Category: Selling Your Home (page 2 of 5)

Tell me if you’ve heard this story before…

As always, the price of delay is FHA. 194 DOM, 91.34 net-SP/OLP.

Started at a wise price, just much too high. The Sold Price looks like a counter to me: Buyer offered $220k, but the seller had had enough of this dagnabit discounting. 116 DOM, 88.42% SP/OLP.

FHA again, and another counter offer for the Sold Price: Buyer offered $300k, seller countered at list? Or are there undisclosed seller-paid concessions? 126 DOM, 95.38% SP/OLP.

The Original List Price hinted at $340k, as did the reduced List Price. But cash is a rapacious king: $330k again is likely a countered number, with the original offer coming in at $320k. The $35k concession is going to be in lieu of repairs, and taken all together this reads like an iBuyer-style flipper offer: Gouge ’em on price, then nick ’em again on repairs. Why did the seller go along with it? They ran themselves out of time playing stupid pricing games. 71 DOM, 80.82% net-SP/OLP.

From sleazy to sleazy to sleazy. I like the buyer’s offer at $380k, with the difference split by counter-offer. Regardless: 239(!) DOM, 86.46% SP/OLP.

In the mood to draw conclusions? These are all of yesterday’s Closings in Sun City – and every one of them pursued the same faulty strategy: List high at a stupid or sleazy number, languish pointlessly for weeks or months, periodically making price reductions to other stupid or sleazy numbers, ultimately approaching market value only to cave to an offer that discounts on price, concessions, repairs – or all three.

And that’s how we get here, with virtually every listing agent in Sun City making the same boneheaded mistakes in the same ways over and over again and learning nothing from the experience:

If you want better results – (ahem) better money sooner – you have to work from a different strategy, one focused on selling high and fast rather than low and slow – and to the least-prepared buyers.

I am proud to say that I have had a salutary influence on real estate agents who live and work nowhere near me. Locally, no one has learned anything, but that’s their problem – and their clients’.

This is me DM-ing in Facebook with an a team leader in Florida whom I’ve known for – could it be? – 17 years or so:

We’re talking about pricing, of course. Nothing in residential real estate matters more. And specifically, we’re talking about my ideas about wise, stupid and sleazy prices.

I’m telling my friend to look at thousands of prices, but we’re not going to do that. But there were nine Closed listings in my Hotsheet this Sunday morning – why? it’s a mystery – so we’ll use those to demonstrate my logic:

But wait! Only four of the nine Closed prices are wise. Perhaps. Let’s post-mortem them one-by-one and count again at the end.

Not adorable – collapse for cash at ~60 DOM – but wise.

Another big drop for cash at high DOM, but wise.

This is why appraisers hate Closed sales with low DOM: They conclude that the property was thrown away. I expect the original offer was $240k – 80% – with $255k – 85% – being the counter-offer. Listed at a wise number – which, as I’ve noted on Facebook, is often a tell for throwaway homes. Is 9 DOM, 85% SP/OLP a full, free and fair test of the market? Regardless, unwise.

This is a double-dip – same agent ‘represented’ both seller and buyer – and that looks like a $300k offer with a $5k face-saving counter. I call it a wise offer.

Concession-bait. Born to be unwise. You can see that the intent is to simulate a $300k offer, though.

Wise. It actually sold in 7 DOM. No idea why it took ~40 days to close cash.

Virtually the same story – with both serving as nice illustration of the dilatory power of sleazy pricing. But: Wise.

Cash taking a concession is probably repairs. My bet: Offered $320k, countered at the then-reduced list price, then the investor split the difference post hoc with a repair concession. I like this as a wise offer.

Offered $400k, countered at $405k? I like this as a wise offer.

You have to look at a lot more listings to know for sure where Closed prices cluster in your market. Is it on $20k, $10k or $5k boundaries? But I know for sure where it isn’t – at $xxx,999, $xxx,995, $xxx,990, $xxx,900, $xxx,500, etc.

But: We went from mostly unwise to mostly wise offers, and we dissected the logic behind the unwise numbers.

This is the most painfully obvious truth in real estate, and the one that is seemingly hardest for agents to learn: If you price your listing using a number that seems both fair and honest to buyers, you will sell faster and for more money.

