positioning your home to sell in today s market you… · adjusting your price is not the only...

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Paton-Showley Group

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574.527.6022 mobile or 574.269.7878 office

Positioning Your Home

To Sell in Today’s Market

Service Provided by Your Real Estate Professional

Deb Paton-Showley of The Paton-Showley Group

Century 21 Integrity Real Estate Group

www.debjustsoldit.com [email protected] 877.929.2733


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Market Value – The most probable price willing and informed buyers and sellers can agree upon in a competitive market without any undue influences on either party. Appraised Value An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Assessed Value The valuation placed on property by a public tax assessor for purposes of taxation. Replacement Value The amount it would cost to replace the home at current prices less accrued depreciation. List Price – The owner-assigned numerical monetary value at which the owner will sell the property.

The seller sets the price of the home… …but ultimately, the buyer determines the value.

My job is to supply you with facts about what has sold recently and what is for sale now to help you make a decision.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Frequently Heard Pricing Objections That Have No Relationship to Value

"Another Agent said it was worth more." – It isn’t an agent that puts a price on a property. It is established by the market which includes what similar properties have sold for recently and what the supply and demand is currently.

"Our home is nicer than those houses." – This is a subjective opinion, generally, from a biased individual (the seller). What is “nice” to one person may not be to another.

"People always offer less than asking price." – This makes the assumption that everything is over-priced and that isn’t the case. There are lots of properties that sell for full price or sometimes even higher. By over-pricing a property to allow for the buyers negotiations actually encourages lower offers.

"We can always come down on our price." – Studies have shown that the longer the home stays on the market, the lower the price will be. Sometimes, it can be lower than what it would have sold for if it had been priced properly in the beginning.

"We have to get that much out of our home." – There is no rational reason why a buyer should pay more than fair market value for a person’s home just because the seller has a need for the money. The buyer usually thinks that they have a good need for the money also.

"My neighbor was able to get his price." – “His price” may be less than he was asking and the only way to know is through examination of the MLS or county records. Many times, this objection is a misunderstanding about what the neighbors “thought” the property sold for.

"Let's try it at our price for a month or so." – Trial and error is generally not an acceptable way to price a home. The initial price enthusiasm of the market generated by a new listing is lost and can’t be regained.

"The buyers can always make an offer." – Unfortunately, the correct buyers who might make an offer won’t even be looking at it because it is out of their price range. Buyers don’t want to look at homes they can’t afford just to get their hopes dashed and have to downsize their realities.

"We paid more than that for our home." – Regardless of the reason, ignorance of value or downturn in the market, appraisers don’t care and neither do the buyers.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Obstacles to Proper Pricing Incompetent Agents – There are some agents who will accept a listing at any price the seller puts on it. They either don’t know what the proper price should be or don’t have the courage to tell the seller the truth. They don’t understand that there are costs to placing a home on the market to both seller and the agency. The seller loses time and possibly a home they wanted to purchase but needed theirs to sell first. Even when the home is finally priced correctly, it may be too late because the property has lost the “new listing” appeal.

Neighbors – Sometimes the neighbors mislead others by allowing fellow homeowners to believe they got more for their home than they did. They may have priced it higher that they really wanted and when a lower offer came in, they accepted it. However, when the neighbor asks what they got, the seller says “Just what we were asking.” Inflationary Times – Proper pricing is difficult regardless of whether it is an inflation that affects the entire economy or local supply and demand that cause prices to go up. These situations can be exacerbated when a seller has a long closing date and house being put on the market even before his closes are priced higher than his. Recessionary Times – It is particularly difficult for sellers who cannot sell their home for as much as they paid for it a few years earlier. It isn’t what the public expects of the real estate market and it is an unusual situation. Sometimes adverse economic conditions such as the loss of a major employer in a small community can lead to market price adjustments. Fear – The uncertainty of putting the correct price on a home can lead to losing a significant portion of a homeowner’s equity. The fear of making a costly mistake can result in indecision that can also lose money. Loss of Perspective – Many times a seller is so emotionally involved that they are not necessarily thinking objectively. A disinterested third party can offer sound advice and alternatives that may not be apparent to the seller. Need for a Certain Amount of Cash – One of the saddest excuses heard from Sellers is that they need to get a certain amount out of a home. While the reason may be entirely legitimate, it still has nothing to do with value.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

