REALTOR

The Five Stages of Real Estate Grief

September 11, 2008 by admin

There are three factors that determine the sale of a home.

Location

Condition

Price

What good news! Why? You have nearly complete control over 66% of what sells a home. Granted, you cannot change the condition of the surrounding properties or the type of construction of your property. I mean, you could raze your house and rebuild a completely different style home, provided your HOA didn’t prevent it, but then you’d be throwing good money after bad as you created a home that didn’t fit the surroundings. The condition of the surrounding homes has mostly to do with location anyway, so you really do have control over most of the consumer response to your home.

There are five stages of grief that, if you are not in touch with reality, you will traverse throughout your experience selling a house. Why is this? Well, selling a home isn’t like selling off your possessions at a garage sale. Garage sales are usually designed to eliminate junk. Your home is a very personal space, and you’ve grown very attached to it, most likely.

My job is to provide you with the right information to help you make an informed decision about how you should price your home, and what you can do to improve its chances of selling.

In todays market, of the determining factors that you can control, price carries the most weight, and many sellers have fallen victim to “rear view mirror” thinking. Newsflash! The gig is up. We have to price our homes in line with what buyers are willing to pay. Remember that the value of a home is determined upon close of escrow. Asking more than it will sell for does not declare the new value on the block. The actual sale price of a neighboring like property combined with an appraisal is what is going to help you price your home properly.

Stage 1: Denial. Nobody is exempt from feeling this if their expectations are out of line. Not even real estate agents these days are pricing their properties realistically. If you enter the transaction with a realistic outlook on what your home can actually get in the marketplace, you’ll be able to avoid the denial that accompanies the let down after your property has chased the market.

Stage 2: Anger. Obviously if you’ve felt the loss of thousands of dollars (albeit on paper only, which makes the situation even crazier because you never had the money in the first place) then you’re going to experience all five phases. To what degree is determined by how quickly you can bounce back from fantasy land. You will be angry about waiting too long to sell. You’ll be angry when you realize that your Realtor was right when he/she recommended a much lower price bracket than you insisted upon. Get over it. It’s time to sell your home. Make the adjustments now and minimize your losses (remember, that didn’t even exist in the first place.) And, if you are actually experiencing more than just losses on paper, that’s all the more reason why you should price your home right, the first time.

Stage 3: Bargaining. Through your anger you’ll find yourself justifying why things are the way they are. You’ll begin to think things like, “If only I had.” “Maybe if we try this we can still salvage our…” Nope. You’re where you are now, just get it sold. Listen to your Realtor. He or she does this every day and sees people go through this process all the time. Trust us, we are here to help you move on with your lives.

Stage 4: Depression. This is where you’ll want to give up. Perhaps you might even consider taking your home off the market because you’ll find no point in selling. Most people can’t afford to hold two or more properties. Lots of people can’t even afford one property these days, especially after getting into the financial trouble that lenders allowed. You may even want to let your Realtor off the hook and find someone else to sell the home. Trust the Realtor you have. If he’s done his homework and is working hard for you, stick with it. We dread working our tails off to be a victim of the fourth stage of grief, which usually ends in you finding another Realtor who advises you to drop your price only to sell where your first Realtor had already suggested you price your home.

Stage 5: Acceptance. If you’re a healthy person, you’ll probably make it here quickly. In fact, if you’re a healthy person, you will probably avoid this entire process of grief through the idea of losing your yet unrealized equity gains in your home.

I can’t stress enough how important it is to price your home to sell. If you’re serious about selling your house, think about the cost in your lives of the process of selling. You may own two homes, you may have added utility bills through the process…you name it. The cost of pricing your home too high can last far longer than it’s worth. Your time is important. If you’re not actually serious about selling your house, then you probably shouldn’t list it at all.

Are you happy with your real estate situation? If not, please give me a call and I’ll help you move from point A to point B in as few steps as possible so you can go about the business of living and enjoying your life.

Experience the Second Advantage

July 14, 2008 by admin

Experience the Advantages of working with a Realty Executives agent.

No. 2: Peace of Mind

When you work with an “Executive” you’re working with one of the best REALTORS in the business. Not only will you always feel like you’re my only client, you’ll feel a peace of mind that comes from doing business with a company that practices the highest standards of professionalism and integrity. And, since I am equipped with the tools, information and support I need to make the most of our relationship — as your Executive, I will be by your side serving you throughout every step of the entire process.�

ARMLS Blackout to Occur in July

July 12, 2008 by admin

$Don\'t get caught in the dark!$ Don’t panic. It’s not really a blackout, but for the days July 25th, 26th, and 27th, no changes will happen in the MLS system at all. Your Realtor will have full search capabilities and you’ll be able to see your Portal, but during that time, no changes will be able to occur.