Who knew…?

Me, on Facebook:

Wisdom clearly eludes us: I did the same analysis yesterday:

I won’t promise to do this daily, but clearly I don’t need to: For whatever reason, Sun City listing agents are committed to pricing tactics that incite either rancor or confusion – resulting in costly delays, either way.

Here’s why this matters: While listers goof around playing theory-free, strategy-free pricing games, their sellers’ equity goes up in smoke.

Witness: The buyers got the golf-course lot-premium for free:

Justice is a piece-rate and a toll road: You get what you pay for and pay for what you get. Straight-commission compensation is the best possible incentive for successful sales results. But for every dollar your home falls short of its Fair Market Value at Close of Escrow, your listing agent feels only a few pennies of your pain – and you will pay those pennies even on dollars you concede to the buyer.

Your home is not a mudpie – pointlessly filigreed even as it loses its luster with every wasted Day on Market. You will never draw more attention to the property than on the first weekend. If you repel buyers with stupid or sleazy pricing, your house may do something no real mudpie can do: Lose value.

I classify list prices for real estate as being wise, stupid or sleazy. A house that is priced well – priced to market – and wisely should sell right away. Pricing stupidly causes delay, as we’ll see. And if the list price is sleazy – such as $449,999 – the buyer will be hostile to the seller and the listing agent from first contact: Conniving people are connivers.

Take a look at this Expired listing:

Both the listing agent and the seller knew on Day Zero that the market value of the home was $360k. The stupid Original List Price says so, as does the subsequent List Price reduction, also stupid: Both numbers are hinting at $360k, while simultaneously praying that buyer’s agents can’t comp and buyers can’t cope with so many confusing numbers.

Had the home been priced to market – $360,000 – on Day Zero, it probably would have gone for full price – or more? – by Day Seven. Instead, by pricing the property stupidly, the listing expired at 89 DOM.

But wait. There’s more.

Here it is again, Closed yesterday. Priced stupidly yet again, again clearly hinting at $360k, but this time the lister stood by his number, dagnabit! Finally sold at a small discount – after six-and-a-half-months(!!) from the original listing. 158 total DOM, 95.33% net-SP/original-OLP.

There is no rationale for any of this. Both listing agents knew what the home should ultimately sell for, and they must have included the seller in their wily machinations: Phase 1, over-price; Phase 3, profit!

The theory is what? We’re so smart we can trick those clueless buyers – and their appraisers – into over-paying for a largely-fungible production home.

As witness – here and day after day on Facebook – it doesn’t work. A sleazy price annoys the buyer, but a stupid price confuses him – necessarily introducing delay.

I believe in the sweet spot – the price that makes buyers act immediately. Priced wisely and to market, a brand new listing should be irresistible to the buyers you’re looking for – ideally so much so that they bid against each other to snag the property. There is no greater energy for a new listing than in its first weekend on the MLS, and that sweet spot price is what incites all the action.

You don’t have to take my word for this. You can see it all here in black and white: The listers and the seller knew all along that the house should sell for $360k. Thanks to repeatedly stupid pricing, it only took a buyer 158 Days-on-Market to figure that out…

As I’ve noted, I will often post-mortem closed listings on Bloodhound Realty’s Facebook page. Yesterday, I did nine houses in bulk:

Here’s a single closing from this morning, explicated in greater detail:

I love those two little boxes of dates and numbers. Sometimes I have to read the full listing history to figure out what happened, but 95% of real estate transactions are perfectly summarized by those two boxes. They are a residential real estate sale’s obituary, and my one-line summary – e.g., 190 DOM, 87.80% net-SP/OLP – is that transaction’s epitaph.

That’s morbid, so don’t even get me started on Expired and Cancelled listings. Meanwhile, here’s a lexicon to explain all the acronyms:

ADOM is Agent Days on Market, so it’s just DOM. There is a CDOM, Cumulative Days on Market, for exceptionally badly marketed properties. 

SP is Sales Price, what it sold for, excluding concessions – which many of these closings had. If I say net-SP/OLP, I’m subtracting the concessions. That is, I am arriving at the seller’s gross proceeds before commissions, closing and parasitic costs – so call it another 6.5%-7.5% off that gross number to get to the net payoff.