TERMS / PRICE Relationship Terms describe the financing conditions and other concessions that are attached to a property for sale and an offer to purchase. It has been said that “you can set the price if I set the terms.” For instance, you might set a price that is 50% above the market value of the home and I might agree to pay it as long as I can set the terms. I might say that I want the home for $100 a month for 20 years at which the entire loan will become due: principal and unpaid interest. I could live in the home for cheaper than I could rent a home and if at the end of the 20 years, the house wasn’t worth more than I owed, I could let you foreclose. While no one would agree to such extreme terms, terms can make the difference in the marketability of a home. If the only terms available are cash and in the home’s present condition, which would not qualify as good or great terms, the terms would have to be considered fair because they are not good or great. Fair terms equate to only a fair price for the home. If the seller is willing to pay points to help a buyer obtain attractive financing, that concession might qualify as good terms. This would appeal to more buyers, especially the ones who could qualify for a higher price but want lower payments. In this case, good terms equate to a good price for the home. If the terms were exceptional such as the seller was willing to carry the mortgage on the house at lower than market rates, this would obviously qualify as great terms which would equate to a great price.

Fair Terms = Fair Price

Good Terms = Good Price

Great Terms = Great Price


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Adjusting your price is not the only thing you can do to sell your home. There are five factors in the marketing position of any home: Price, Location, Condition, Terms, and the agent you select. In most cases, if the property is in a poor location, there isn’t a remedy. Short of moving the home, which may be a possibility in manufactured housing, adjustments must be made in other areas. Improving the condition of a home is a frequently overlooked strategy in selling. The seller may rationalize why he is willing to give the buyer an allowance to make his own personal choices for paint, carpet and the like. However, it takes a trained eye and considerable imagination to see a finished home in its present condition. The discount that the buyer imposes on the price is usually greater than the cost of the seller actually doing the work. Terms as was discussed previously can cause a home to sell for a higher price. The majority of the time that a home fails to sell in its initial market period is due to one or more of the first four factors. On occasion, unfortunately, the agent listing a home may not know or understand what it takes to sell a particular property in a specific area. Other times, the agent might be so busy with other business that not enough time and energy can be spent to affect a sale. Price is without a doubt the easiest factor to control. Adjustments in price can take care of deficiencies in any of the other categories. The key to a successful sale is knowing which of the factors to focus on to maximize the sales price while minimizing the marketing period.

$219,000 $209,000 $199,000


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Competition in the Marketplace

Positioning According to Supply & Demand

Area Riverbend High School

Price Range $180,000 - $220,000

Past 12 months

Past 6 months

Past 3 months

Current

Sold 48 20 8

Average 4 3.3 2.7

Active

Supply 14 months 17 months 21 months

If your home went on the market today and it took this long to sell, how does that fit into your moving plans? Competition in the market place affects the sales price of a home. If the demand is constant and the supply is low, the price can increase. On the other hand, if demand is declining and the supply is constant or increasing, the price will go down. 90 to 120 days of market time is considered to support a healthy inventory of property. If the market time is less than that, the shortage of properties can cause the price to go up. If it is more than that, the glut of properties can cause the price to go down. Another uncertainty that occurs when the market time is extended is that economic conditions may continue to deteriorate. This could lead to lower values and possibly longer market times. One strategy would be to price the home in today’s market so that it would sell within 30 to 60 days. Experience has taught the industry that if a home sells in the first 30 days that it is on the market, it will usually sell for its highest price. An explanation for this is that there are people in the market who have seen everything that is for sale currently and are waiting for something new to come on the market. They rush to see the home immediately and these seasoned buyers can tell if it compares to other homes in price, location, condition, and terms. They know they might be competing with other buyers and have a tendency to make their best offers first. Contrasted with a home that has been on the market for a long time, the buyers in the market place begin to think that something is wrong with the home because it hasn’t sold. If they are willing to take a chance on it, the think that they deserve to get it at a bargain price. Positioning the Home to Sell