What does this mean? No new listings, no new photos, no price modifications, no pending changes or active with contingency changes…

…basically, the database becomes READ ONLY during this 3-day period.

Do You Want to Sell Your Home or Not?

June 24, 2008 by admin

As though we haven’t heard this plea enough, it’s time for sellers to let go of unrealistic expectations. There are too many people who are testing the market and aren’t serious about selling their homes and many of them forget that they aren’t the only one taking the hit. When we list your home, our job is to market the home. We will put it on the market for SALE, not for tour, not for show…for SALE. Right now, more than ever, price is driving the sale of the home.

Supply and Demand

My goal as your Realtor is to analyze the market in your area and help you determine what the most realistic asking price for your home should be. It’s up to you to set the price. It’s up to me to point you in the right direction.

Supply and demand are the two opposing forces that are intertwined in the process of determining the right price. Typically, when you increase the supply, provided that it is not a response to increased demand, the price of the item falls. There’s more of it, so the consumers have more choices, and they can afford to shop for a lower price. If you decrease the supply, as long as it’s not in response to changing demand, the prices tend to go up because there are more buyers than there are items for sale. (To read my quick article describing supply and demand, please click here)

Is it possible to artificially affect pricing without affecting the supply? Yes, but it requires artificially altering consumer demand by offering incentives or specials, or conveying a sense of urgency for the buyer.

Is it possible to artificially affect demand by changing the price? Yes. How? Lower the price. If you offered a gallon of gas at 50% of the surrounding competition’s prices, you’d artificially increase demand for gas in that area. The problem with this is that the gas station won’t make any money, so lowering the price too much is not in their best interest.

Is it possible to increase the value of a product by artificially inflating the price? In other words, if I want to sell my peanut butter for $1.00 more than all of the competition, will that increase demand for my product? Will it increase demand for the product that’s $1.00 cheaper? No, and no. Increasing the price of a product that is competing against less expensive products is not going to increase demand for higher prices.

It is our job to get the highest price that we can for your home. We cannot do this by pricing your home higher than the competition, no matter what the condition of the home. Even if the home has upgrades, the price you set may be too high for the area to bear.

In order to sell a product to a consumer, the price must be right. Your neighborhood is like a grocery store filled with products. Those products are homes. When you shop in the grocery store, you look for the best products at the lowest price. Sometimes you pay more for a better product because it has 10% more!!! Sometimes you pay more because of the brand name. Sometimes you settle for bargain basement prices because name brand aspirin is the same as the local grocery store aspirin, and you just don’t care. But, if you find a product that is clearly over priced, it is guaranteed that you’ll pass it by with only a glance.

Manufacturers spend millions of dollars every year to market these products to you. Realtors also spend their money on your home to make sure that it is marketed as effectively as possible. If you, the seller, set a price that is too high, you may generate interest in the product simply because it’s on the same block as more realistically priced homes, but nobody will buy it, especially when three other identical products down the street sold at a price far lower than yours.

“But our house is upgraded.”

There is a very clear difference between a home that is upgraded and a home that simply has new features that are already expected. Is it really upgraded, or is it just more sellable? Just because a fixture is new, or tile has been laid doesn’t mean that you have a home with upgrades. What it does mean is that you have a clean home. What makes those items upgrades? The quality of the items. New linoleum is still linoleum. It doesn’t increase the value of your home nor will it command a dollar for dollar investment recovery at sale. A pool is a great feature to have, but what type of pool is it? Is it a pool that most people expect, with a diving board and/or decorative rocks surrounding the perimeter, or is it an enlarged spa? In Arizona, in the 200-300K price range, a pool adds about $5,000 in value. Sometimes more, sometimes less. This really depends on how many homes in your sub-division have pools. In some countries, as you can see in the illustration, pools are in very high demand.

Paint is not an upgrade. An air conditioner just like the neighbor’s is not an upgrade, even if it was installed yesterday. Sure, it’s new, and that may influence whether or not someone will consider your property, but it will not support a higher price. It is a deferred maintenance item. An air conditioner twice the size of the surrounding neighborhood could be considered an upgrade, unless you’ve upgraded yourself out of the market.

Basically, anything that is expected to be in a standard single family home in the 200K – 300K range will only add to the sellability of the home, not the value.

