Tonight while reading Lane Bailey's blog "The best agent to use..." I was reminded of a conversation recently with a fellow broker about how many people are taken in with the 'buying the listing' scheme.
Last year we had a client who, in preparing to relocate out of Alaska, called us to put their home on the market. We sold the home to them and knew what improvements they had made, so giving them market value was a piece of cake.
As it turns out we were not on the same page with respect to value. When it was clear we were at an impasse they listed with a competing firm who told them what they wanted to hear rather than what they needed to hear. More than a year, seven or eight price reductions and two real estate firms later, the home remains unsold.
The truth is most homeowners don't have a clue what their home is really worth. Most know what their note is, what they owe and some even know their current property tax assessment. Unfortunately, those numbers rarely reflect current market value.
Preparing a comparative market analysis is not rocket science. As Realtors we look at predominately the same set of numbers appraisers look at to define value; recent sales of homes similar to yours. The best Realtor to sell your home may not be the one that gives you the highest price. Trust, but verify. Ok, but how?
It's pretty easy to see if a home is a comparable; it will be equal in size, age, condition, location, etc. The question becomes how it compares by price. Just like your arithmetic teacher used to say, so should you... show me the math. Look to see how the adjustments are calculated for the residential square footage, garage square footage, effective age, lot size, amenities (i.e. fireplace, Jacuzzi tub, hardwood floors), bathrooms, etc.
Ask to see not only the actual adjustments but also the source of the numbers used to make the adjustments. I take my cue on adjustment values from local appraisers and by closely reviewing appraisals. If an appraiser is using $40 to adjust the residential square footage and Agent Not-So-Genius is using $110, you're going to have a market analysis that's good for one thing... lining the birdcage.
If an agent can't or won't show you how they arrived at a price, take that as your cue that a) they might not know what they're doing or b) they're inflating the price to get you to sign a listing agreement. As Lane mentions, don't be too surprised to see this agent come armed with pre-authorized price reductions. They know in order to sell your home, it will need to be at market value.
While numbers can be made to say just about anything, asking the agent(s) sitting in front of you to 'do it long hand' should help you weed through the rhetoric and select an agent to represent you based on what they'll do rather than by the dollar amount they fill in on the listing contract.
The best agent to use just might be the one who tells you the truth...
48 comments • Fairbanks Alaska Real Estate Specialists Jesse & Kathy Clifton 907-328-9328 • January 23 2009 05:14AMComments
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Jesse, yoiu are right....in that very few sellers know the actual value of their homes. They may here from the neighbors or read the newspapers but they don't do apple for apples. They don't know the s.f., the upgrades, the days on market. It requires a professional to interprete the data. Of course they are all tempted to just go higher and many if not most do.
That is their call, it is my call to say, "next".
Jesse, You are right! Had a friend in the real estate business tell me what my house was worth. I was really surprised - in a good way...
Good post Jesse! I recently attended a seminar, and the new President of our local Board suggested bringing complete listings of ALL sold comps, with similarities and difference highlighted so sellers can see exactly how we're getting our pricing.
Jesse,
Yes, I can relate to your story---it has happened to me more than I like to remember. The truth is difficult for some people to accept but that's what I'm giving them.
Jesse - I have lost a lot of listings in the past year to agents promising a higher price. None of them have sold. In this market, in my opinion, setting the price too high is the worst thing an agent can do for a client.
It's not always what a client wants to hear ...but it is ALWAYS what they need to hear! Everytime!
Jesse, Not only should we be firm about what the real value of the house is, as a REALTOR and a business person it is not a smart business decision to take an overpriced listing. We all know it is not going to sell and we will waste money and time tending to it. The other thing is it is a violation of the CoE to mislead a client as to the value of their home. Great post, love the house in the photo!
Please tell me that you are not trying to condone honesty as a good business practice.
I could never figure out why agents would do that? If you over price (buy the listing) it usually just sits there. Makes no sense to me.
One of the things that I never do is write down a projected price on my comparable! I look over all of the market analyses and come up with a price that is mutually agreed between myself and the seller. They don't become bristled at my price, because it becomes "our price"!
Price is affected by so many things. Not only what the comps are, but the appreciating or depreciating market you are in.
The truth may initially "hurt" if someone was wanting a higher number, but it does get rid of the long term pain of having a home on the market for 1 yr plus!
