Greedy home seller tips

Don't be a greedy home seller
Pricing Strategy for a Home Sale (infographic from forsalebyowner.com)

When there is a buzz about home sellers being greedy, you know home sales are doing well.  So, not surprisingly, along with last year’s record home sales came the reports of greedy home sellers.  Are you a greedy home seller?  Or are you adjusting to a market where home prices are increasing?

Greed has developed a bad rap.  Surely there is an evolutionary basis for greed.  Many believe that early hominids promoted personal and group survival by being “greedy” (although disputed by some).  Those who hoarded food, so as to have more than enough, lived through difficult winters and droughts. During times of financial prosperity, greed is looked upon favorably.  However, in the aftermath of a recession, greed is thought of as the basis for fiscal calamity.  Immortalized in Gordon Geckko’s famous “greed is good” speech in the 1987 movie Wall Street, “greed” is a cinematic vehicle to show the fine line between a healthy desire to prosper and a corrupt drive to have more than enough.

Avoid being viewed as a greedy home seller by creating a realistic pricing strategy.  Creating a pricing strategy is an art and a science.  When selling a home, you have to determine the list price.  There are many factors to consider besides recent neighborhood sales, such as condition of your home, sales trends, mortgage interest rates, economic trends, etc.  Like other home sellers, you fall into a conundrum.  If you price your home too high, then it will limit potential home buyers who visit.  However, if you price your home too low to increase home buyer interest, you may not get the price you want.

Contrary to some assertions that a home’s list price doesn’t play a role in the sale, there is evidence to suggest that it really does matter.  Lu Han and William C. Strange determined that a lower list price does increase home buyer visits – but only to a point (What is the Role of the Asking Price for a House? University of Toronto, Rotman School of Management; 2012).  They concluded that there is a point at which the home price is perceived to attract too much buyer competition, which may turn off other home buyers.  Furthermore, their data shows that there is a negative relationship between a list price and the number of home buyers: meaning that the higher the list price relative to the neighborhood, the lower number of home buyer visits, and vice-versa.

If you fear being a greedy home seller by asking for a high price for your home, there is research to suggest that you’ll let go of the greed in order to make a deal.  A 2013 study by Nuno T. Magessi and Luis Antunes looked at how the emotions of fear and greed compete internally (Agent’s fear monitors the spread of greed in a social network; Proceedings of the 11th European Workshop on Multi‐Agent Systems EUMAS, 12-13).  They concluded that greed is mitigated by the fear of loss within the confines of a social network.  When applied to a home sale, the fear of not selling a home competes with the impulse to hold out for the high price.  Deducing further, there is a need to fit within one’s social network by trying to sell a home for the most money, and yet avoid the stigma of a failed home sale.

Don’t be a greedy home seller. RealtorMag described three common home seller mistakes in a 2015 post (3 Mistakes Sellers Often Make; realtormag.realtor.org; April 12, 2015).  Included were “Not being honest with the home’s history,” “Not making a better home presentation,” and “Being unrealistic about the home’s value.”  About unrealistic home value, it was said:

“…Despite tight inventories of homes for-sale in many markets, sellers still need to be careful not to get too greedy with their list price, say real estate professionals…Home owners tend to get a much lower price when they overprice a home at the onset and then drop the price several times. The longer the home lingers on a market, the more likely it will receive a deeper discount…”

If your home doesn’t sell, you must examine your pricing strategy.  Was the price realistic, or were you too greedy?

Copyright © Dan Krell
Google+

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

35 years of home buying changes

home buying changes
Years of home buying changes? (infographic from keepingcurrentmatters.com)

This week’s release of the National Association of Realtors® Annual Profile of Home Buyers and Sellers marks the 35th year of NAR’s analysis and description of home buyer and seller behaviors and attitudes.  You may not remember what it was like in 1981, but the country was coming out of a deep recession.  The economy was still scarred with double-digit unemployment, inflation and interest rates.  The 35th issue makes us think about home buying changes over the years.

According to the US Census Bureau (census.gov), the median price for a new home in 1981 was $68,900, while in 2010 the average new home price was $221,800.  Freddie Mac’s (freddiemac.com) data indicates that the average mortgage interest rate in 1981 was 16.63 percent, and 4.69 percent in 2010.  Surprisingly, the cost of housing (when financing 100 percent of the sale price) has only increased about 17.5 percent from 1981 to 2010!

People want their space and privacy.  According to the American Enterprise Institute (aei.org), the median square feet per person in a home in 1981 was about 550sf, while in 2014 it was 987sf.  This expansion in personal space was expressed in the home size.  The median size of a home in 1981 1,550sf, while 2010 it was 2,169sf (according to the Census Bureau).  Also consider that the typical home of 1981 only had one and a half bathrooms, and the expectation today is that a home should have at least two and a half bathrooms.