Be careful when you spend money on your home, because some items don’t fit. A 6-Burner Viking Gas Stove in a 300K Home with Corian counter tops and laminate floors won’t increase the value of your home. It will make it sell faster, true, but you won’t recover your costs. Nobody expects there to be that high of an upgraded item in your home. Consider upgrades to be vast improvements over not just the condition of the previous item, but also the quality. The items you perceive to be upgrades may only be what you believe to be upgrades and the rest of the world may expect more.

The Bottom Line

Your house has an inherent value to someone. Until the home closes escrow, your home’s value is basically unknown. What you do know is:

How much others have paid for similar homes, recently.
How much you paid for your home.
How much money you put into your home.
How much you still owe.

The average return on Real Property is around 4% annually. 2005 really screwed up homeowner’s perception of value in housing. If you purchased your home in 2003 for $150,000.00, and you apply the average rate of return, a realistic price for your home in 2008 would be about $185,000.00 give or take. That’s $7,000 per year in value, and it’s realistic. If your neighborhood comparables show that properties just like yours are selling in the $220,000 range, then your return is HUGE and you need to realize that it’s completely abnormal. Many homeowners screwed up by tapping into that artificially bloated equity to upgrade their homes or buy other properties or a boat or other luxury item. Now, they think they can recover it, and they can’t.

Let’s just hope that Sellers will become more realistic about looking at how much value they have gained already and consider it a blessing, and to not be greedy. If you are thinking about selling your property, and you thought it was worth more than it actually is, think again about your reasons for selling. If you must sell, get realistic about the price and sell. The offers are there and there are plenty of hungry buyers. If you don’t have to sell, hold the property or rent it out and take a small monthly hit for a while. You’ll benefit from it in the long run.

If you have no idea whether or not you’re in the right position to sell your home, give me a call at (602) 312-3262 and I’ll be happy to work up a Market Analysis of your home so you can make the right decision. When you’re ready to list your property, know that I will take care of you through the entire process and in the most cutting edge ways.

I hope to hear from you.

How do Real Estate Agents Get Paid

June 6, 2008 by admin

…and who pays them?

Before I was a REALTOR, I was a consumer, and I bought a house. Fortunately for me, or maybe it wasn’t so fortunate, my REALTOR was my father. He also owned the house that I purchased. This worked both for and against me, but we won’t go into that now. The point is, I had no idea how REALTORS made a living prior to diving into the business myself, and you may also have questions about how we get money on our european wallets.

Real estate agents are 100% commission based jobs. That means, we don’t get a paycheck unless we do business. Makes sense. Open up shop, provide a service, get paid, or sit on the couch all day wondering what to do.

Real estate agents also work as sales agents under a real estate Broker. That broker typically collects a percentage of what we make to cover the costs of running the company. At Realty Executives, we pay a premium to use the name while we conduct business according to their standards and the standards of the Arizona Department of Real Estate and the National Association of Realtors.

If we don’t sell a home, we still pay our broker, mortgage, utilities, etc. So we’re always in a position where cash is flowing out, but not always in a position where cash is flowing in. We’re also in a business where we need to be available when most of the rest of the world is not. This means that we sometimes have to work on the holidays that you get to spend having fun. On the other hand, we have the freedom to “take a lunch” whenever we want.

What does having a Realtor cost the Buyer? Answer: Nothing. Zero. Zip. Nada.

When you meet me for the first time and express an interest in purchasing a home, I assess how serious you are about purchasing, and then I begin to spend money on you to help you find that home. Searching for a home with a REALTOR costs you only time. You will spend nothing out of pocket, but we will commit a large portion of our business day(s) and marketing budget to provide you with the most pleasant showings as we possibly can. We fill our tanks, fill your stomachs, and become your city tour guide for the duration of your search. If you purchase a home without using us after spending all that time, we don’t get paid, but we also don’t hold it against you, because you may not have known, which is why I’m writing about it. 🙂

When the seller hires a broker to sell their home, the broker charges them a commission to do so. When that broker lists the property on the MLS, they indicate how much of that commission will be paid to the agent who brings YOU (the buyer) to the table to purchase the home.

The buyer won’t have to open their wallets until an offer is accepted, at which point a series of events begin that justify why the selling broker is willing to pay us in most cases half of the agreed upon commission.

What does having a Realtor cost the Seller?

The seller is the one who has the highest expense. From fixing up their property to staging it, the seller will bear the majority burden of cost in selling a home.

When the seller strikes an employment agreement with the broker, they typically agree to a set commission of the final sales price of the home and they offer a portion of that to anyone who brings a buyer. When the property closes escrow, the funds owed the listing brokerage are distributed according to the agreement between the two brokerages and each real estate agent is paid accordingly.