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SAY NO TO 9’s!!!
Why do my fellow Realtors insist on continuing to use the 9’s in their pricing in today’s market? $499,999, $599,000, $649,900, $254,900 – you get the picture. It may have worked in the days prior to the internet, search engines, etc., because the price of the home was less than it’s rounded up number. But today it may be the biggest mistake a seller and Realtor can make in marketing a home to a buyer, today’s buyer. But then again, most Realtors and sellers forget to realize that they are marketing a home to the buyer and not for themselves.
Today’s buyers go to the internet first for their real estate search. We get that, but what also must be gotten is that when marketing a home to that buyer you must consider their search habits. Searches by buyers although limitless in scope are limited to search engines parameters. Search engine parameters for properties are set in 0’s, 25’s, 50’s and 75’s. (ex. 300-350k, 450-475k, etc.) Because of that, home marketing today must fit to those guidelines. When a home is priced at a “9”, their market is limited to those who search within only that price range. Whereas, if a home is priced at a 0, 50, 25, or 75, the home now encompasses two markets, those looking up to that price and those looking above that price.
It is common marketing sense. A home priced at $399,999 will only be seen by those looking up to $400,000. Whereas, a home priced at $400,000, will come up for buyers searching up to and above that price point. Exposure is the name of the game in any marketing and opening the house to two markets doubles the number of hits on the internet, which in turn brings in more offers and higher prices. It’s Economics 101! It allows a buyer in the above 400k price range to compare that home to the others and just may find it to be the perfect home for themselves. If that home was priced at $399,000, that perfect buyer (and it only takes one buyer) would of never had the opportunity to find their home and for the seller never to sell their home.
Conversely, and using the same price point, if the home was priced at $401.000 – 414,900, the buyer searching up to $400k would have never seen the home either. And although the buyer was not looking over $400k, they just may of come up with the funds to buy it for a little over that mark. Especially because a home purchase is 90% emotional anyway, buyers will figure out a way to get it. Plus, in many cases a home priced just above 400k, may really be worth under that mark leaving the true buyer of the home out of the loop.
All told, and in today’s real estate marketing searches, $414,900 and 394.900 is the same price as $400,000. Yes, the same price. (And, don’t get me started on those homes priced at the “..55” mark.) Real estate is not a gallon of milk or gas where the number nine is still a marketing tool to give the impression that the price is “less than”. The odd numbers in real estate marketing do not apply. It may sound cute, it may give the seller the thought that it gives some negotiating wiggle room, etc., but the buyers are not fooled anymore – they have too much information at their fingertips. Buyers look at one thing, value for their real estate dollar. They are not looking to steal a home, they are looking for value. Unless a home shows value for the dollar as compared to others, there is no sale. Plain and simple. And for those sellers, that do not want to underprice their homes or do not want to give their homes away, remember, a seller may set an asking price but the buyer sets the value. A home that is overpriced will not sell and by trying a price and then reducing it to find a buyer, results in chasing the market and selling the home for less than what it would of sold for if priced right in the first place. And as far thinking you have underpriced a home, the public will answer that question by creating a bidding war, which would drive the price to is market value anyway Personally, I’ll take a bidding war over no bids any day, wouldn’t you?
But all of this begins with a pricing strategy that encompasses hitting two price target markets as part of the overal marketing plan. Which will you choose?
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Home NOT Selling – Have an Edge
To differentiate one product from another, you need an edge. (I know, Derek Jeter has an edge.) You see it in car dealerships whether it is a “no money down” lease or lower interest rates, you find it in foods stores when you receive a free drink with the purchase of a sub, retail stores with their BOGO’s and even mortgage companies that promote 0 bank fees.
It can be the same for a house sale. As the inventory of homes continue to grow, and the buyer pool either remains stagnate if not lessening, there must be something other than the price of the home, its location, or its condition to attract the limited number of buyers. That something is an incentive to buy one house over another. Selling a home is no different than selling any other product.
The following are some ideas that have worked for my clients for years in selling their homes faster and for more money:
Closing Costs. Saving money for a down-payment on a home is difficult enough, especially for first-time homebuyers, then adding on another 2-3% of their purchase price towards closing costs may make it cost prohibitive. As a home seller, you can offer to pay for a portion or the entire amount of closing costs of the buyer. It allows the buyer to use that extra money for the down-payment, which may just give them the flexibility to offer a little more for the home of their dreams. In actuality, no money is exchange. The proceeds to the seller is diverted towards those costs and the buyer is financing that amount. This would raise their mortgage payment by just small amount but alleviates the up-front costs. (Note: Any give-back to buyers cannot exceed 6% on a 80%LTV loan & 3% for any loan above the 80%LTV)
Real Estate Taxes. Since we all live it, New Jersey has the highest (or nearly the highest) real estate taxes in the country. The difference in many contiguous communities vary greatly, resulting in similar home’s selling faster in one town over another. If that is the case, a seller may consider paying a portion or all of the first year’s real estate taxes on behalf of the buyer. This could be in the form of a reduction in the selling price, a credit at closing, paying the town directly, or paying the three to five month tax escrow collected by the lender.
