How Did You Determine That Listing Price?
February 2nd, 2010 categories: Market Trends, Real Estate News
Successfully selling homes isn’t rocket science. Or, is it?
Does a home sell itself, or is smart marketing the key? Or, is it a little of both?
While most of us realize that targeted marketing is a sound sales strategy, it is tough to sell a lemon in any market. But most would agree, rarely is a buyer willing to pay more than an item is worth, unless of course, there’s more to the item than meets the eye. But, that is seldom, if ever the case. Wouldn’t you agree?
Attempting to accurately price homes requires consideration of various factors including:
1. Home Inventory
2. Current Market Conditions
3. Recent Comparable Property Sales
4. Condition of the Property
As many who provide valuations of property will tell you, any good Comparative Market Analysis (CMA) will provide a property owner with an accurate price window for his/her property. If we’re comparing like properties, it is hard to go wrong with a CMA. But, if you’re expecting an apple to be the same as an orange, you could be in trouble! So, where do those inflated listing prices come from? The owner? Yes, at times. But, unfortunately, often, the blame lies with the Realtor.
An article in a recent Business Week reviewed William Poundstone’s new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It). In it, Poundstone examines both the psychology of buyers and sellers, and the logic used when placing a value on a product or service. The author argues that pricing is anything but an exact science. In his words, ”In the new psychology of price, values are slippery and contingent….” According to the article, many “clueless” consumers are vulnerable to the marketing or sales practice of anchoring. Anchoring, in its purest form, is the act of using of a high priced item that may never sell, in order to make a lesser priced similar item much more attractive. Often, the same manufacturer may sell two like products, one tagged with a designer name and price, the other, a “great deal” at almost half price. The “cheap” one sells like gangbusters!
Since it’s hard to ask twice as much for a similar home, overpricing occurs far too frequently. The good news is, that high price tag makes all the rest of the homes look lots better! The bad news is, the anchor model is probably going nowhere.
While pricing or valuing a home isn’t quite as easy as 1-2-3, accuracy is a result of using the proper comparable properties when determining the listing price of a home. But, if instead, you believe your property to be priceless, and list it accordingly, don’t be disappointed if you find the price you’re offered is only what the educated buyer thinks it is worth.
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Are The 5 W’s Important in Real Estate?
December 4th, 2009 categories: Market Trends, Real Estate News
We’ve seen lots written about the latest “du jour” method of communication, advertising…..and marketing. It’s called Social Media. If you aren’t there yet, they say you should be, and ultimately, will be. I know, sometimes we just don’t have much choice.
Most of us have realized, usually through trial and error, that success depends a great deal upon building a firm foundation to begin with. And, in Social Media, it’s no different. It begins by understanding who you audience is and what they want. In Social Media “speak”, it starts with the 5 W’s.
1. WHO
Who is saying things about your products and service?
2. WHAT
What are they saying about you and the product you provide? Is it good? Bad?
3. WHEN
When are they talking about you? If your business is cyclical, are you only being mentioned during the busy season? If you specialize in one area of your profession, does the discussion occur only when your specialty is hot?
4. WHERE
Where are these conversations taking place? On blogs related to your business? On other popular discussion platforms?
5. WHY
Why is anyone commenting, discussing, or examining you and what you have to offer.
There are a number of variations of the 5 Ws. Many, recently, have focused on web sites and blogs. Earlier this week, Inman News’ featured an article “The 5 W’s and your Web site“, by Robert Hahn. Other informative articles on the 5 Ws include, “Knowing What’s What and What’s Not the 5 W’s (and 1 H) of Cyberspace“, and The Five W’s of Web Site Evaluation.
Social Media platforms are useful marketing tools, and today, they’re all the rage. A careful analysis of any marketing devices and means is is not only useful, but a necessary factor in identifying what works and what doesn’t. The 5 W’s is another, and value added, method way of determining what we need to pay attention to, by identifying who may be listening, and what they’re interested in. And, if that’s the case, do you think it might be helpful for Realtors to pay attention?
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What’s “short” About A Short Sale – Part II?
June 29th, 2008 categories: Finance, Market Trends, Real Estate News, Repairs
So, despite the promise and benefits of a “short sale“, why do they seldom work? Why does there seem to be such a huge disconnect between the seller and their real estate agent, and the lender?
Unfortunately, there are a number of reasons for the general failure of the short sale process.
1) One of the biggest obstacles to a successful short sale is the lack of communication between the listing agent and the lender. Coordination between the real estate agent, who has listed the property, and the lender, or the asset manager handling the property is crucial for a successful transaction. Communication between the asset manager and real estate agent is problematic at best. In almost all short sale cases, attempts to contact the lender’s loss mitigation department or asset manager are rarely successful.
As any agent whose handled a short sale transaction will tell you, in a transaction whose success depends on coordination, frequent and easy communication with the asset manager handling the transaction is rarer than rare. Despite agent’s best efforts, it’s normally a struggle (and that’s putting it midly!) to contact the lender’s point of contact. Building this bridge between the listing agent and the lender is crucial to the success of any short sale. Without this relationship, the short sale is destined to be Dead on Arrival (DOA).
2) The asset managers are overwhelmed by their case loads. Like most of America, lenders were blind sided by the subprime mortgage mess, and are in the crisis management mode attempting to stop the financial bleeding. In other words, the lender’s employees, especially those in loss mitigation, are peddling as fast as they can.
3) The real estate community, much like the lenders on the other side of this short sale joy ride, are, in most cases, lacking the preparation needed to properly market the property in coordination with the lender. To begin the process of coordiation with the lender, the listing agent must compile a full package with supporting documentation from the seller. Rarely, if ever, will the lender even begin to listen to an agent without a complete short sale package in front of them. This short sale submission package should include, among other things:
1. A synopsis of items enclosed.
2. Completed financial disclosure.
3. A hardship letter, preferrably hand written. Remember, this the opportunity to relay the seller’s “story” to let the lender know why they’ve missed payments and won’t be able to make them in the future.
4. Purchase contract.
5. Net sheet or HUD1.
6. Proof of income for the last two pay periods.
7. Copies of last two bank statements.
8. Copies of last two years tax returns with W-2s and 1099s.
9. Third party authorization form.
Some additional items that may be helpful include, a Broker Price Opinion (BPO) or Comparative Market Analysis (CMA), neighborhood foreclosure stats & proof of active listings in the area that are priced low but aren’t selling. All of these will assist you in presenting the seller’s case to the lender.
Pricing the property correctly is another must. A simple method is to take the low end of the comparables, and price the property $10,000-$20,000 lower. It’s important to price the property to peek interest, but the pricing needs to be realistic as well.
An opportunity for a short sale is beneficial to both the seller and lender. For both parties, it’s an escape from a difficult financial predicament. The seller unloads a property they can no longer afford, as does the bank, with minimal damage to the credit rating they need for future investments. The bank, unlike a foreclosure, can avoid managing a property, and unload one on much better terms than if foreclosed.
With the attractions of the short sale option, we can only hope the practice gets much better before the window of opportunity for this “bargain” creeps closed. There’s work to be done on both sides of the transaction. For lenders, establishing a routine and regular avenue of communication with the real estate agent listing the property is a necessary first step. For agents, taking the time to learn the steps necessary to comply with lender requirements might make the coordination process on the other end a bit easier to navigate. In either case, progress is measured in dollars, not finger pointing. So, what are we waiting for?
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