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Tips for Sellers

1. How do I determine the best price for my house?
2. Is there one factor that determines price?
3. Should I price my home similar to those homes listed close by?
4. Should I price my home high and test the market?
5. What is "Computer Shunning"?
6. Why not list high and hope for a buyer that doesn't know prices?
7. What if I need a certain amount of money to sell?
8. Is the cost of my improvements equal to what I can get for them now?
9. How do I justify my price to the buyer?
10. If my house sells in the first week, did I ask too little?
11. I have some expensive improvements to the house. Should I include them in the listing?
12. Should I invest any money in the house before I sell it?
13. How important is it to keep the house clean and clutter-free for each and every showing?
14. What should I do if I get a lower offer?
15. Is advertising the key to selling my house?
16. What happens after we list the house?
17. Should I sell when prices are less than they were two years ago?
18. Should I sell when prices are increasing?

Surprisingly, this question is easier to answer than a person may think. Your realtor is going to provide you with a form called a "CMA" or Competitive Market Analysis. This form is going to have three things in it that I want you to look at, and I want you to study to determine the best price for your home.

Category 1 is "homes just sold."
This area is the most important of the three because these are the homes where there is an actual meeting of the minds between buyers and sellers. The buyers agreed to buy at a certain price, and the sellers agree to sell at that price. When you look at this form, look at the features in those homes, the location and the date they sold to help you determine the best price.

Category 2 is "current listings."
These are properties that are going to be in competition with your property. At first you might feel that you are going to price your home exactly where they are. But that raises a question. Look at the form and see when those properties were listed. If they were listed 60, 90 or even 120 days ago, and no buyer has sought to purchase them at that price, then be leery of their price and back off somewhat.

Category 3 is "expired listings" and is just as important. Sometimes realtors have a difficult time finding these listings, but these are the properties that were on the market but did not sell. It is important for you to look at these, because if the properties did not sell at their asking price, then you do not want to get near that price. If you do, you will end up in the same situation they were in which is "expired listings."

The thing you must do is be competitive with other homes on the market in price and condition.

Yes, there is, and it is the "Sold List" on the CMA form. You see, the "sold list" is the only list where there was an agreed upon price between buyers and sellers. Yes, those properties may have been listed higher to begin with, but buyers have agreed to buy at a certain price, and sellers have agreed to sell at that price. It is the only list that determines true market value at this time. Now, there are two things to be aware of:

1. Look at the dates of those sold. If they were six months ago, nine months, or even a year ago, you may be able to price your property somewhat higher because of time.
2. I want to tell you this at the beginning. You are going to be somewhat disappointed when you see that list. As sellers, you are probably looking at current listings as market value; but current listings are not market value. They are only the value that is set by the seller. The "Sold List" is the only list that will determine true market value for you.

I am not going to recommend that, and I'll give you some specific reasons why not. It turns out that the first one to four weeks of the listing period is the most important in the listing period. Here is why. A few specific things probably happen during those first four weeks.

1. Your home is put in a computerized multiple listing system by the realtor.
2. There is an ad in the paper, maybe on your house and similar houses.
3. There is going to be a tour by other realty associates so they know the house exists.
4. The sign will be put up.

All of these marketing techniques expose your home to buyers who are already out in the market. You see, before you listed your home, there were many buyers just waiting for a home that is priced right, in that location, and a home that has those features. Those buyers are waiting for your home, and if you price it right at the beginning, you'll get the best possible sale when that happens. If you test the market and try to price it high, it works against you.

Buyers are pretty astute. They know the general value of homes in your area, and if yours doesn't fit, they move on. Many have buyer's agents that do a Competitive Market Analysis (CMA) for them as well.

My experience is that homes that have been on the market for a long time typically bring less than market value.

This is not a question normally asked by a seller, because they are not aware of it. Let me share an example:

Let's say that an out-of-town buyer comes into town and is financially qualified for a home between $230,000 and $250,000. Let's also say that your home has a value right now of about $245,000, but you have decided to overprice your home at $259,000. When realtors go through computer listings, they pick out the best homes in the $230,000 to $250,000 range. Since your home, although valued in that range, is not in that range, the computer actually shuns you. Those buyers never have an opportunity to see your home.

Here's the answer. Yes, it is possible that you may get an out-of-town buyer that comes from an area of higher prices. They come into your area, see your price and decide to buy it right away. It all sounds good, but, unfortunately, it never works. Here's why. About 95% of all homes are financed. The lender always asks for an appraisal of the home, which the buyer pays for.

