When Selling a Home – stay away from gimmicks & listen to buyers

You’ve probably heard a story or two about a home that was priced very low to “create a buzz” and illicit a bidding war. And in fact, there was a 2012 article in a local newspaper about such a sale in DC that touted the rebounding housing market. But guess what? A recently published study, with robust empirical data, suggests that such a strategy may not be the best for a home seller. Furthermore, the study suggests evidence that real estate agents who recommend under pricing as a strategy believe that homes listed for less – sell for less than comparable homes.

Bucchianeri & Minson (A Homeowner’s Dilemma: Anchoring in Residential Real Estate Transactions. Journal of Economic Behavior & Organization. May 2013: 76–92) collected and compared data related to “anchoring” (higher list price to prompt buyers to make higher offers) and “herding” (lower list prices intended to creating bidding wars) theories. Although actual sale prices may depend on location and time on market, the conclusions are that homes listed at higher prices sold for more than those that relied on bidding up the price. The authors suggest that sellers should think twice before under pricing their home to create a bidding war; and suggest that results from such strategies are typically anecdotal.

If setting a higher price may translate into a longer time on market, how could you know if you are priced too high or low? Listen to home buyers. A study conducted by Case, Shiller, & Thompson (“What have they been Thinking? Homebuyer Behavior in Hot and Cold Markets.” Brookings Papers on Economic Activity. 2012: 265-315) of 25 years of data in four metropolitan areas concluded that there is a strong relationship between buyer’s perception of price trends and actual price changes; the stronger the price trend (in either direction), the stronger the agreement among home buyers perceptions.

Home buyers’ short term and long term expectations of home prices can differ. And although Case, Shiller, & Thompson indicate that it is more difficult to gauge long term pricing expectations, they were undoubtedly impressed that buyers’ were “out in front” of short term home price changes. They stated, “…We find that homebuyers were generally well informed, and that their short-run expectations if anything underreacted to the year-to-year change in actual home prices.”

If deciding on your home’s selling price gives you a headache, Stefanos Chen wonders if taking a Tylenol could assist in making a decision. In his October 23^rd Wall Street Journal article (Can Tylenol Ease the Pain of a Home Sale?), Chen reported of to-be-published research that indicates taking the pain reliever may ease the anguish associated with “loss-aversion” (an avoidance of a perceived loss).

“Can acetaminophen reduce the pain of decision-making?” by DeWall, Chester & White is expected to be published in the January volume of the Journal of Experimental Social Psychology (pages 117-120). The results indicate that those who took acetaminophen sold a mug (that was given to them 30 seconds prior) for significantly less than those who tool a placebo. Chen’s question whether taking a Tylenol could help a seller take a lower sales price is a stretch, considering that the study was limited to 95 college student subjects. Although further research is indicated, the study’s conclusions may have implications to lessening the “pain” of letting go of ownership.

By Dan Krell
© 2014

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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.

September 12, 2014November 23, 2021

Getting home buyers into your listing – sellers and agents take note

Some economists have discussed how consumers are increasingly “shopping” rather than buying. And this is evident in the housing market, where home buyers have become overly discerning about their purchases. After what seemed to be a brief seller’s market, we find ourselves slipping back into a buyer’s market; and an old dilemma is reemerging: how are you going to get more buyer traffic and more offers on your home?

If your home has been on the market for while, check with your agent to review feedback from those who visited your home. Typical responses focus on price, home condition, and how the home shows. If you’re about to list your home, have some neighbors and friends tour the home (as if they were home buyers) to provide an alternate perspective of your home’s selling points and shortcomings.

Pricing your home correctly is critical to selling in a reasonable time frame. Your agent should keep you up to date with neighborhood sales activity, so you can remain competitive with other relevant listings. Recent neighborhood sales trends (1-3-6 months) can indicate where your price range should fall, as well as understanding the types of homes that are selling.

One of the main objections you may have heard from home buyers, is that your home “needs work,” which has a number of meanings. Of course, it may mean your home does need updating and/or repairing; in which case you should discuss with your agent about the possibility of making updates/repairs, and/or adjusting the price to reflect any needed updates/repairs. Before you decide to go all out on a renovation, consider making updates that are equivalent to your neighborhood and price range; over spending may not significantly increase your home value. If your home is updated and shows well, another meaning of “needing work” comes from the buyer wanting a turn-key home; and your updates/renovations do match their tastes and preferences.

Another issue to consider is that although your home may be updated and clean, you just may have too much stuff! Lots of furniture, wall hangings, and other stuff can make large rooms feel cramped and small, as well as give a busy and unsettling vibe. If this sounds like your home, consider removing items that can distract and detract from your home’s true elegance and style.

