Don’t leave money on the table

money to close on homeA nagging concern that is often expressed by many home sellers is that they are leaving money on the table; in other words selling for too little. The dilemma often presented to a home seller is that if the home is priced too high, then there is risk eliminating potential home buyers; while at a lower price, there is risk selling at a less than desirable price.

Pricing a home is both a science and art. Skilled agents employ mathematical formulas as a foundation upon which to build a case for a range of sale price (the science); as well as demonstrating their ability of making price adjustments for variations in improvements, updates, as well as intangibles (the art).

But it may not necessarily be your home’s list price that can set you up to leave money on the table. Examining how your home is marketed, as well as your motivations and reasons for selling may reveal a weakness in your negotiation position as a result of convenience.

Selling a home can be disruptive to your daily life; and the prospect of having people, whom you’ve never met, traipse through your home can be unsettling. The typically limited and highly targeted private placement or pre-listing marketing may offer the convenience of limiting buyer traffic to your home, but its appeal is sometimes promoted to increase the potential of the agent receiving both sides of the commission.

Before you agree to a marketing plan that promises exclusive home buyer targeting; consider that many experts make the argument that you can leave money on the table when limiting your home’s exposure to potential buyers. In a world where everything and everyone seems electronically connected, you can increase the buyer pool by taking advantage of every reasonable marketing opportunity (including the internet and local listservs, and electronic bulletin boards, and other acceptable marketing tactics).

The process of selling a home can also be emotional and time consuming; more so if you’re divorcing and selling marital property, or selling your parents’ or grandparents’ home (sometimes because of a move to an assisted living facility or to settle an estate). The convenience of a quick sale can be very tempting; but can also set you up for selling for too little. And if the home is in need of repairs, updating, and renovations, the pricing can be unclear and inaccurate adding to the pressure for a quick sale.

You might even be considering responding to an ad promising a fast home sale without real estate commissions, repairs or home inspections – which is alluring to be sure. However, consider that many of these operations are seeking to purchase homes at a fraction of retail value minus repair costs.

Unfortunately, there is no “real time” measure to determine if you’re selling your home for too little; and some home sellers often lament in hindsight selling at a lower price out of convenience. However, a little homework and investigation can at least better your negotiating position. Ask questions and understand the purpose, benefits and limitations of a private placement or pre-listing marketing. Additionally, you can get pricing guidance from a market analysis, obtained from at least two (three is better) neighborhood real estate agents. And finally, weigh the pros and cons of selling out of convenience to the process of selling on the open market (listing the home in the MLS).

Original published at https://dankrell.com/blog/2014/09/26/dont-leave-money-on-the-table/

© 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.

Private, pocket listings surge during housing recovery

luxury real estateThe recovering housing market has brought to light the controversial practice of the pocket listing. Although pocket listings are more common in the upper bracket and luxury real estate market, pocket listings tend to increase during hot markets when there are few available listings and increased home buyer competition.

by Dan Krell © 2013

Sometimes called “off-market” listings, or “private” listings, the pocket listing is a home sale that is not openly marketed in the multiple list service. The listing is kept “quiet” and is only known to the listing agent and/or broker who typically market the home to a select network of contacts and clients.

Pocket listings are common among the utra-wealthy because of privacy concerns; anonymity is an often cited reason for a home seller to choose to have a pocket listing, typically because the seller has some celebrity status. Private listings may also be promoted as a way to limit home viewings to those who are financially qualified to purchase the home; the focused buyer pool reduces the number of showings, which may be less disruptive to the seller’s daily schedule.

However, critics of pocket listings often point to MLS concerns, dual agency issues, and housing laws as reasons to be wary of the practice. Agents are not the only ones who have access to an MLS listing; MLS listings are often syndicated throughout the internet and available for anyone with internet access to see. Clearly, one of the obvious issues of a pocket listing is the reduction of marketing exposure that is lost from not having an MLS entry. Another issue that arises from a pocket listing is that it skews home sale and price data that appraisers use for valuations.

Consumer Advocates in American Real Estate (caare.org) cites the possibility of dual agency (where the buyer and seller’s agent is from the same real estate company) as a major concern for pocket listings. Because dual agents do not act exclusively in the interests of either the seller or buyer, the possibility of a conflict of interest may arise. Additionally, CAARE states that a seller who agrees to a pocket listing may exclude 70% or more of qualified buyers who are actively searching for homes.

A recent Maryland Real Estate Commission newsletter (The Commission Check; Summer/Fall 2013), reprinted an article from the August 2013 ARELLO® Boundaries discussing pocket listings, that stated; “pocket listings may run afoul of federal fair housing laws that not only prohibit readily apparent or intentional housing discrimination against protected classes, but also practices that have a “discriminatory effect” that “… actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin…”

Unbeknownst to some home sellers, their home sale may be marketed as a pocket listing during the period between the signing of listing paperwork and when the home is entered into the MLS. Although this time is often used to prepare a home for sale; it may also be privately marketed by the listing.

Although the National Association of Realtors® has “not defined what constitutes a pocket listing, nor do they have an official policy regarding the practice” (“What is a Pocket Listing”; Realtor Magazine, May 2013); potential housing law issues and ethical concerns of pocket listings should be addressed with your real estate agent/broker.

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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.  This article was originally published the week of October 28, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.