Regardless of the market favoritism, meaning whether it is classified as a buyer’s market or a seller’s market… if it is time to sell your home, you want to yield as much cash as possible. Let’s face it – terms like return on investment, equity, residuals, profit, unrealized gains, etc. are irrelevant – the truth is that “Cash is King”. We all need to know the amount of cash to net from a transaction, so we can plan for future events that will ultimately use that money.
Useful to remember as we continue with this writing is a concept call TVM or the time value of money. So … not only is the amount of cash important, but also is the timing at which you receive it. Meaning that, $100,000 in your pocket today, is worth more than the same amount 6 months from now.
For those who have been living under a rock, the Real Estate market conditions today cause it to be classified as a buyer’s market. Typically this means that supply exceeds demand, although not in every case, but more importantly the buyer’s activities are the driving force that most significantly effects pricing. The typical buyer today is very knowledgeable about the housing inventory, the features offered by houses and by neighborhoods, and the pricing levels that represent value to them. Buyers’ today are very casual in their searches, often taking months before making the final selection. They are looking for, er uh, maybe demanding to find homes that are in turn-key and move-in condition, with extreme features, and all at discounted pricing.
Having said all that I have above, then, selling a house is still possible, although certainly not without its challenges. My business partner and I have hosted more than one hundred open house events within the last year, and from those, we can provide some of our observations and opinions for your benefit. Homes that are well maintained and free of defects, will generally sell in fewer days, and generally will receive higher offers than their dilapidated counterparts. See if the following thoughts make any sense to you.
Mindset Preparation:
Buying and selling homes is an emotional decision first, and then justified by logic. And sometimes the emotions can become highly charged. This is why, in my opinion, it is not a good idea for either, buyer or seller, to represent their own interests – plain and simple they are not of clear mind, nor in an objective position. Identify the motivational forces that are influences to you selling, and embrace them as you move forward with your plans.
Use visual imagery. While in the process of making the decision to sell, peacefully imagine that your “home” is now converted into an inventory item called a “house”, and that you will now detach your feelings. It is now time to think like a business owner. Your house is a product, and you are selling this product to a very discerning customer base. Others like you are competing for the buyer’s money, and now the responsibility rests with you to differentiate your product. Take ownership of your decision, take your memories with you – but alienate your emotions.
Next, begin to imagine your house from the perception of value, however, do so from the eyes of a buyer – and not your own perception. Begin thinking about an action plan to physically prepare your house for sale, and visualize in your mind’s eye that you are handing over the keys to a buyer as you drive away to your new destination. Continue the imagery by connecting with the good feelings you expect from achieving your goals and moving onward.
Hire a Competent Real Estate Agent to List Your House:
This is where you expect me to spend most of my writing time – by sending you direct and subliminal messages to hire me as your agent. Well … this is not an advertisement – sorry to disappoint you. If you need for me to give you at least 20 good reasons to hire an agent, then call me.
Curb Appeal:
Let’s face it – you do not want your house to be just a “drive-by”. You want your house to be inviting and welcoming… to say to prospects “look no further, this is the home for you”. What is that expression? … “You never get a second chance to make a first impression” – well that applies here also. Tour the outside of your house and make a complete list. Maintain a keen eye toward simple and tasteful landscaping, fix sidewalk cracks, replace falling gutters and downspouts, put on a fresh coat of paint – in other words, de-clutter and refresh. While you are at it, have a pest inspection and remediate any issues.
Bringing Your House Up To Selling Standards:
This is where many people get confused. Repairs and maintenance items such as replacing the malfunctioning HVAC or worn out roof, is not upgrading your house – it is merely maintaining its integrity – a condition of purchase that any buyer would expect. If your house has functional issues such as 12 bedrooms and only one bathroom, then you have real problems, otherwise, consider cosmetic improvements and ordinary and reasonable fix-up. Some of the obvious examples would include, (1) fix and remediate mold, (2) repair cracks, (3) replace broken and non-working windows, doors, light fixtures, plumbing fixtures, (4) spackle and refresh paint, (5) remove odor sources, (6) fix crooked doors and cabinets, (7) clean carpets and floorings, (8) clean all appliances and make sure they are in good working condition, (9) remove oil and grease spots from areas like garages – consider a protective floor coating, (10) hide or remove loose phone and internet wiring, (11) look for and resolve safety issues, particularly where people may stumble or fall. Do I need to go on forever, or do you get the picture? And by-the-way, ask a friend or non-occupant family member to help with your house’s self-inspection.