If your home is not getting many showings, another factor to address (independent of price, condition and clutter) is how your home is marketed. If you haven’t done so, look at your MLS listing; are you satisfied with the pictures, and remarks? Keep in mind that about 96% of home buyers search online and make decisions based on what they see and read. Home sellers, like you, are savvy and know that solely hanging a sign and posting a MLS listing is no longer acceptable to market a home. Ask your agent to update you on active marketing efforts, as well as other resources that may be used to market your home, including: local and global networks of agents and buyers; as well as using the internet and SEO (search engine optimization) to get buyers interested in your home.

If you’re home has been on the market for a while, you might consider addressing any of these issues to boost home buyer activity. If you’re considering a sale in the near future; have a plan of action before you list, so your sale does not languish.

February 14, 2014December 13, 2022

The magic of 4 to sell a home

For a successful home sale, you need to focus on four areas…

Spring is rapidly approaching – are you one of the many home owners listing your home for sale this year? Sure, last year may have seemed like a breakthrough, but the still recovering housing market is just as quirky as The Doctor’s TARDIS. And unless you consider condition, preparation, pricing, and marketing; your home sale could fall flat.

A home’s condition can affect a home’s sale price (sometimes significantly), and is often overlooked by home sellers and listing agents. It is not uncommon for owners to put off home maintenance, especially after the financial crisis of 2008; housing experts estimate that home improvement spending decreased about 28% between 2007 and 2011. Deferred maintenance can deter some home buyers, while motivating others to make a low offer. You can get an idea of potential cosmetic, mechanical, and structural issues by having a pre-listing home inspection.

Whether or not you choose to address deferred maintenance and repairs prior to listing, preparation is required to get ready for home buyer viewings. One of the most important things to do to prepare your home is to declutter. Decluttering is often overwhelming because sellers expect to make the home immaculate; but really, the purpose to decluttering is to give rooms a neat and spacious feel. Decluttering will make you decide which items to keep, what to throw out, give away, or put in storage.

Home staging is a way to create a “vision” for home buyers. Home staging can get pricey if you hire a staging professional and rent furniture. But it doesn’t have to be expensive; “do it yourself stagers” can often transform a home with little or no money. If your home is vacant, inexpensive rentals can be used as room “place holders,” to help convey a room’s size and use to buyers.

Pricing your home correctly can mean the difference between a successful sale and languishing on the market. A common mistake that occurs in a recovering market is the eagerness to price high; but buyer push back can be an abrupt awakening to the realities of the housing market – making you wonder why your home is not selling. Be careful of the listing agent who intentionally over-prices your home, this is an old technique to persuade you to sign a listing agreement; the flip side is listing with an agent who intentionally prices the home too low, promising a “quick” sale (which only makes the sale easy for the agent).

Marketing a home sale has changed significantly in the last five years. Gone are the days of “set it and forget it.” Creative agents are constantly seeking avenues to publicize and promote listings. A sales strategy can determine the correct positioning for the home; while implantation of a marketing plan can include new and imaginative methods, such as placement in specialty magazines and websites, video, and even open house “parties.”

Many don’t realize that the internet is where a majority of home buyers now congregate, viewing your MLS listing across hundreds of websites. To bolster online appeal, make certain your agent uses professional pictures, inspired home descriptions, and complete MLS information. Be wary of new marketing technology, which often has mixed results; for example: “virtual staging” is a technology than can enhance online appeal by electronically staging a home, but can flop when buyers expect to see what is pictured.

by 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. This article was originally published the week of February 10, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

March 13, 2013November 23, 2021

Pricing your home to sell 2013

by Dan Krell
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DanKrell.com
© 2013

It has been a while since home sellers have felt optimism about the housing market. Although many would be home sellers continue to wait before jumping into the market; a combination of inventory shortages and reports of appreciating home prices are making some home sellers push the limits of home pricing.

Consideration for an appropriate list price is vital in any market. However, regardless of current market conditions, setting the right list price today could prove challenging. If your home sells quickly, you might feel as if you priced the home too low; while setting the price to high could make your home languish in an otherwise active real estate market.

Since the home seller decides on the list price, you might be tempted to use the most recent neighborhood sale or list price as a guide for your home sale. However, without deeply examining these comparables, this methodology may result in over or under pricing your home.

As public information is widely available on the internet, you might find yourself searching the ‘net for recent neighborhood sales to assist you in making a decision on a list/sale price. However, public records usually post dates of deed transfers as recorded in the courthouse, which are usually after the actual closing (sometimes several months or more). Additionally, public record home descriptions can sometimes contain incorrect or outdated data on home interiors and living area. Relying solely on data found on the internet could make you miss out on more recent and significant sale comps –again possibly leading you to under/over price your home.