I am writing a similar post - on draft mode - haha. It is a hard thing to swallow, and yes we have and will lose some listings because of that. But when taking a listing, we take it to sell it - not to sit on it. We put so much effort on marketing the homes. ~Rita
Jesse, good post I find that sellers only believe what they want to hear anyway. An agent that "buys the lisitng" usaually doesn't even bother with a CMA, the look at what the person paid up it by 20 - 25% and bingo. Then they start working every week till they bring the price down to the point of selling. If they won't bring it down that low so be it because the next agent won't get it sold either. So the agent buying the listing wins.
I was once affiliated with a broker who told me that if I don't take the listing in hopes of getting buyers from it, someone else will. For them, it wasn't a matter of price reductions as much as it was utilizing the sign as a lead generation tool.
Jesse,
It is amazing how people think that just because they need xyz dollars a buyer is just going to jump and pay the price. I know of quite a few listings in our MLS that have been with the same agent for over 1 years. First off, are these people hiding their heads in the sand? Is the agent just telling them things will turn around or what is the motivation here for either one? Can't figure it out.
You are lucky to have appraisers who will gladly give you figures to use for adjustments. In our area we are told "everything is relative to the situation".
I agree with you...be honest and tell them what they need to hear and not what they want to hear.
Thanks Jesse,
Good post
Jesse, it is almost as though we need Sellers seminars out there to alert homeowners of these Realtor tricks by the unscrupulous ones.
God blog! We also need to know their motovation to sell, along with current and (if possible) future local market conditions, you know ....JOBS? If jobs are moving out or non existent, it pretty much takes the value away from a house that has to sell, but on the other hand, if you don't have to sell and you like your home as it is, well then, it's worth $1,000,000.00 to you isn't it?
Value is what sells, the house is just a by-product and the owner turns it into what they wanted. No house is ever lived in as it was originally purchased.
Great Blog!!!
Jesse,
Hard lesson to learn, but it is reoccurring all over the country...!!! Good post!!! Thanks, Fran
My sellers tell me what the listing price should be. and I am fine with that. We study the comparable sales together, in price order, with the sold price blacked out. Then, when we agree which two comps their home fits in between, we look at the price. It's pretty hard for them to argue with their own analysis.
Hmmmm ... Truth and knowing what you're doing - what novel concepts! I don't understand what the point would be to overprice a listing that you know can't sell for that. While it sits on the market you will spend money on marketing, and even if you get prospects to come to open houses, they may see that this home is overpriced and feel that you won't be able to help them find a well-priced home if you don't know what that is.
I show my listing prospects a high and a low figure and the comps and calculations for both, and then recommend that we start in the middle. My high and low are usually not very far apart. The reason I give a range is because of the number of REOs that have to be considered, even if they are trashed. They muddy up the valuations.
I like the idea of challenging the other Realtors or competitors to know how they come up with the numbers. I'm not sure how to integrate this idea into my presentation, but I will.
Hi Jesse...When I was an agent in Northern Virginia I found it much easier to do a CMA. Unless you were doing one on a very large, expensive, custom built home you usually had good comps to come up with a price.
Most of the subdivisions had a few model homes and people did some modifications and that was that.
In my market almost every house is custom built and the lots, because many are waterfront, vary quite a bit from one to another. Value is much more subjective here and experience in pricing really helps tremendously.
There are many markets where it really takes a knowledgeable and honest REALTOR or an appraiser to help sellers. There were areas in Anchorage that had some great custom homes and spectacular views. I'm sure you have areas in Fairbanks that take more expertise to evaluate.
Sellers and purchasers need to work with REALTORS that level with them. That's the bottom line.
Take care,
Kate
It is ALL about the price. I always compare the homes that I have sold with that of other competing agents by drawing a graph with my Days on Market and the Percentage of List to Sale Price compared to theirs. It is pretty compelling. thanks for the great post
Good Post. In my analysis when I make adjustments, I make them solely on square footage - everything else, in my opinion, just makes it more marketable. After consulting with my favorite appraiser, I take the difference in the subject and comparable, multiply by 1/2 of the SP/Sf of the comp and either add or subtract as the adjustment. I have this completed prior to the appt then always show on the calculator. They get it, but sometimes its not what they expected. More than that, it goes back to knowing your numbers and especially, scripts and dialogues. As I get better at the latter, the better my presentations get and the smoother the listing goes. I too give a range, usually about 10K and let them choose. Based on the saleability, it may be near or at the top or towards the bottom or less. Depends on motivation as well as other factors.
Keep up the ethics and dont be afraid to walk away.
Jessie,
So true "telling them what they wanted to hear rather than what they needed to hear" so very true.
One of my past clients gave me a testimonial that stated just about said that exact thing and he was a Dr. Now can you imagine going to a physician who told you what you wanted to hear, vs. the truth? Not me, not for a minute.