Mansion Tax. New Jersey keeping to their tax state name, adds a fee of 1% of the purchase price to be charged to buyers who purchase a home for one million dollars ($1,000,000) and above. By having the seller fully pay or a portion thereof, via the proceeds of the sale, will give the that particular home a better look at than one that is not offering it.
Home Warranty. Offered by most real estate companies, a Home Warranty is an insurance policy that covers many of the homes inter-workings such as: plumbing; HVAC; electrical; water heaters; appliances; etc. With just a small deductible, these items will be repaired or replaced by a licensed contractor and are covered from the day it is applied for and for a year after the buyer closes. The cost to the seller is between $450-650 based on the coverage, but only paid from the proceeds from closing. This incentive gives the buyer a comfort level in their purchase and has proven to sell homes for more money and in a shorter time period, and again with really very little cost to the seller. And it covers the seller until they close.
Maintenance Fees. Whether a co-op, condo, townhouse, PUD, lake community, private community, etc., there are fees involved in the form of maintenance fees, lake fees, or the like – adding yet another monthly expense to the buyer. By offering to pay a full year or a portion of it you will attract buyers over your competition. That can be done by sending the Association for said amount.
Renovations. If you are willing to and a buyer is willing to wait, renovate or partially renovate rooms that they would like done or give the buyer a closing credit for the same.
But wait, there’s more! Be inventive with your incentive by determining what buyers are finding detrimental to your home. You Realtor should know as well as prospects that walked through your home and has willingly given constructive feedback. But whatever the incentive, be sure to advertise wherever possible, so that the buyer will see it.
Incentives that do not work. Adding a Realtor bonus may incentify an agent but it does nothing for a buyer and cannot be advertised as such. Remember you are attracting buyers.
The best incentive to give a buyer. It always comes down to price. Price it right and the incentives are not necessary but they do help.
Looking for more incentive ideas or any other real estate questions please contact me anytime at 201.317.7527.
LET’S GET READY TO RUMBLE!
In the past several months I have been involved with several bidding wars on homes, representing both buyers or the seller. Most of the are in the price range of $250-400,000. Is it a good sign – yes? Is it the sign of the times – maybe (at least for the immediate future).
The good news to report is that many (not all) sellers are pricing their homes to sell (or under-pricing their homes to produce bidding wars) and all the owner-occupant buyers on the fence are coming off the fence, as well as investors and flippers. The competition is fierce. They see value in the right priced home as well as finally taking advantage a favorable interest rates, fence-sitters become fence (and house) buyers, whereas, the investors are paying cash. Conversely, inventory is low, driving prices up a tick and multiple offers on the little inventory there is, ticking them even higher.
Getting back to bidding wars, both sellers and buyers need to know what to do if you as a seller is lucky enough to have your house as the subject and the buyer is unlucky enough to be involved in trying to attain the home.
Seller. Without a doubt it is exciting to have your home as the subject of a bidding war. It is obvious that your home was fully marketed to enough of its target market through various Multiple Listing Sites (more than one), a slew of web sites, blogging, social and business networking, mailers, newspapers, etc., as well as pricing either at market value or just below it (yes, just below as it brings about many bids and sell for what market value is).
Because a seller has the upper hand in a bidding war, the seller can control the outcome of the final price and conditions. Seller should beware of the highest bidder. The highest bidder is not always the best of the bids and a seller must use their head and not their pocket to decide which offer to accept.
Multiple offers can come in at anytime during the selling process and actually by law, can be presented to a seller up to the moment they close with a buyer. However, in most cases, multiple bids come in when a property is first listed. When they do occur, the seller with their Realtor (and hopefully one who has had experience with them), should review each offer carefully. Do not get caught up in the hoopla as it is a business decision you must make to take the right offer.
Specifically speaking, with your Realtor, review the conditions of the contract: price; mortgage amount vs. all cash; down payment; closing date; items included in the sale; home inspection time limit; and additional contractual conditions, which may include a house to sell contingency, or the like.
From there go back to the bidders with a counter-offer, or ask them to enhance their offer. Try to avoid asking them to come to their highest and best as in my experience, there really is no such thing. It is better just to come back with a counter. If the offers are at full price, revert back to enhancement or you can actually, come back with a price that is higher than the asking price (just be wary of what it is as it may just turn all your bidders away).
The respondents will either not budge from their price, come up to a price, or just walk away to avoid the hoopla. Some may ask for the other offering prices, and although the Realtor Code of Ethics (if you are using a Realtor), with written approval by the seller, requires that the existence of other offers are present be disclosed, it does not require that the other offering prices are. As a moral and ethical standpoint, I believe that the prices be kept quiet. At that point the counter-offers are presented to the seller.