Upgrades:
This is a tough call. Are you actually going to spend thousands of dollars to upgrade your house when you plan to move onward with your life? And in addition, what insight do you have about the personal decorating tastes of the potential buyer – or as an alternative thought, will you narrow the field of potential buyers because of the upgrades that you choose? If your house is not already upgraded, then this may not be the time to commit. All too often, while hosting open houses, I hear people comment that they appreciate the upgrades, but they would have preferred to save the money on the purchase price of the house and used that differential to perform the upgrades themselves. Real Estate agents differ widely on their views on this subject. I think consideration should be given to just accepting that your house must sell in its present state, and as an incentive to the buyer, offer a price reduction to compensate for the deficiencies, or offer a credit back to the buyer for them to apply toward upgrades of their choice after move-in. Think of it this way! What if you just spent $20,000 to install brand new Berber carpet, and the buyer prefers hardwood floors. Do you think the buyer is going to pay your asking price, and then rip out the carpet?
Staging:
Many people, myself included, have little, to no creative insight. Second worse to selling a house in poor condition, is selling a vacant house, or one with old and beat up furniture. Most people need visual assistance to help them to see how their lives will look in a new environment. A vacant home immediately gives the impressions of void, loneliness, emptiness, and even emotional depression. Junk furniture emphasizes to the potential buyer, that their new life, if they buy your house, will become broken and dilapidated, just like your furniture. There appears to be an associative reflex between how a house is presented, and how people view the transformation in their lives as a result of buying a home.
I offer no analytical data in support for my next claim, except to say that these are my observations. Houses that are left vacant or poorly furnished, are on the market for at least 4 months longer, and receive offers at least 5% to 10% less than their staged or furnished counterparts. While there is reluctance on the part of homeowners to pay additional overhead costs for staging, it does not take a financial genius to realize the advantages. Let’s just say that a house is marketed at $1,000,000. It is in very good saleable condition, however, it is vacant, and the cost of ownership (mortgage, insurance, property taxes, HOA, etc) equals $6,000 per month. The incremental time on market alone, will cost the owner an additional $24,000 (4 months X $6,000 / month). Further, there is a risk of forfeiting from $50,000 to $100,000 cash because buyers view a poorly presentable house as one with negative issues. Oh, and don’t forget about my earlier comment about the time value of money. (For those considering to rent their homes, see my earlier blog on this subject.)
Defects and Price Concessions:
My mother was not successful at raising the most intelligent son in the world, but she was successful at teaching me the value of honesty and integrity. My advice is to erase the concept of caveat emptor or “buyer beware” from your thoughts. The world is different today. Both you, and your Real Estate agent will be obligated to complete a full disclosure about all known material defects of your property. It is better to deal with these issues up front and adjust your expectations about selling prices. I feel it is in the seller’s best interest to acknowledge and disclose any defects that cannot, or will not be corrected (i.e., the house’s backyard has become a resting point for migratory birds, or your house is located adjacent to a public waste water recycling facility) and consider making a price concession to attract and retain buyers.
Market Pricing:
Of course, you already have some idea of the price at which you would like to sell your house. This was established in your mind before you reached the decision to sell, and was likely predicated on the recent selling price of your neighbor’s house. But, of course, you are convinced that your house is far better than any of your neighbors. Now is the time to re-engage with your motivation to sell. Putting your house on the market to see what kind of offers you will receive is not motivation, that’s called fishing. The amount of money that you need to, or would like to net from the sale, has nothing to do with buyer’s perception of value. Consider this – if you bought XYZ stock for $100 per share in 2007 and it is now selling at $75 per share, what makes you think that you will find a buyer willing to pay you more than market value.
If you have hired a competent Real Estate agent like I suggested, then that agent has already provided you with additional market data to help you in determining the price at which to list your house, and a price that will cause it to sell. Keep in mind that one of the key reasons for any property to not sell, is because the price was not realistic to the market conditions. Yes, you can argue location, house condition, upgrades, etc. but everyone has a price-point. If you have not received many offers, or if those offers that you have received, are substantially below your list price, then this is a hint that your house may be over-priced.
Timing:
Although, you may have already selected a Real Estate agent, now you are in position to actually sign the listing contract and set the price. To place your house on the market for public exposure before it is ready for sale can be a mistake. Remember our discussion about first impressions. Plus, you want to avoid any negative associations as a result of your house being on the market for too long. So, to place your house on the market to get initial exposure, remove it to remedy defects, and then return it to the market, may only create unwanted suspicions among those highly informed buyers.
Our goal is to help and guide people to buy and sell San Diego Homes: Contact us soon - and let us apply for the job of being your Real Estate agent.
Charles M. Schevker (CPA)
DRE # 01875556
Broker Associate
Prudential California Realty
1299 Prospect St.
La Jolla, CA. 92037
Google Keyword = Homes in La Jolla CA
DRE # 01875556
Broker Associate
Prudential California Realty
1299 Prospect St.
La Jolla, CA. 92037
Google Keyword = Homes in La Jolla CA
Main Office: (858) 459-0501 ext. 319
Home Office # 1: (858) 750-2578
Home Office # 1: (858) 750-2578
Home Office # 2: (858) 412-6082
Mobile: (858) 449-8250
No comments:
Post a Comment