An October 18th news release from the NAR (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) provided some insight into how the housing market has changed through the years.  One noticeable factor is the reduced number of first time home buyers entering the market due to underemployment, student debt, lack of down payment, or delaying family formation.  Last year’s percentage of first time home buyers dropped the lowest rate since 1987; and “according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds is currently at 34.1 percent, the lowest level in records dating back to 1994.”

It’s becoming apparent that real estate agents are not being replaced by the internet.  Although a majority of home buyers use the internet to assist them with the home buying process, the NAR reported that 90 percent of home buyers and sellers surveyed for this year’s profile worked with a real estate agent.  As a result, for-sale-by-owner transactions were at the lowest level ever (FSBO transactions peaked during 2003-2004).

The home buying process now takes longer than it used to.  Putting aside recent changes to the mortgage process, the 2016 Home Buyer and Seller Profile brings attention to the amount of time a home buyer needs to find a home.  According to the NAR, the average time to find a home was relatively unchanged from the 1980’s to about 2007; which about seven to eight weeks.  The duration of the home search peaked at twelve weeks from 2009 to 2013.  However, since then the average time needed to find a home is about ten weeks.  The increased search time is due to a number of factors.  Brisk sales combined with periods of low inventory has not provided home buyers with much of a choice from which to select.  Not to mention an unprecedented amount of available information that has created a savvy home buyer.

Copyright © Dan Krell

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

About friendly advice

friendly advice
Human behavior (from thediagonal.com).

Home buyers and sellers often seek advice from others.  Even when they’re working with a professional who provides expert guidance.  You might think it’s good to get validation from others on your real estate decisions.  However, a Vancouver consumer study suggests that following friendly advice may be a bad idea (Friends give bad advice; The Sun, 4/14/2011, p29).

Research of consumer psychology and behavior have time and again found that consumers want to be correct in their choices.  They want to feel good about their decisions.  They want to believe that their purchases are the best, and the professionals they choose are tops in their field.  Consumers are known to behave irrationally to prevent the cognitive dissonance that occurs when they are confronted with conflicting thoughts about their choices. And that means they often make poor decisions.

Mintel’s American Lifestyles 2015 report indicated that 69% of those surveyed sought out product and service reviews before purchasing.  While 57% of those surveyed sought out recommendations from social media.  Given the finding, it is suggested that there may be emphasis for communal thinking over “individual preference.”  However, about 38% of those surveyed considered independent review websites as “trustworthy;” while 34% found them useful.  But, 31% found social media contacts trustworthy; while 25% found them useful (Seven in 10 Americans seek out opinions before making purchases; mintel.com; 6/3/2015).

Seeking out friendly advice is part of herding behavior, which has been found to be a part of our everyday decision making process.  A groundbreaking study of home owners’ decisions to walk away from their mortgages (strategic default) during the great recession revealed how people seek and give advice (Luchtenberg & Seiler (2013). The effect of exogenous information signal strength on herding. Review of Behavioral Finance, 5(2),153-174).  The study concluded that people tend to seek advice when they feel that their choice is not in agreement with others.  While advice was readily given by those who felt their choices were believed to be the consensus.

Buying and selling a home may not always feel as if it is a rational process. And you may think it logical to seek friendly advice.  However, indiscriminately following advice may not be the best practice because all real estate transactions are different.  Each transaction presents a different set of variables such as personalities, market conditions, contract terms, etc.

Given the research, more often than not, you are doomed to follow the advice of a friend or family member – even when confronted with the evidence that the advice is ill advised.   You can infer from the Vancouver study mentioned earlier that friends and family feel “pressured” to give you advice on your real estate transaction because they want to be helpful.  Furthermore, herding research suggests that you probably give emphasis to advice from friends and family because following their advice will likely make you feel you are “doing the right thing,” as well as increase your acceptance by them.

Regardless of your rationale, your real estate decisions are most likely based in psycho-emotional needs and/or fears (such as status, acceptance, and avoidance of failure).  Breaking away from the herd is difficult.  Improve your decisions and make your transaction successful by pursuing balanced information and becoming aware of your motivations.

Copyright © Dan Krell

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Home owner savvy

Home owner savvy
Home maintenance schedule (from homezada.com)

The playwright Oscar Wilde must have been fond of the idiom “nowadays people know the price of everything and the value of nothing,” because he used it in back to back works; first in The Picture of Dorian Gray, and then a variation in Lady Windermere’s Fan.  Today, corrupted forms of Wilde’s phrase are wrongly attributed or misquoted – but the point is well made.  More psychologist then poet, Wilde seemed to characterize a core consumer behavioral trait of seeking short term gain vs long term value – which applies to home owner savvy!

Consumers in the 19th century were much like consumers today, such that they sought out to get a bargain; often times overlooking the costs from which it comes by.  And what may have been in Wilde’s time a conflation of price and value, is still common today – especially for home owners.  While many home owners pride themselves on their frugality in home maintenance, they don’t realize the consequences of their poor choices when it comes time to sell their home.  Home owner savvy is also knowing about value.