OLP is Original List Price, which may have been eclipsed by many subsequent price reductions, each of which is known in its turn as LP, List Price.

Note that, typically, if an agent gloats, “Sold at list price!,” he means the reduced LP, not OLP. In that circumstance, he probably doesn’t want you looking into DOM or concessions, either.

The kind of reporting I’m doing closing-by-closing, as Cautionary Tales, should be built into the MLS. There is no objective way to evaluate buyer’s agents, but listers sort themselves over time by those two numbers, DOM and SP/OLP.

Allowing for linguistic infelicities, language like that appears in most Sun City real estate listings: “Welcome to Death’s Door. Try to stay out of the way.”

That much is crass – and it is terrible as a real estate marketing strategy. But the underlying truth – the fact of our own mortality – remains, regardless of how much we’d rather not think about it.

So: To be much more blunt than that ham-handed send-up of senescence: I want to be your last real estate broker. I want to be the broker who represents your interests when you can no longer speak for yourself.

That’s morbid, and I apologize for that. But fortune favors the prepared mind, and I want for you to be prepared to defend your legacy in full.

So let’s talk about this now, long before it will matter. I want to meet your attorney and your kids – and I want my business card with each of them.

Too many houses get thrown away at the end. I’ll make sure yours commands its full market value.

Virtuosity requires one or more sparks of genius, but mere proficiency is simply a matter of consistent, insistent, persistent adequacy – which mainly consists of finding and fixing your mistakes.

That would be the essence of my way of working: Genius would be great, but not getting things wrong is where the magic happens. 😉

These are my listing results for the past ten years:

There aren’t very many. I’ve been doing property management since the twenty-tweens. But they are good and getting better by the only metrics that should matter to sellers: “How much money will I get and how soon will I get it?” A year from now, I will have many more Sun City sales, but my numbers will still be excellent.

Working from ARMLS, here is a spreadsheet I made summarizing every transaction:

It’s not presented in date order, but, if it were, you can literally see me getting better over time. This is terribly boastful, I know, but I live in a completely different world, as seen in our stats, from every agent I’m competing against. This again will be even more evident a year from now.

Here’s the Executive Summary in an easier-to-read format:

A praxis is a practice you get better at over time. By carrying your results back to your theory, you learn where your performance – or your theory – came up short. Iteratively – house-by-house – listing agents should get better. They should not make the same mistakes over and over again, blithely insisting that this time will be different.

If I am very lucky, I will grind up a few sparks of genius, when I list your home for sale. What I won’t do is make the kind of mistakes I document with dismay here and on Facebook. And, starting here, starting now, I will show you exactly how my efforts are paying off for my sellers.

I have a daily hot sheet; I look at every status change for every listing in Sun City every day. If you follow Bloodhound Realty on Facebook, you will see me opine briefly on things I see, especially post mortems of Closed transactions.

The images illustrate a pattern I’ve seen four times in the past two weeks: Seller caves dramatically at high Days-on-Market to an all cash offer from buyer who is represented by the listing agent – by Dual Agency, a double-dip.

All secrets kept, of course, and it’s churlish suspect ugly motives, but it is worth your while to be aware of this listing strategy, even assuming it is simply wholly erroneous. The buyers will claim they are ‘rescuing’ desperate sellers, but really, again assuming the absolute best, they’re sharks circling around mis-marketed listings, waiting for those desperate sellers to run out of two things: Time and alternatives.

So: First: You should be listing with me. I don’t play stupid or sleazy pricing games, so I’m typically done very quickly. But, more to the point: I don’t double-dip. I represent you only – as fruitfully and expeditiously as possible.

But: Second: If you price your home wisely and well – priced to market, to the recent comparable Closed sales – you won’t find yourself in this awful situation.

And: Third: If your prospective listing agent promises to rescue you with a pre-arranged cash buyer, should the listing fail to attract a buyer, take the time to ponder who is getting the best end of the representation – you or that buyer?

I am utterly amazed that the NAR has so thoroughly screwed up all the many lawsuits brought against it. Literally everything the plaintiffs complain about is soporifically consented to in many, many pages of paperwork.

Moreover, as mega-producer Bob Ryan inimitably discloses, the seller-paid buyer’s agent’s commission is a GOOD thing, a tool to motivate agents to work FOR FREE, on spec, in your behalf.