To prepare the appraisal, the appraiser looks at homes sold in the area, not what homes are listed for. The appraisal is the true market value. If, in fact, your home was priced $5,000, $10,000 or $15,000 over market value, but the buyer still agreed to buy at that price, this is what can happen. Since the contract was based on a financial contingency fee, the buyer can get out of the contract when the property does not appraise for that amount, and by that time, they usually do. Now your problem is that it's 30 or 60 days down the road, and you thought you had a contract that you no longer have. You may have made your own commitment which now has to be reversed. Again, I don't want that to happen to you, so I want you so know the true facts.

This is probably the worst spot that you could get yourself into, and I do not want you to do that. Here's what happens. Sellers over the years have told me, "I need $60,000 (or $80,000 or $150,000) to get out of this home. When I ask them "Why?" they always say it's to reinvest in their own business or maybe to get a home of higher value. These are all good reasons, but "need" has nothing to do with market value.

At the beginning, a lot of sellers base their need on what properties are currently listed for, not what they sold for. What I want you to do is not look at need based on a current listing. Instead, look at your need based on true market value. Then, if you find out that you need more money, get it from another source. Your need won't make your house worth more.

If the cost of the improvements is low, you can always get them back. Let me share some examples:

If you put a few bushes out front to improve the landscaping, you'll get that back. If you paint the inside or outside of your home (even one room), you'll get that back. The areas of more difficulty are where you have added a fireplace and maybe added a room or a garage or an in-ground pool. In many cases, you might not get your money back on these improvements.

Here's what I want you to do. With your realtor, discuss each and every improvement you had to see what value there is. Money spent doesn't always add the same amount of value to your home. You are going to find that value is not necessarily going to be in the improvement, but sometimes in how fast you sell your home. You see, if your home has a fireplace and others do not, it may not add full cost to the value, but people may buy your home over another home that's listed that does not have that feature.

The answer to this is simpler than you think. You don't have to. When a buyer is considering price, all the realtor has to do is show them the Competitive Market Analysis (CMA). The "Sold" section shows the price that buyers have offered. Once that is done, buyers realize that your asking price is true market value, and they offer you at or close to your price. It means a quicker sale for you.

The answer is "Absolutely Not!" Here's what happens. If you price your home at market value, then the buyers are already out there. There are certain buyers in the multiple list system who are working with realtors right now. They have looked at a number of homes, they want a home that has your features, and they want a home that is at market value. When your home comes up on the market place, and it comes up through the multiple listing system, they are waiting for it. If it is priced right from the beginning, they are likely to buy it right away because they know its market value.

One warning here:. Sometimes when you have a home that is about to sell the first weekend, you may even get multiple offers. Some sellers with multiple offers feel they did price it too low. Again, you did not. You priced it at market value, and the buyers were out there. They were sharp, and they were smart. They were ready for a house at market value, and they decided to buy yours.

My answer to this is, "It depends." Do you want these items or not want them? Let me share an example: Let's say that you have a portable gas grill that's top of the line, it's beautiful, it doesn't have to come with the home because it is portable. If the buyer sees that portable grill, they may decide to include it with the offer to purchase.

So here's my recommendation. If there is something that's expensive and personal in nature, box it up, cover it up, get rid of it right now. Don't allow potential buyers to see it. One of the simplest examples I have ever seen is a very expensive chandelier in the dining room. The sellers really wanted to take it with them. As soon as the buyers see it, they fall in love with it and they want to include it and not pay for it. I highly recommend if there is something like the expensive chandelier, replace it with an average one right now so the buyers never have an opportunity to see it.

The answer is "absolutely!" I'm going to give you four recommendations: I want you to paint it, fix it, clean it, and remove it. If you remember those four things, you'll do fine to make sure you get the most money for your home. Let me give you some of the details.

1. "Paint it." Paint is one of the cheapest things you can do to get the best return. I'm not asking you to paint your entire home inside and out. But if there is any room in the house, any room at all, I want you to repaint it if it needs it. Of course, an example of this may be a teenager's room that has been painted a very unusual color. It's fine for that teenager, but remember that the teenager is going to be moving out. So I would paint it a neutral color. Look at each and every room in the home and paint it if it needs it.
2. "Clean it." You know people are stuck in model homes, and I want you to do everything possible to really clean that home up. Vacuum everything. Vacuum from basement to garage, to the first floor, to the second floor, and even the attic. Clean everything in that home so it shines. This applies to walls, draperies, floors, carpeting, everything. Clean it. If you do not want to do it yourself, hire a cleaning service to come in for a couple days. But clean it. Buyers love it!
3. "Fix it." The third thing is going to be "fix it." Fix it means to fix anything that needs fixing. It could be as simple as squeaking hinges on a cabinet or just fixing a leaky faucet. It may mean fixing a disposal or even a dishwasher. Whatever needs fixing in your home, make sure you fix it now. Let me tell you why. When a buyer comes through your home and really likes it, but all of a sudden, there is a leaky faucet, or the disposal does not work, they are going to immediately start taking money off your asking price. You don't want that to happen. I know for many of you, there may be something broken in the home that's been broken for years Well, now is the time to fix it. A small investment now is going to be a big return to you.
4. "Remove it." I know this is going to sound unusual, but here's what I want you to do. I want you to go to the moving company that you are eventually going to move with and ask them for about ten or twenty boxes now. After all, you're going to be moving in the next couple of months anyway. I want you to remove anywhere from one-quarter to one-half of everything you have in every closet. You know, people love closet space, and yet I know there are many things in the closet you just don't need now. So get those boxes out and "remove it." The same thing is going to apply to kitchen counters and bathroom counters. Anyplace you feel there is too much clutter, remove it now.

