How to Sell Your Home Quickly and For The Best Possible Price
There's really nothing mysterious about this. There are some subsidiary tricks and issues, but the most important thing is obvious. The economic games theory is crystal clear, as is the research into what really happens. But most people don't like what the theory says, and think it somehow doesn't apply to their
ego wonderful property.
Price the property correctly in the first place.
Negotiating strategies are variable. In seller's markets, your optimum marketing and negotiation strategies are far different that in buyer's markets such as most of the country has right now. But every optimum strategy, in every market, starts with the same piece of advice. Price the property correctly from the moment it hits market. That price won't be the same price it would have been six months ago, and it won't be the same price it would be six months from now. But just because it changes over time does not mean there isn't an optimum price now, and now is when you're trying to sell it.
A good listing agent can keep you from under-pricing the property, and can keep you from giving away the farm or losing the sale in negotiations. But nobody can reliably get you more than the property is really worth, and the attempt is almost certain to end up costing you lots of money.
Here's how things work if you price the property correctly. You put it on the market, you get people coming by to view it because they can afford it and the basic numbers fit. If middle class properties are priced correctly, you're going to get offers within the first two weeks - probably more than one, even in the buyer's market we have going right now. You all negotiate in good faith, you reach an agreement with one of the prospective buyers, you go through escrow in 30 days or less, and within sixty days the property is sold.
But when you over-price it, here's what happens: When buyers compare your property to the others that are available and competing with yours, yours falls short. Result: They make offers on other properties, not yours. It's as if you wanted to sell a $20 bill for $50. Guess what? It's precisely the same situation with a different commodity.
Time goes on. You spend money on the mortgage, the property taxes, the insurance, and the upkeep. Plus any number of other possibilities, for instance if there are HOA dues. Even if there aren't, let's consider a median sales price in the zip code my office is in: $390,000. Let's say you've got a loan for eighty percent of the value at 6%, pro-rated property taxes at 1.25%, and $100 per month for insurance. You paid $1560 in interest charges for one month. That's cash, right out of your checking account! I don't count the cost of principal because you're paying that to yourself, but pro-rated property taxes would be slightly over $400 per month, and add the $100 per month for insurance and you're well over $2000 that not selling for that month actually cost you, plus the phantom of another couple hundred dollars principal out of your checking account that you're essentially giving the bank to hold for you until the property sells - unless that extra month decreases the eventual sales price, which it will. It's worse than this if your property is highly encumbered, or caught upon the fact that prices are receding in most of the country. That $390,000 property today would have been $500-$520,000 at the peak of the market, and lots of folks were buying then and are discovering now that those prices weren't real. So if your property doesn't sell for 4 months (the average days on market locally), that's nearly $10,000 out of your pocket that you're not getting back. Actually, it's worse than that.
Your period of highest interest is right when the property hits the market. The longer it's on the market, the fewer people will come by. The buyers who already looked have already made their comparison and decided they're not interested. The buyers who are new to the market will see that it's been on the market for thirty, sixty, ninety days or more and wonder "What's wrong with it?" The larger the "Days on Market" counter goes, the less inclined they will be to go view the property. Remember, at this point it's all numbers as far as the buyers are concerned. You can stage the house, paint it, remodel the kitchen, replace the carpet, landscape the yard, and nobody will notice because these don't translate to attention grabbing numbers. The property is what it is, has what it has, and the counter is ticking up, and every day this property sits . The only number you can change to induce people to come back is the asking price, and guess where it has to go? That's right, down. At this point, you have to give them a reason to come back and look that has its root in numbers. If you're now the cheapest property in your class in your area (or more precisely, the lowest asking price), that has a good chance of working. Maybe if you're now the second cheapest, you'll get a smaller amount of interest. But if there are still a significant number of lower prices in your class, this won't work. Nobody comes back to look at the 18th cheapest 3 bedroom home, even if there are 1000 others in the zip code, despite the fact that these numbers say you're in the best 2%. You've got to be priced significantly below the market to drag people back, where you didn't have to be nearly that low if you priced it correctly in the first place. Furthermore, attempting to negotiate the price back upwards is extremely unlikely to work. People came to look and made an offer based upon your implicit representation that the asking price would be an offer you'd be happy to accept, and if that turns out not to be the case, expect them to walk away no matter how hot the seller's market.
