a year. To this seller, all they were thinking about was saving money. Well, you only realize that savings when you close the sale. The house sold and is back on the market. Usually when a house comes back on the market, it doesn’t get the same attention from buyers. Most buyers in the market have already seen it and either said no to the house or made an offer that obviously wasn’t the best one or they would have gotten it the first time. This is where experience is worth every penny, even though I wasn’t planning on getting any pennies from this sale.
I am currently working hard to keep a deal together for a house where the buyer went to do the final walk through before the closing and found the ice maker had been leaking and has caused $12k in damage to the house. I know if my listing goes back on the market, we will never again catch such a fantastically qualified buyer who was the highest bidder, so I better put on my thinking cap and get this done.
These are just a couple of current examples of where experience can make or break a sale. The goal is to get to the closing. I am thinking about the entire process, not just the beginning. Not just the next step.
As I was making my second cup of coffee and thinking about writing this post, it reminded me of the early days of GPS. You’d enter the destination and take off. I think that is how most sellers view this process…….”I’ve got a realtor and they just stuck a sign in the yard. It’s all downhill from here!” If nothing goes wrong, then that is very true. But how often have you had your GPS take a crazy route or not know about construction, wrecks or other annoying delays? It’s the same with real estate. A lot of inexperienced agents don’t know what to lookout for along the way or don’t know how to negotiate. Sometimes you have to take an alternate route. Sometimes you need to change lanes along the way. A good realtor is more like the Waze app……not only are we watching out for delays, we are looking for speed traps and doing it all in real time as we get you to the final destination, which is the closing.
I have always said a house is gonna sell for what it is worth. I said it when it was a Buyer’s Market. I’m saying it now. Overpricing your house is the surest way to make the process take longer and likely sell for less than it could have. Price it right and buyer’s all rush to see it when it is a new listing, regardless of the market conditions. They are afraid of losing the house if they like it. You want that sense of urgency.
Back in a Buyer’s Market, the goal was to drop the listing on the market at the right price and hope to get multiple offers. It is the same today, only with a few tweaks.
Today the list price is more like when an auctioneer begins the auction with a number low enough that they know they will get that first person to raise their hand. Then the price keeps going up until nobody else raises their hand. The list price is more like a suggestion these days. You still do not want to start off with too high of a list price. I often suggest a list price to sellers. They will tell me how strong the market is and want it to be higher. Then when a house sells for more than the list price, they feel like they left money on the table and undersold it. That is not the case. If you had several buyer’s bidding up your house, that means you got every penny out of it.
What I like to do is examine the most recent comparable sales in the neighborhood. I figure out what the house is worth compared to what other buyer’s have recently paid for houses around my listing. Then I put it on for that price since we know 100% that number will work. The worst thing that could happen is you sell it for full price. Then I drop it on the market late on a Friday. That way everybody sees the listing and starts scheduling showings for the weekend. It is good when buyers see other buyers coming and going. It shows them it is a hot listing and they better decide fast. Once I get one offer, I let all other realtors who have shown it know. You don’t tell them before they show it. You wait until after they have shown it so they don’t assume they won’t get it and cancel the showing. Even if the offer sucks and is not one I can suggest my seller accept, just having one enables me to leverage any other offers up as high as any buyer can go.
I recently put on a listing for $360k. We got 6 offers on it. Five had escalation clauses and we ended up selling it for $384k……and that must be the market value since that is what a ready, willing and able buyer agreed to pay. My seller is a good friend who was very happy with the results. If I had put the house on the market for $384k, do you know what would have happened? Since there was only one buyer willing to pay that much, I probably would have only gotten one offer. It would have been full price or less. I wouldn’t have been able to leverage the terms towards the interest of my sellers without the presence of more than one offer any more than an auctioneer could drive up the price with only one bidder in the room.
A buddy of mine is a realtor in Oklahoma. He posted something on facebook about the market there. Somebody made a comment. He replied to their comment basically saying that a lot of sellers think it is easy to sell their house right now without a realtor, but they need realtors now more than ever to sort through the chaos of getting so many offers.
It got me thinking.
Back when the market was bad and houses were taking forever to sell, I would sometimes have a seller joke that I am making too much money when their house sold immediately.
The public thinks being a realtor is easy money. When it’s a sellers market like it is now, they think they can do the same tasks we do and save the money. But here is the thing, you are really paying a realtor for what they know and to use their knowledge. You are not paying them to just perform tasks. That is why most for sale by owner houses take longer to sell, usually don’t get as many offers, and tend to fall apart more often than those listed by a good realtor……and I will not even get into the quality of pictures that for sale by owner people take, lol.
Even in this market when selling a house is so easy, you need somebody who can tell you which offers are most likely to get to the closing table. There are many variables within an offer besides just the price. Most sellers just think “This buyer is willing to pay the most so let’s go with that one!“
Okay, so you have made a mistake and overpriced your house. No worries. The market is strong enough that you haven’t shot yourself in the foot, you’ve just wasted a little time.
