Selling your home – try, try, again

selling your home
Why your home didn’t sell (infographic from househuntnetwork.com

If your home didn’t sell this spring, it’s ok.  Rocky never quit when he lost, and neither should you.  No one said selling your home was easy.  Take stock and plan for your next sale.

If your home didn’t sell, you’re not alone.  Consider that April’s existing home sales dropped 2.3 percent, according to the National Association of Realtors May 24th press release (nar.realtor).  NAR Chief Economist, Lawrence Yun, stated that the April slide was “expected” because March sales were very strong.  Additionally, he pointed out that new and existing inventory is not meeting demand.  Many prospective home buyers are frustrated because there is not much of a choice and they are not finding the homes they want.  When selling your home, does it have features that buyers want?

Pending home sales also declined in April.  Based on contracts signed, the forward looking indicator suggests additional decreased sales in the months to come.  Yun also attributes the prospect of future decreased home sales to low housing inventory. He stated that the inventory of existing homes for sale decreased about 9 percent from the same time last year.

When selling your home, consider that the appearance of a brief period of slow sales is not necessarily a warning sign of an impending housing crisis.  Instead, a slower sales trend may be considered part of a normal economic cycle after a breakthrough sales year.  It is a sign of a healthy market seeking balance.  The cycle is caused by home buyers and sellers struggling to find equilibrium.

If your home didn’t sell, you may have a better chance in a few months when the cycle changes.  However, before going with the same strategy, try to analyze what happened during this listing period.  You may find interesting and revealing information, about your home and your agent, that could help you the next time.

First, talk to your listing agent.  If they were active in marketing your home, they should have a wealth of information.  Start by asking them about showings.  The number of showings determines buyer interest in your home.  If you had few visits to your home, it could mean the price is too high.  It could also be a result of low quality MLS pictures and information.  Buyers start with the MLS listing to determine if the home is worth a visit.  However, if you had plenty of buyer visits but no offers, there may be other issues that need attention.

Check with your agent for feedback.  Agents often communicate about their visits to homes.  Home buyers who attend open houses also provide feedback.  Skip over the positive feedback because agents and home buyers often offer positive feedback just to be polite, even if it’s not warranted.  Look toward critical reviews for help to improve your home presentation and marketing.  If the same item is mentioned multiple times, you should take that as an indicator and begin there.

When selling your home, price, presentation and marketing are relatively easy to adjust.  However, your home’s condition could be a deterrent.  Buyers in the current market are very demanding and selective.  They want a turn-key home that has the recent updates featuring the newest technologies.  Even though housing inventory is low, many home buyers will not settle for any house.  If your home is not updated relative to the top sales in your neighborhood, you may have to consider a major price adjustment.  If your home’s condition is holding back a sale, do a cost-benefit analysis.  You may discover that selling for less could net you more than if you spent tens-of-thousands on renovations.

Copyright© Dan Krell
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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.

Consumers changing real estate agent commissions

real estate agent commissions
Real estate agent commissions (infographic from visual.ly)

Consumers have most likely complained about real estate agent commissions since the advent of real estate brokerage.  However, before the turn of this century, most did not question the real estate agent commissions they paid because they chalked it up to the cost of selling a home.  Times have changed, such that having a conversation about commissions and compensation is a common topic when agents and consumers first meet.

Real estate agent compensation is evolving as fast as the industry.  The US Bureau of Labor Statistics (bls.gov) reports the median annual wage for real estate sales agents was $44,090 in May 2016 (The lowest 10 percent earned less than $22,230, and the highest 10 percent earned more than $112,570). The BLS states:

“An agent’s income, therefore, often depends on economic conditions, the agent’s individual motivation, and the types of property available. Income usually increases as agents become better and more experienced at sales. Earnings can be irregular, especially for beginners, and agents sometimes go weeks or months without a sale. “

Before the turn of this century, there was more conformity in real estate agent commissions because most agents were not negotiable in the compensation they charged.  However, modern agents have adjusted their business models and are open to negotiate how much they will be paid.

There are also many real estate broker compensation structures from which you can choose.  Some brokers offer limited services, and some offer fee-for services, which includes a MLS placement service.  Some fee for service brokers offer à la carte services, where you can choose specific services for which you want to pay.  Most “full service” agents still charge a percentage, but the percentage can vary from agent to agent.  Full service agents can also vary on the extent of the “full” service they provide; however, many will be open to negotiate their commission rate.  Regardless of model, get the agent’s services in writing and hold your agent accountable.

The increased market pressure on agent compensation is actually good for the consumer.  It doesn’t only lower the cost of the real estate transaction, but it also increases the quality of services.  This was the finding of an empirical study by Panle Jia Barwick and Parag A. Pathak (The costs of free entry: an empirical study of real estate agents in Greater Boston; The RAND Journal of Economics; Vol 46, No. 1, Spring 2015, p.103–145).  Their study investigated three scenarios that are chipping away at the traditional real estate agent compensation models: lower commissions, commissions based on break-even costs, and improved information about agents’ past performance.