For relevant comparables, ask your real estate agent to prepare a market analysis based on comps found in the local MLS (which contains real-time data). Although the market analysis is not an appraisal, its purpose is to assist home buyers and sellers in deciding on a list/sale price. An experienced agent preparing a market analysis will search for comparables that are most similar to your home by considering home factors such as: location, type, style, size, age, condition, interior amenities, exterior amenities, room count, basement, updates, etc.

Additionally, since the comparables used in the market analysis are as analogous to your home as possible, finding recent comps within your neighborhood are ideal not only because of the proximity to your home, but also because homes within the same subdivisions usually have many similarities (including age, style, lot size, upgrades, additions, as well as functional obsolescence).

Even though many home sellers are optimistic about home prices, you could still encounter appraisal issues. Appraisals are opinions of value by an independent party typically requested by lenders to verify the home’s market value in underwriting a home buyer’s mortgage application. And although appraisers use a standard methodology to derive a market value, some appraisers may exercise caution and seek the conservative value in ensuring the appraisal meets the loan guidelines. Issues can also arise when the assigned appraiser is unfamiliar with your neighborhood and surrounding area.

Pricing a home to sell has been described as a skill by some and an art form by others. Deciding on an appropriate list price not only establishes buyers’ expectations for an offer, it can also set the tone for a smooth sale or a bumpy protracted ride in the marketplace.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of March 11, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

November 3, 2010October 5, 2019

Home sellers and sale prices; what is the data saying?

by Dan Krell © 2010

As the housing market goes into a third year of turmoil, you have to wonder how area home sellers are coping with a prolonged challenging housing market. One indicator to consider is the home seller’s price expectation versus what home buyers are willing to pay; which is the list price as compared to the actual sale price of a home.

Before we check out the percentage of list price received at settlement, let’s review how home sellers may have become used to consistent and significant home price appreciation. One indicator to consider is the House Price Index (HPI), which is used by the Federal Housing Finance Agency (FHFA) to indicate changes to residential home prices. The HPI is the percentage home value change relative to the prior year; the HPI indicated in this column is for the local Metropolitan Statistical Area (MSA) of Bethesda – Rockville- Frederick.

During the 1990’s home price appreciation was sluggish at best and did not have significant quarterly appreciation until the late 1990’s. The HPI indicated that area home prices depreciated in Q4 1990 and Q1 1991. However through Q3 1992 to Q3 1997, home prices were mixed; there were eight quarters of depreciation and ten quarters of appreciation of less than 1%. The last two years of the decade showed increasing appreciation when the HPI ranged from 2.25 to 3.63; then a significant appreciation for Q3 and Q4 of 1999 when the HPI exceeded 5.

But oh the 2000’s! If you compare the sluggish housing appreciation in the 1990’s to the seemingly ever increasing market in the 2000’s, it appears to be a stark contrast. The 2000’s saw quarterly appreciation through the second quarter of 2007. During the beginning of the 2000’s, the HPI increased the first eight quarters from 6.76 to 13.82. Then from Q4 2003 through Q2 2006, the HPI did not fall below 12 and had four quarters when the HPI was above 20 (yes, there was annual appreciation over 20%)!

Historically, area housing prices have not been affected by economic turmoil as much as it has recently. Even during recessionary periods in the 1970’s and the 1980’s, the HPI was negative for no more than four consecutive quarters (for example: Q4 1982 to Q3 1983). Unfortunately, recent housing prices have had a negative HPI for thirteen consecutive quarters (since the second quarter of 2007).

Thirteen consecutive quarters equates to just over three years of home price depreciation for the local MSA. So, just how well are home seller’s acclimating to the new housing market?

According to single family home data collected and reported by the local MLS, Metropolitan Regional Information Systems, Inc. (MRIS), Montgomery County home sellers received a price shock in 2007 and 2008; sellers received about 92% of list price in 2007 and about 89% of list price in 2008. Since then, Montgomery County home sellers seem to have adjusted to the market as indicated by more recent percentages of list price received at settlement, which appears to have returned to pre-crisis levels (about 94% or more of list price).

Now that the housing market changes are no longer dramatic, most home sellers have accepted the nature of the housing market and price their homes accordingly. For those who haven’t yet accepted the new housing market, you may be in for a (price) shock.

Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 1, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

For a successful home sale, you need to focus on four areas…

by Dan Krell Google+ DanKrell.com © 2013

Since the home seller decides on the list price, you might be tempted to use the most recent neighborhood sale or list price as a guide for your home sale. However, without deeply examining these comparables, this methodology may result in over or under pricing your home.

Pricing a home to sell has been described as a skill by some and an art form by others. Deciding on an appropriate list price not only establishes buyers’ expectations for an offer, it can also set the tone for a smooth sale or a bumpy protracted ride in the marketplace.

by Dan Krell
Google+
DanKrell.com
© 2013