Tricks exist to reset Days on Market, of course. The various MLS affiliates are wise to most of them and getting better at catching them. Not to mention that the buyer's agent is going to check back and see if it's been on the market anytime recently, if they don't happen to recognize it off the top of their head. Listing Agents are becoming correspondingly more reluctant to play games to reset that Days on Market because they can lose the ability to place properties in MLS altogether. Buyer's agents are tired of this game, and many of them are perfectly willing to put their competition out of business by bringing their malfeasance to the attention of the MLS operator. I haven't done it yet, but I'm becoming more tempted in a couple of cases.
I see a lot of nonsense put into MLS by owners, and by agents who know better about how high the automatic valuations, CMAs, and appraisals for a given property are. These are all worthless. For one thing, this data can be manipulated, and sellers have just a little motivation to want it manipulated in their favor. More importantly, none of these influence sales price, and representations that they do or should is worthy of ridicule. What influences whether you get any offers, and from that, sales price is how good of a deal prospective buyers think they're getting, which in turn flows from the asking prices for comparable properties, as well as recent sales. If there's only two properties available for sale in the Zip Code that thousands of buyers want, sales prices are going to be increasing rapidly. Reverse this if the opposite situation applies. Incidentally, these are reasons a buyer's agent needs to be a fount of information on both the attractive points and the not-so-attractive ones.
With this information freshly in mind, what does all this say about the competence and ethics of an Agent who accepts the listing at a too-high price "to see if we can get it"? Nothing good. They're deliberately inducing the seller to harm themselves in order to get that listing. It's hard to put a monetary value on hurt feelings of betrayal when the agent starts pressuring them to drop the price the instant they have the signature on the listing agreement, but for a lot of folks, that's even worse than all of the cash it's going to cost them.
Lest anyone mistake me, this is no way relieves the need for an agent, and a good one. How many of the comparable properties that sold in your area in the last few months were you in? How familiar are you with all of the competing comparable properties? Try and put it on the market without that knowledge, and you're basically spinning the roulette wheel as to whether you're in the right ballpark, price-wise, with completely predictable downside if you're not. Who's your target buyer? What are the effective ways to attract their attention to the property? How to convince them they need to make a better offer? I guarantee that buyers don't care about "what you want to get" for the property! If real estate were easy and obvious, anyone could do it about as well as anyone else, and that is definitely not the case. Finding a good agent isn't trivial, and their pay isn't what most people think of as "cheap" but it will more than pay for itself in time and money.
The attitude of the seller is also critical. Sellers that expect to be treated like royalty are royally hosing themselves. If everything has to be convenient for you, you won't get as good a price as if you make everything convenient for the buyer, and in buyers markets, it often makes the difference between a good price and not selling at all. What are you willing to do in order to sell your property, to make it more attractive to buyers with special issues? Especially, what are you willing and able to do if it will get a higher price? Being willing and able to offer things that other sellers are not is an excellent way to appeal to buyers with special needs, perhaps even to the point where they have a choice of your property or none at all, no matter how many properties are "for sale" where the owner can't or won't. Do you think that might induce someone to offer a good price? To use some examples I've encountered recently, are you willing and able to carry back part of the purchase price? That's one way to give yourself an advantage over competing properties in any kind of market. Are you willing to work with someone who has a need for immediate occupancy? Can you carry the property for an extended escrow period if you're properly compensated for it? A good agent can use all of these, and others, as wedges to get the property sold, sooner and for a better price, but they can't do these things for you. You have to be willing and able to do them.
There are a few other things: Have the property ready to show before it hits the market, do what you can to enhance visual attractiveness (it's amazing the difference polishing furniture that's going to leave with you can make!), and especially make showings absolutely as easy as possible. It's a better sales tactic to get the family heirlooms and other valuables out and type, "Just Go!" in the showing instructions than just about anything else (although "5 minutes notice so we can be gone!" is even more effective), and permissive or restrictive showing instructions can make all the difference. If you've got tenants in the property who want 24 hour notice, you're in a world of hurt in a buyer's market, and even in a seller's market you're going to find that your traffic and final sales price will suffer because of it.
The asking price should take all of these factors, and more into account (and almost entirely as subtractions from a theoretically perfect sales situation), but choosing an optimum or near optimum asking price in the first place will make more difference than anything else, because the money a seller ends up with is about the time it takes to sell as well as final sale price.
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