Barwick and Pathak found some interesting outcomes from their research.  Besides concluding that there are consequences for fixed real estate agent commissions, they also discovered that the easy entry into the industry (i.e., the ease of getting a real estate license) reduces the quality of service.  Furthermore, the increased competition among real estate agents caused by easy entry into the industry is not beneficial to a home selling or time on market.  They also concluded that

“…lower commissions reduce transaction costs, which might lead to a more liquid housing market, improved asset allocation, and better housing consumption. Flexible commissions also provide a channel for consumers to choose services tailored to their preferences.”

Their results suggest

“…that a 50% cut in commissions would result in 40% fewer agents, social savings that amount to 23% of industry revenue, and 73% more transactions for the average agent.”

Realtors should embrace the discussion about compensation and real estate agent commissions with their clients.  It offers the agent an opportunity to demonstrate their accountability.  It also promotes transparency and the services we Realtors provide, and builds the trust that is lacking in the industry.

Copyright© Dan Krell
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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.

Curb appeal can boost home sale price

curb appeal
Curb appeal (infographic from nar.realtor)

If you want to increase the sale price of your home this spring, you will no doubt focus on the interior.  But how does the home’s exterior look?  You’d be surprised about the amount of necessary cleaning, decluttering and repairing around the exterior of your home.  But don’t skimp on the exterior home preparations before your sale – research conclusively shows that improving your home’s curb appeal can increase the sale price by as much as 8 percent!

An empirical study conducted by Chen, Evans-Cowley, Rutherford, and Stanley (An Empirical Analysis of Effect of Housing Curb Appeal on Sales Price of Newer Houses. International Research Journal of Applied Finance. 2013, Vol. 4 No 11, p1407-1419) was the first to demonstrate the relationship between a home’s sale price and curb appeal.  The authors also discussed how home buyers’ preferences in a home’s exterior influence the home’s sale price.  Besides curb appeal, they suggest that the home’s architectural elements could also be important in the final sale price.  The idea that today’s modern designs are more desirable, and likewise costs more money, is only transitory; such that today’s designs could become trite and tired in twenty years.

The study used a seven-point “attractiveness” scale to determine how respondents viewed the attractiveness of a home’s exterior.  They concluded that there is a relationship between a home’s exterior attractiveness and the home’s sale price.  In fact, they reported that a one-point increase in their scale corresponded to an 8 percent increase in the home’s value!

Home buyers make assumptions about your home’s interior based on the appearance of the exterior.  An unattractive exterior can repel home buyers before they even see the beautiful and updated interior.  Attract home buyers and boost your home sale price by focusing on cleaning, repairing, and “finishing” your home’s exterior.

Basic landscaping can make a huge difference in your home’s attractiveness.  Having too many plants, or letting them grow too much can make the home’s exterior appear crowded and unkempt.  Make sure your lawn is full but manicured throughout your listing.  Properly trimmed trees not only look tidy, but allow home buyers to see your home from the street.  Appropriately placed and trimmed shrubs and flower beds can accent the home’s architectural design.

Check your home’s siding.  Replace and repair any missing or broken siding pieces.  Freshen up siding by power cleaning, or painting.  Even if your home has artificial materials as siding, inspect window frames and fascia boards; these areas are often neglected and may need urgent repair.

How does the deck look?  Unless you maintain the deck regularly, chances are it may seem dull and tired, and may need to be re-treated.  Even if your deck is made of artificial decking, check the railings.  Hire a licensed contractor to repair and secure the deck as necessary.

How about the sidewalks and patio?  The sidewalk and patio can be easily cleaned by power washing.  Cracks in the sidewalk and patio are not only unsightly, but can be a trip hazard.  Cracks are typically caused by rain and water runoff, but can be repaired.  Consider also sealing the sidewalk and patio to prevent further water damage.

Finally, consider finishing the exterior to make your home more appealing and cordial.  Much like staging the home’s interior, you can use similar principles to increase the exterior’s attractiveness; such as placing appropriate chair(s) and potted plant(s) on the porch, deck or patio.

Copyright© Dan Krell
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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.

Misguided house makeover

house makeover
House Makeover (Infographic by Allianz Australia Home Insurance allianz.com.au)

Do you really need to spend money to make money?  Deciding what renovations and updates to make prior to your home sale can be tormenting.  It’s easy enough to say that your home needs a facelift; but, the repairs, updates, and painting costs money – and usually lots of it.  The suggestion of making renovations and updates to your home before you sell is everywhere, it’s on TV, the internet, and magazines.  And if you ask friends and real estate agents, they will also give you a list of “must do’s.”  Regardless of how you decide to do a house makeover before the sale, chances are that you’re not doing it right.

There is no doubt that many home buyers are looking for a turn-key home.  If your home is not “out of the box brand new,” you probably need to freshen it up, as well as make some repairs and updates.  But before you embark on the house makeover by making those renovations, you need to ask yourself two important questions: “How much money can I realistically allot for a makeover?” and “How much am I expecting to net from my home sale?