Back when the market was bad, it was even more critical to get the price right from the get go. The reason was because there were so few buyers entering the market. If they came to see your house and didn’t like it, a small price reduction wasn’t much motivation to come back and see it. About all you could do was made a big price reduction or wait for new buyers to emerge into the market.
Today, there are new buyers out every day. I don’t think in this environment that you need a huge price reduction to get your house sold. While it is true a lot of the same buyers who saw your house probably haven’t bought anything because there is literally nothing else to buy, your best bet is to catch a buyer who just started looking.
I think right now, I would suggest a small price reduction. That could serve two purposes. The first is that it might just cause a buyer who is tired of losing out in multiple offers to come back to you. It also makes it attractive to those brand new buyers. Every buyer loves a price reduction.
If your house makes it past the first day on the market and you didn’t get an offer, something is wrong. Whatever the issue is, a lower price always helps. If you reduce the price a bit and it still doesn’t sell, keep reducing the price a little until it does.
Of course, the best way to prevent needing to drop your price is to start out with the right list price from the beginning. Pricing it correctly usually means a faster sale and a far greater likelihood of getting multiples offers.
It’s their market. Why would they need to do anything? Aren’t they the ones holding all the cards?
Yes, they are. However just because it is their time right now doesn’t mean they don’t need to do things to ensure they got the best terms possible and had a smooth transaction.
So here we go!
DO NOT SELL YOUR HOUSE OFF MARKET-I know this is very popular right now and us realtors love it because it is easier. It has become sort of a status symbol. Sellers feel like their house was more exclusive that it was. Buyers feel like they got an invitation to the after party. It isn’t a good idea though. The market is crazy right now. Buyers are tired of making offers that don’t get accepted. They want a house. I have seen numerous times where I will get multiple offers on a house and one buyer will go way over the list price to get it. Let’s say you get five offers. Four of them are pretty much the same and then there’s one that is waaaaay better. Come to find out, they had lost several houses and were just tired of it. Their attitude was that they were not going to lose another one again. Long story short, you never know what your house is going to sell for until you expose it to the market.
DON’T TAKE THE FIRST GOOD OFFER-There is no question that if you have a decent house and don’t overshoot the value with the list price, you are going to get multiple offers. Too often I see sellers in a rush to accept one. They know it is a sellers market but since they don’t buy or sell houses all that often, they are afraid of losing a buyer. It is up to their realtor to let them know that the buyer is not going to suddenly rescind their offer if it is not accepted within a few hours of receiving it. The only time you want to be in a hurry to accept an offer these days is when it is the ONLY offer you got. I think it is best to give the market at least 24 hours to see the house and let everybody know the cutoff for sending offers. That deadline implies you have multiple offers even if you don’t and makes buyers in a rush to decide if they want the house.
DON’T SELL THE HOUSE “BY OWNER’-I know this one sounds self serving. The temptation to save paying real estate commissions is appealing for sure. I see more for sale by owner sellers having deals fall apart or selling for less than they could have gotten for their house. This could be an entire blog series so I will just skim the top. To begin with, few sellers take good pictures of their houses. That makes people less interested in seeing it. Then they can usually only show the house when they are available. That means fewer showings. Then they don’t leave for showings. Buyers ALWAYS feel awkward when a seller doesn’t leave. They think they need to be in a hurry or can’t open closet doors. They feel like they are invading the sellers personal space. Even worse are the sellers who want to lead you around and tell you unimportant details about their home like telling you what the kitchen looked like before remodeling it. Newsflash, painting a picture in the buyer’s head of the old ugly kitchen does not help to sell your house. Then they go with the highest offer, which on the surface sounds good, but the buyer has to sell their old house first and they were preapproved by “By-Pass Mortgage and Bait Shop” which is located somewhere in Arkansas. Then they feel like they shouldn’t do any home inspection repairs since they have been living there and that leaking roof has never bothered them. In the end, few for sale by owner sellers know if the offer they have is the best one and if it is likely to close. They often kill their own sales since they don’t know what they are doing.
ALWAYS ASK FOR THE TERMS YOU WANT, EVEN IF IT WASN’T IN THE OFFER-If you have several offers, try to combine the terms you like from all of them. Sometimes it works. Let’s say you like the price of one offer, the closing date of another, the possession date of another, and the inspection type of another. What you do is pick the one that you think has the best chance of closing (cash or preapproved with a lender your realtor knows is good, bigger down payment, etc.) Then you see if that buyer can match the other terms you like. You might say to the buyer’s agent that you really want to work with their buyer but you also would like to close on such and such date like one of the other offers you got, and that you’d like the buyer to not do a home inspection like one of the other offers you got. It is a friendly way of letting them know that while you like them the best, you might just go with another buyer who has already agreed to those terms. My experience is that most of the time a buyer is more than willing to alter a closing date, possession date and possibly change their inspection type to get the house.