Today’s home owner’s frugality comes honestly as a result of the great recession.  A McKinsey Global Institute consumer sentiment survey from a year and half ago sums it up in the title: America the frugal: US Consumer Sentiment Survey (Martinez, Motiwala, and Sher; mckinsey.com; December 2014).  Martinez, Motiwala, and Sher wrote in their economic analysis that “…Multiple years of austerity have left consumers with altered views about spending. Almost 40 percent say they will probably never go back to their prerecession approach to buying…

While looking to spend less on maintenance and home repairs, home owners often ignore the effects of their thriftiness on the long term maintenance costs of their home.  Trying to spend less often means becoming reactive to maintenance issues, instead of proactive.  Reactive maintenance typically means that the plumbing, electrical, or roof issue the owner is repairing, may have been an ongoing problem that may have also affected other systems of the home.  However, proactive home maintenance is an ongoing process that can prevent minor problems from becoming costly major issues and is home owner savvy.

John Riha invoked Ben Franklin’s “An ounce of prevention is worth a pound of cure” when writing about home maintenance and house values (How Much Value Does Regular Maintenance Add to Your Home?; houselogic.com).  He repeats a common theme that regular preventative maintenance doesn’t only save you money down the line, but can add to a home’s sale price.  Riha quotes University of Connecticut and Syracuse University studies that implies the value of a regularly maintained home may increase by 1% a year!

Riha recommends a “proactive maintenance strategy” to help stay on top of necessary repairs and system replacements.  He suggests saving 1% to 3% of a home’s cost for regular maintenance.  To help keep it “interesting,” he suggests repairing and updating one room per year.  If you are unsure where to begin, a home inspection may help identify areas of immediate concern; as well as develop a regular maintenance schedule.  Also, keeping records of ongoing repairs and upgrades will cement in a home buyer’s mind the amount of care you had for your home.

Home owner savvy is not necessarily about being frugal with home maintenance, which is also not about knowing the price of everything; but in reality, diminish the value of their home.  Regular home maintenance can not only keep you comfortable and safe through the year, it may help you sell your home faster and for more!

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Presidential election and home sales

election and home sales
Election and home prices (from movoto.com)

Elections have vastly changed in mood and intensity.  It used to be that the candidates debated about substantive issues looking for win-win solutions, including housing.  Maybe some of you remember how both the Clinton and Dole campaigns showcased their ideas of expanding the capital gains exemption during the 1996 election.  Housing and home sales doesn’t seem to be a platform issue anymore.  Elections have become divisive and nasty, even among the electorate; and for many Americans, the trending (real estate) election issue is – whom is moving to Canada!

That’s right, moving to Canada.  Maybe you’ve heard someone at work or at the store proclaim they are moving to Canada if “the other candidate” wins the election.  The theme of moving to Canada after the election has become a mantra so much so that it’s become part of pop culture. The idea has even been satirized by the likes of South Park.  And of course there is the growing number of celebrities who vow to move to Canada if the election outcome isn’t to their liking.

Of course the threat of moving to Canada is tongue in cheek (for most), or is it?  Nevertheless, leave it to astute real estate agents who realized that people considering such a move is now a target market.  Agent ads and blog posts popped up in recent weeks reaching out to those disaffected home owners asking for their business.  Reporting for Buzfeed, Craig Silverman reported on two agents who posted such an ad on their Facebook pages (Leaving Because Of Trump? These Texas Realtors Want To Sell Your House; buzfeed.com; May13, 2016).  Although both agents received a lot of attention for their seemingly whimsical posts, there was a mixed response; some did not get the humor.  It was reported that one of the two agents interviewed was asked to remove her post; and of course neither reported any new business from the posts.

Every four years, people wonder if presidential elections effect the real estate market.  During the 2012 election cycle, the real estate portal Movoto took it upon itself to find an answer (David Cross; Election Years Are Bad for Home Prices; movoto.com; May 12, 2012).  They analyzed historical data from the California Association of Realtors® and found that there is indeed a direct effect of a presidential election on home prices (at least in California).  They determined that the average home sale price during an election year is lower than that of the years preceding and following an election.

Movoto’s hypothesis was: “Presidential election years are stressful for the American people and in times of uncertainty people are less likely to take chances—this includes making large purchases such as a new house.”  While the National Association of Realtors® comment on Movoto’s findings was, “We’ve observed no correlation between levels of home sales and an election year. The market responds to a wide range of economic factors, including jobs, interest rates and consumer confidence.”

Although there maybe anecdotal evidence that presidential election years affect home prices; there is no doubt that the outcome of a presidential election effects policy, which as a result affects the economy and the housing market (see Experts: Housing to Grow Steadily, But Maybe Less So if Trump, Cruz or Sanders is Elected President; Zillow.com; May 17, 2016).  But no one has yet suggested that US elections would have an effect on Canada’s real estate market.

Copyright © Dan Krell

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.