Does a house makeover really get you top dollar? Spending money on renovations will certainly make the home sell faster, but not necessarily make you more money.  And there is no guarantee that the house makeover renovations you make are to home buyers’ tastes.  So if you’re goal is to get top dollar, don’t look at the sale price.  Instead keep your eye on your estimated net (the amount you’re left with after the sale minus total renovation costs).

Of course, the best way to maintain your home’s value is to perform regular maintenance.  It would certainly make the home prep easier too!  But the reality is that many home owners defer maintenance until they feel it’s absolutely necessary.  Deferring maintenance can actually cost more in repairs down the line, and lower your home sale price.  Spending money to correct all the years of neglected repairs and updates prior to the home sale won’t necessarily get you top dollar.

Not all buyers are looking for renovated homes.  One of Stephen B. Billings conclusions in his recent research (Hedonic Amenity Valuation and Housing Renovations; Real Estate Economics; Fall 2015, 43:652-82) was that during the past “healthy” housing market, there was a balance between renovated and non-renovated homes that sold.  However, he also found there was an increase in renovated home sales during the housing downturn of 2007.

Selling your home “as-is” would certainly decrease your sale price, but could net you the same or even more if weighed against extensive renovations of the house makeover.  Consider that you would only recoup a fraction of the cost of a minor kitchen and bathroom remodel; which averages about $20,122 and $17,908 respectively (according to 2016 Cost vs Value Report; remodeling.hw.net).

Concentrate on the basics of decluttering first. Decluttering can make your home look different and feel larger.  Decluttering can set the stage for fo you decide on renovations, and maybe even home staging.

If you decide on freshening up your home before the sale, start with the basics.  Focus on deferred maintenance, and make necessary repairs.  Consider a fresh coat of paint, and maybe new carpets.  Wood floors don’t necessarily have to be replaced or sanded; flooring professionals use state of the art processes to “renew” wood floors.

If you decide on a house makeover, focus first on making repairs and freshening your home. Work out a budget and get several quotes from licensed contractors.  Don’t automatically go for the cheapest quote, even if you’re on a tight budget.  Focus on quality, even if it means limiting the scope of work.  Poor workmanship can sabotage your home sale by making your home look shabby and in need of additional repairs and updates.

Copyright © Dan Krell
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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 selling don’ts

home selling don'ts
Do’s and Don’ts of preparing a home for sale (from realestatestagingassociation.com)

When preparing for a home sale, the devil is in the detail.  You probably already know about the “do’s,” de-cluttering, curb-appeal, staging, and making necessary repairs.  But here are a few home selling “don’ts” that often trap home sellers into making mistakes:

Home selling is not about you. Don’t make a statement.  Now is not the time to be bold with renovations and staging; but rather stay focused on getting your home sold.  Stay away from trendy features, and bold designs.  Although bright and dramatic colors seem tempting, stick with neutral color schemes.  Besides making rooms feel awkward, making a statement with trendy fixtures and bold colors may turn off home buyers.  Bold style statements make home buyers fixate on the style, rather the space and potential of each room.

Home selling is not about being cheap. Don’t hire a contractor because they are the cheapest.  When it comes to home repair, the idiom “you get what you pay for” typically holds true.  Home buyers have a discerning eye and can spot poor workmanship.  Don’t be tempted to hire the unlicensed handyman to save a few dollars either; you and the future buyers won’t have recourse if there is a problem with the repair.  Don’t also be talked into a cheap renovation that is meant to appear as a luxury amenity.  Poor workmanship, sloppy installation, and/or inferior materials will turn away many home buyers.

Home selling is not about being amateur. Don’t assume all house painters are alike.  A good paint job can make a room look terrific and create positive emotions; while a poor paint job makes a room appear shabby and unstylish.  And even though you may be tempted to save a few dollars, don’t paint your home on your own – hire a professional.  The amateur paint job appears sloppy and has the telltale uneven edges, painted over light switches and receptacle covers, and painted shut windows.

Home selling is not about guessing. Don’t assume your prepping will bring you a big return on your investment.  If you deferred regular maintenance, you may have to make repairs regardless of the return.  Likewise, if your home is outdated, you may consider making some updates to lure home buyers.  Before getting in too deep on a prepping project, have a budget in mind and do a cost benefit analysis.

Consider checking out this year’s Remodeling Magazine’s Cost vs. Value Report (costvsvalue.com) to find out what updates and renovations make sense and which ones can bring you the biggest returns.  Although most renovations won’t bring you a dollar-for-dollar return, they may add to the overall aesthetic and make your home more appealing.  However, some renovations may not only lose money but can also blemish your otherwise beautiful home.  For example, adding a backup generator may seem as if it is a much needed amenity, however, the report indicated that for the Washington DC region, you would only recoup about 57.5% of the cost.  And it is possible that the home buyer will remove it because of it was poorly installed and too noisy.

The purpose of preparing your home before a sale is to not only to compel home buyers to make a top-dollar offer on your home, but to also get it sold quickly.  Consider planning out how you will prepare your home. Do the research.  Don’t fall into the traps that ensnare many home sellers because it can cost you. You may not only have to correct poor workmanship, but your negotiated sale price may be lower than expected.

Copyright © Dan Krell

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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.