We work in one of the fastest moving real estate markets in the world. Our clients are intelligent, highly educated, entrepreneurial, and accustomed to taking risks in most all aspects of their lives. However, when selling your home, it’s a good idea to anticipate potential concerns in order to avoid costly mistakes and mitigate risks.
A few years ago we shared some of the top mistakes home sellers can make when approaching the real estate market, and we have updated that list based on Spring 2015 market conditions.
- Overpricing the home. Well-counseled sellers will interview several real estate professionals who are familiar with their neighborhood to obtain an opinion of value. Sometimes a seller may already have a relationship with a local Realtor with whom they wish to work. In this instance, you may ask your Realtor to enlist the help of other real estate professionals in your area. Many of the best agents will be happy to help recommend a list price as a courtesy to you and the agent you have chosen.
One of the current challenges in pricing a home is that recent sales are most often far in excess of their list prices due to buyers competing in multiple offer situations. Sellers are often tempted to use the closing price to justify their list price resulting in such a high list price that buyers will completely withdraw from the process. It is essential that buyers see “value” in the list price for them to participate.
- Underpricing the home. Yes, you are reading this correctly! Sellers should never put a price on a home that they would not be happy to receive. There have been a number of situations where sellers chose a price with the expectation that they would receive significantly more in a multiple offer situation. While they do not have to accept an offer, even if it is a full price offer, buyers generally do not react favorably when a seller responds with a counter-offer for more money, especially when the buyer is the only buyer.
Sellers can always increase their list price, but they should know that the Multiple Listing Service memorializes the pricing history of the home. Buyers will know that the sellers have increased their price and this is rarely a winning strategy.
- Relying on on-line estimates. Unless your home is located in a housing development with similar age, size and quality homes, on-line valuations from national real estate sites are rarely reliable. They are based on formulas but do not take into consideration differences such as condition, floor plan, and the surrounding homes. Do not be seduced by a tantalizing on-line valuation!
- Listing with the agent who says they can get the highest price. Agents do not control the market. They do manage the presentation and marketing of a home which can certainly influence the outcome. The seller always sets the list price, so when interviewing agents, focus on their recommendations for presenting and marketing your home.
Be sure to separate “marketing” from “publicity”. Some agents use their listings as platforms for self-promotion, rather than considering what is needed to effectively promote your home to the right audience.
- Not discussing the commission. Most Realtors are paid on a commission basis at the close of escrow, and commissions are negotiable. Many members of the public are unaware of this and assume that there is a standard commission. A Realtor should be prepared to not only discuss the commission but also the scope of services provided.
- Free Services? There is an old saying that there’s “No free lunch”, and that comes to “free services” as well.
There are Realtors who advertise a whole menu of free services including staging and support services for market presentation. However, often these free services are offered with an increased broker commission paid to the listing side of the transaction and an overall higher commission paid by the seller.
So, if a seller pays more commission is it really “free”?
When interviewing Realtor-candidates, sellers should know how much the commission will be and what is included. There should be no ambiguity about this!
- Listing with an agent who may be too busy to give the home the priority it needs and the seller deserves.
The velocity of the current market is astounding, and it is vitally important that sellers choose an agent who is knowledgeable, competent and available.
One of the biggest problems we see is poorly prepared disclosures and disclosure packets. Yes, we know, this is the boring part of real estate, but it is the part that will keep you out of trouble down-line. Choose an agent who can not only ensure your home is beautifully presented, and but who can also spend time on the documentation details!
- Listing with an agent who is not familiar with the local market area. Strong local market knowledge is essential to pricing the home and representing the seller. In some markets, like the one where we work in Silicon Valley, many sales occur “quietly”, i.e., they are not exposed to the Multiple Listing Service. Well-informed local agents are better positioned to know about these properties and to access the agents and prospective buyers for selected, unique opportunities.
- Not exposing the home to the broadest segment of buyers. Normally this is accomplished through the Multiple Listing Service. In certain price ranges or for personal privacy, sellers may not want this type of exposure, but a well-counseled seller should insist on some element of exposure. In our local area which covers Palo Alto, Menlo Park and surrounding communities this is done through networking among the agents, often electronically with a good visual presentation, in person and by telephone.
- Sellers should not show their homes until the home is in showing condition. A cluttered environment and relaxed housekeeping and home maintenance are not positive visuals! Few of us live in our homes in the way they need to look for a favorable showing appointment. It is the rare buyer who can overlook these details! Insist on professionally taken pictures and having them on-line when your home “goes live”. Most buyers are introduced to the property through an on-line notification system and the importance of pictures cannot be overstated! Pictures taken with a cell phone are inadequate and do not do your home justice!
- Sellers should understand that in most markets the buyers are in charge. (Sorry to be the bearers of bad news!). When inventory is abundant, buyers can be selective and if they cannot negotiate successfully with one seller, they will move on to the next opportunity. When a market has low inventory, buyers will compete with each other for homes. Sellers will benefit from high prices and aggressive terms.
When a home does not sell right away, it is important that sellers understand this, and that they react quickly by reducing their list price. The rhythm of the luxury home market and for unique homes is different. A talented Realtor will know the difference and can guide you appropriately.
- Not asking the agent for references. Some agents may “look good” until you talk with some of the people who have worked with them.
There are on-line sources such as Yelp.com which are helpful. Yelp screens reviews based on their formula, one of which is that the reviewer must be recognized by Yelp, e.g. someone who frequently reviews. One word of caution with Yelp: Scroll to the bottom of the reviews and there is a section called: Reviews not currently recommended. Read those additional reviews also because they may give you additional insight when evaluating an agent. Other resources that might be helpful are your company wiki, or asking your circle of friends and colleagues for a recommendation.
As we embark on the second quarter of 2015 underlying market conditions are very favorable for home sellers in our market area. We continue to need more homes to sell in order to satisfy buyer demand.
It would be our pleasure to connect with you concerning your real estate plans. Please do not hesitate to contact us.