If you remember these four items, you are going to go a long way to spending just a little bit of money to make sure you get the maximum return.

The answer is VERY IMPORTANT. When you were looking at homes, were there some you were in that just didn't feel good? Did you buy one of those? I tell all my sellers to visit a couple of "model homes" before they put their home on the market. Then make their home look as close to the model homes as possible. Make beds, turn on lights, clean kitchens and baths meticulously, bake some bread, mull some citer, pick up toys and clothes, open blinds and drapes to let light in, and mow the grass. It pays dividends.

Buyers know that you have to live there, but the attitude conveyed to them with a positive showing often makes the difference. Don't waste any opportunity.

In today's market, a lower offer does not carry the same connotation as in years past. So as a seller, you want to maintain all the objectivity you can. Before you respond, put yourself in the buyer's shoes. Most buyers simply want the best possible deal, and the only way they can feel good about it is to make an offer. The most important thing they are telling you is that they can be happy living in your house. All that remains is getting together on price and terms.

When I get a low offer on one of my listings, my hair always bristles. My first reaction is very emotional, and I'm not even the owner. I can't condition myself out of this response, so I know you can't either. My conditioned response is, "What is the buyer trying to tell me?" Invariably it boils down to, "I want to buy your house if we can agree on price and terms." Then I take a calm, calculated approach to determine if we can get together.

The answer is "yes" and "no." Where sales come from breaks down in the following manner: Advertising 8-10%, Signs 16-20%, Open Houses 8-10%, cooperation and realtor contacts 60-68%. Advertising does help. Your realtor should advertise your home, or one in the same size/price range, consistently. A survey recently showed that less than two percent of people who call in about a home actually end up buying that home. Advertising does help sell homes, but it's not as important as the realtor's total marketing effort.

There are a number of steps that happen, and you should be aware of all of them.

1. The first step is going to be marketing of the home and "selling" the potential buyers.
2. When that is concluded and you find a buyer that is interested in your home, there will be contract negotiations and contract signing.
3. Once that is completed, your buyer is going to go through the financial approval process. To do that, the buyer is going to make an application.
4. Once they do that, there will be a formal appraisal of the home so the lender can verify that the home has that value.
5. After that is done, there will be a number of paperwork items-things like buyer income and debt verifications, and some home inspections might be done.
6. After that, you are going to have the buyer approval from the lender. Very quickly after that, you will have the actual closing.

What I want you to do as the seller is to review these steps with your realtor. You are going to find some local differences, and you are going to find some things that you want to know more about, so please do that.

I am going to recommend "Yes," and here is why. To explain this, I will give you an example. Let's say, for instance, that two years ago, your property was worth $170,000. But now, two years later, the market has decreased, and the property is worth 10% less, or $153,000. Let's also say that you are going to move up 50% which is what the typical American family does. That home that you are going to move up to would have been $250,000, but because the market has decreased, at 10% less, it is only going to be $225,000. What has happened is that you have lost $17,000 but gained $25,000. In other words, you are saving $8,000 by selling low now, but also being able to buy low.

This is something that a lot of sellers do not understand. But I will tell you this: When you are thinking about moving to a higher priced home when the market is low, sell now and buy at today's prices. It will be worth it for you.

Surprisingly enough, the answer is the same as when prices are decreasing. The answer is an emphatic "Yes" if you are buying a property that is worth more than your property right now. Let me give you an example. Let's say that your home is worth $170,000 right now, but you believe that in the near future it will be worth 10% more, or $187,000. Let's also say that the home you are about to buy is $250,000, and after that same 10% inflation it will be worth $275,000. What you have just done is lost $17,000 by selling now in an increasing market while saving $25,000 at the same time. The net savings to you is $8,000. Even if the market is increasing, you should sell your home now.