Jesse, You're 200% right on in your title. Unfortunately not every one wants to hear or are in a position to handle the truth.
I disagree with your comment that 'pricing a home is not rocket science'. Obviously it takes a little more than just a license to get a home sold and that one isn't sold yet! We present value to our clients by telling them the market price also based on our 'gut' instinct of the market demand. It's easy to just say 'yeah, we'll list with the highest price'. House ain't sold yet is it?
Oh that we could take the blinders off the seller - would be more like a miracle for some folks.
I wrote an article for About.com that covered how to choose a listing agent, and the first two points were don't choose an agent based on:
But that's the formula the public uses, and it's so wrong, on so many counts.
If you find that piece (just google: choose listing agent), you can email it to that seller. Providing the listing has expired. :)
So true! It is so much easier to tell them the truth at the beginning than to have to explain every day why no one is coming through the house.
As much as I hate the pre-signed price reduction if I can't get the seller to listen to me at the time of the signing I require them to sign the pre-priced reduction or I walk!
Unfortunately too many people go by what they want to hear, its an emotional response. Both when it comes to price with an agent, and rate with a lender. They don't often ask about what it takes to get that price, what service the agent will provide for that commission and what could possibly go wrong. Just as they don't ask lenders about experience, education, service and potential pitfalls.
Anyone can tell you what you want to hear. I can quote low rates all day long, you can quote high list prices... but unless you can deliver it is meaningless.
Hi Jesse! There's really nothing that I can add to this discussion that hasn't already been said! You are SO right and I've actually started using this very description of double-checking your prospective agents' comparables and NOT selecting the one that 'says' they'll get you the highest price. They seem to be listening a bit better these days! The truth will set you free from your home!!!
Hey, great post and awesome advice, as always, Jesse!
Jesse, an agent who tries to "buy" listings isn't doing anyone a favor. Overpriced turkeys cause stress and expense for everyone.
So absolutely true!! I have been watching a home in a very similar situation sit on the market for over a year. The owner did not like what I told them about the price the market would bear and listed with another agent. It has not sold.
I'm going to include this is my week in review. ~GBU~
You really can't argue with recent (non short sale and non foreclosure) comps. It's amazing to me that sellers ignore these numbers. I didn't just pull them out of my hat. I spent quite a while plugging numbers into an Excel spreadsheet to come up with a realistic price BASED ON VERY SIMILAR COMPS! Thanks for the post.
Great post Jesse! Numbers don't lie!!!
I think there are more over priced listings now than in past years, as many sellers are having to accept the reality of the real estate market. It is just like the stock market; things go up and things go down.
It's unfortunate but most homeowners feel that their property is worth more than its actual true value. Sometimes, the truth hurts but having the house sit on the market for months and months with an unrealistic asking price hurts even more.
Jesse, Love your no nonsense post! I'm a numbers person. I don't hesitate to walk away from an unrealistic seller.
Yep! Not only does an agent have to know the numbers, they have to be able to interpret them an analyze them. Right now, no one has a crystal ball, but it's possible to get a better idea based on absorption rates, pending sales and market trends, where I seller should enter the market. Unfortunately, too many are either unwilling, or unable to listen.
Hi Jesse, Have you seen Rebecca Gaujot's blog about you today. She tells the story of you making a banner for her blog. Very impressive! What a great story about a random act of kindess, good for you!
I do not even expect the sellers to know the value of their property, especially in fast changing market.
I had a problem in a falling market, when I called a few of my clients and told them that if they were thingking about selling, they needed to go right away, as they could sell for xyz money. They all said "no". I warned them not to call me 2-3 months later and say that they want it now, as the price would be different.
I guess, you know that 2-3 months later I got those calles, when they said "Fine, list it at the price you gave us". Well, that price was history by that time
Jesse,
I stopped by because they're talking about a volcanic eruption in AK. I'll be looking for your blog post on the subject!
Mike in Tucson
Jesse, this is a great example of what sellers need to review prior to listing their home with an agent. Great point about having a listing agent explain where their list price came from. If they did it more often and asked intelligent questions they would have less of a chance of their unrealistically happy emotions turning to stressful unhappy feelings when the home doesn't sell.
Greetings,
Great points! I think that "we" will always loose listings to those that choose to overprice and buy the listing. The good news, it will help us sell properly price properties easier AND I can't see the "overpricers" surviving very long in a difficult market. I do think that the public will eventually take notice.
Best regards,
Mike
I'm a late-comer to this post, but oh my... So true! And doesn't it suck when your own client goes with another agent rather than trusting you?