Now is THAT something you might be interested in?

Three closed sales, all the same floor plan, all dowdy/dated but turnkey livable:

Primus: Listed at an almost-wise price on the Wednesday before Christmas, sold for list by New Year’s day.

Secundus: Listed at a sleazy price and closed for less money in 34 DOM.

Tertius: Listed sleazy and insanely high, many price drops, mostly sleazy, finally sold at what we can readily see is the market price – in 210 Days on Market.

If you price to market using a number that looks wise to the buyer, you should sell immediately. If you ‘test the market’ – or worse, try to ‘beat the market’ – the market will be happy to correct your error. Eventually.

There are currently three active listings in that floorplan, again all stone comps to each other and to the solds: $314,900, $328,000, $355,000. Guess how they’re doing. Guess where they will sell – if they do.

It’s Saturday as I write this. There were 15 new listings in my little farm yesterday. Only two have wise prices, with the rest being either stupid or sleazy.

What’s worse is that these homes were listed on Friday, AFTER Saturday’s showing tours were already planned. The email from ARMLS or Zillow or wherever that celebrates these brand new listings will go unread, as buyers and agents rush around getting ready for the work they already have planned.

Sun City is special in that more buyers might be looking at homes on weekdays, but most buyers do not live here already, and they and their buyer’s agents do their real estate shopping on the weekends, just like everyone else.

Listing – or doing price reductions, if you must – on days when buyers are not shopping listings is an unforced error that abets the process of selling slow and low.

I like to say ‘better money sooner’, but that’s just a recapitulation of the core idea of my listing praxis: Highest, safest, soonest. We’re looking for the highest attainable return in a reasonable span of time.

‘Attainable’ means two things: We want the highest price a real buyer is willing to pay, rather than what we might wish we could get, instead. And we want for that buyer to actually be able to pay that promised sum on time – ideally without the seller’s help.

So an FHA offer at 105% of list, with 3% coming back to the buyer in seller-paid concessions, is sub-optimal, even though the top-line number is bigger. The house still has to appraise – and it won’t, not above market value – and you already know your buyers have no cash to spare to make up the difference. Not only won’t you be getting the bigger number, there’s a good chance the buyer will be unable to perform at COE – putting you back on the market, wiser but shop-worn.

On the other hand, all cash at 98% of list can be worth considering. ‘Cash is King’, so it expects a discount. That lousy FHA offer can be useful to get the buyer to 100% or above, but with no or few contingencies and a quick closing, cash is typically better money: Not higher, necessarily, but much safer and much sooner.

The hierarchy of real estate funding looks like this:

• Cash
• Conventional
• FHA/VA, etc.
• Other

Cash is King – very safe, very soon – but a strong conventional borrower who is desperate to possess the house is likely to be both higher and safer (less likely to cancel) than a cash buyer.

VA borrowers can be very strong, financially, but VA loans can take a while to close and they require the seller to pay a significant portion of the buyer’s transaction costs. FHA borrowers are very often weak on credit, cash-on-hand and cash reserves. The offer that seeks a seller concession on the way in may need even more seller-paid funding to make it to the finish line. VA is less soon, FHA less safe.

As for the ‘other’ category – seller carrybacks, hard-money loans, etc. – if we are even talking about them for a Sun City home, something has gone terribly wrong with the property’s marketing.

How do I know that’s so? Because if a house is listed properly – priced to market and promoted irresistibly – it should attract cash and strong conventional offers immediately. It it doesn’t, the price is wrong. If the offers that come in eventually are all crazy government loans – over list but with countervailing concessions – the buyers want the seller to cover their shortfalls. And if the seller waits for months and then finally gets an offer with ‘creative’ financing…

Art elicits a response. A brand new real estate listing succeeds when that home’s eventual buyer says, “Hot dang! Must lock down immediately, before anyone else gets it.” The safest buyer, by far, is the one who wants it more. But if the listing doesn’t surface that buyer, plus others less frenzied – right away, in the first few Days on Market – then it has failed.

But, listed right, your house should attract one or more cash or strong conventional offers at or near full price. Play your cards right, and you could Close above list in ten days – so get packin’! And that is better money sooner.