Once that has been done, revisit the contracts for a second time. If they are close, take the second highest offer – not the highest. In many cases, when the highest bidder wins they will either back out because they believe they may have paid too much, what is known as buyer’s remorse, or they will do what they can to make up the difference of what they wanted to pay, through the home inspection issues. And then there is the issue of the home appraising for that highest price (of which we are finding to be a stopping point for a good number transactions today).
Whereas, by choosing the second highest, the buyer is more apt to stay with the purchase and not ask as much after the home inspection. Giving the seller more control on the buyers requests. It must also be noted to the buyer that they already had an equity increase in the home they went into contract before they even close, as someone was willing to pay more, resulting in a higher value than their purchase price. Plus, the appraisal process becomes more affable.
When the seller has made their choice, I advise that they keep the other offers as back-ups just in case the negotiations fall through.
Buyers. The buyer is most stressed, especially if this is “The House”. Some buyers have to buy 3-4 homes before they actually get a home However, it is a lot simpler. Make your initial offer, look at the seller’s counter-offer, and come back to them with yours. Then do not let the hype take over and make your final price one that is not over your head. be sure to get the assistance of a Realtor who will give you comparables of like homes in the area and in many instances, keeping you grounded. This will give you the information for an intelligent decision. You can ask your Realtor for assistance of a purchase price but keep it in a range instead of a definitive price. (Remember, although they know the market, they are not buying the home, therefore, the value is in the buyers head more than the Realtor).
I suggest you add a letter of praise to the sellers and desire to purchase their home, to be included with your offer. There have been some buyers that have used video to let the seller know they love the home. The video may hurt more than help as the seller may not like what they see in the video. (It sounds wrong but people still do discriminate) If you win the bid, good for you. If you do not, leave your offer as a back-up and keep looking. It may have not been meant for you anyway or the other offer may fall through and therefore, you still have a chance.
Overall, multiple bidding can be stressful for both sides and getting the assistance from a Realtor will keep your emotions in check while giving you a representative that will work hard for you and your real estate goals
Buyers are Liars & Sellers are Yellers
Ever since coming into real estate (1985 for me), my colleagues have always warned me, “buyers are liars and sellers are yellers.” Some still believe it to this day. My take is completely different “buyer are buyers and sellers are sellers”. Pretty simple.
BUYERS ARE LIARS?
“Buyers never tell you exactly want they want. They do not want a townhouse and they buy a townhouse from another agent.” “Buyers tell you they are qualified to purchase at a certain price point when suddenly after making an offer, they do not exactly qualify for their purchase.” “They want just a certain town or neighborhood and would never live in that area and yet they end up buying in that area”
Those statements have been said by agents for years and years and yet it is not the buyer that is the liar, it is just because the buyer just does not always know where they want to live, how they want to live, or may have a misperception of where they can afford to live. It really takes a Realtor working closely with their client and cares enough about their client to go through a discovery period to decipher all the parameters of that client. A Realtor must ask the right questions, and show a smattering of houses and areas. It also takes the buyers to be honest with themselves and their Realtor, to understand what they can buy at the time. A buyer cannot expect the perfect house nor the perfect location, but they should not feel they have to settle for a house either.
A good Buyers Agent realizes that buyers can be a fickled bunch when they begin but in the end, with a Realtor that listens, really listens, the buyer will find the home that they want, not what the Realtor assumes what they want.
SELLERS ARE YELLERS?
“My agent is doing nothing!” “My agent does not bring anyone to my house!” My agent doesn’t advertise enough.” “My agent over (or under or mis-)priced my house!” “My agent never calls me!”
Valid thoughts from the seller? More perception than realty in most cases some and totally correct in a much smaller percentage. One statistic has held true – 70% of sellers whose home listing expires, do not re-list that same agent, instead vies for another agent and agency. The main reason why has nothing to do with the home not selling, but rather how the agent approached the entire process. A bad agent will love a seller to get the listing and leave that seller after they have secured it; otherwise the majority of the agents do what is necessary to get a house sold. However, in most cases the seller has no idea what the heck their agent is doing unless they happen to stumble upon an ad in the paper or a posting on a website.
The majority of home sellers’ biggest complaint is that the agent never communicated with them. The key to a great listing agent as well as their obligation to the seller, is that they keep in constant contact with the seller at least once per week and stick to it. That weekly call should include market updates, showing follow-ups, what actions the agent has taken to promote the property, and a frank discussion of where all of it relates to the subject property. And that communication should happen even if nothing happens that week. If an agent can keep to that discipline, the yelling very rarely happens. If you can find an agency that guarantees it or they will be fired, even better. (ask about the Coccia Performance Guarantee). Accountability is the key to success.
REALTOR OF YOUR CHOICE
In either case buyer and seller, choose your Realtor wisely. Interview several Realtors, even if you know someone in the business. Your relationship with a Realtor first and foremost should be a business decision. Make sure they understand your needs and conversely, listen to what they are saying to you. They are the experts and they represent your best interest. Together you should be able to accomplish your real estate goals.