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

In any given market, only a specific number of homes can sell in a period of time. In order to get your home sold in that period of time, it must be positioned competitively in price, condition, and terms. Price is the most strategic and flexible of these factors.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Range Pricing Value range pricing was originated in Australia where auctions are very popular. It was first introduced to the United States in Carlsbad, CA in 1995. About 40% of property listed for sale in San Diego county now uses range pricing. In addition to the three objective factors in selling a home, location, condition, and terms, there are some subjective factors that include seller’s motivation, buyer’s motivation, and the agent you select. These things add a new dimension to pricing a home which is how value range pricing came to be developed. According to a study made of homes in the San Diego MLS database in 2004 the average time on the market was 30 days for range priced properties compared to 37 days for fixed priced listings. This is approximately a 20% saving in time. The premise behind this strategy is that range pricing will attract a greater group of people. The reasoning seems logical without analysis but when you take into consideration how properties are located today, it becomes more obvious. Databases, whether in MLS or on the Internet, require that you place a high and low price range for the search. If the subject property is not in that range, it won’t be included in the results. This will lead to lower exposure to the potential buyers and ultimately longer market time if the home is over-priced. However, when a home is priced in a range that overlaps rather natural limits, it will be included. For example, if a home is priced at $325,000 and a buyer is in the $250,000 to $300,000 range, the subject property is excluded from the results. On the other hand, if the home was priced using range pricing at $290,000 to $330,000, it would be included in the search. The seller’s home will be included in more search results, thereby getting more showings and more activity. Many agents feel that this will result in a higher sales price for the property.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Overpricing

Reduces sales associates activity because they know it is over-priced and don’t want to waste their time showing it because the seller is unrealistic. Not to mention the fact that increasingly more often, selling agents are representing the buyer and have a responsibility to find the best values for their clients.

Reduces advertising response because buyers as well as agents looking for a particular type of home in a certain area become familiar with what is available.

Loses interested buyers who might have looked at it but didn’t think the seller would consider what they thought it was worth. Not all buyers are willing to go to the effort to write an offer, put up earnest money, and take the time it takes to find out if the seller will take less.

Attracts the wrong prospects because they are expecting more amenities in the home based on the price and once they see it, it won’t compare to the other homes in that price range.

Eliminates offers for the same reason because the wrong prospects are looking at the home.

Helps sell the competition by making the other homes in that price range look like they have more to offer.

Can cause appraisal problems even if you were to find a buyer who was willing to pay more than market value. The lender would require an appraisal which would demand factual, objective proof that the home was indeed worth what the buyer was willing to pay for it. The lender does this so that if they have to take the home back because the buyer defaults, the loan would be covered by the sale of the property.

Extends market time because of all of the reasons listed above. Things that Don't Affect Value

Your original cost is irrelevant to market value.

Your basis in a home which is the price you paid plus any capital improvements made while owning the property is not related to market value.

The cost to re-build it today is important to know for insurance purposes but doesn’t affect market value. Appraisers use the cost approach as one method to help focus on a value but they also depreciate the property for economic and functional effects.

Your investment in certain improvements was made for personal enjoyment and need to be treated as such. It is unrealistic to think that you can locate the buyer who would value those particular improvements the way that you do.

Personal attachment to the home, setting, or other sentimental reasons does not have tangible effects on market value.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Contrarian Strategy Most people make a move when the market is trending up. It is a fairly natural decision in that you can get more for your home and selling while the market is good seems the correct decision. It doesn’t make much difference if you are moving up in an up market or down in a down market. The premium received on the sale of the home sold offsets part of the premium paid on the home purchased. However, it can actually be advantageous to make a move when it contrary to the natural instinct. Moving down in an up market or moving down in an up market can actually yield a better gain as is illustrated in the table below.

Move Up in a Down Market

Sell a home $400,000

Market requires a 10% discount 360,000 (40,000)

Buy a home 600,000

Market requires a 10% discount 540,000 60,000

Net Gain on transaction 20,000

Move Down in an Up Market


Market requires a 10% premium 440,000 40,000

Buy a home 260,000


Net Gain on Transaction 66,000

Move Down in a Down Market


Market requires a 10% discount 360,000 (40,000)

Buy a home 260,000

Market requires a 10% discount 234,000 26,000

Net Gain on transaction (14,0000

Move Up in an up Market



Buy a home 600,000

Market requires a 10% premium 660,000 (60,000)

Net Gain on Transaction 20,000


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Buyer’s or Seller’s Market To determine a trend, it is necessary to analyze whether the days on the market are increasing indicating a shift toward a Buyer’s market or decreasing, thus indicating a shift toward a Seller’s market.

The determination of when it switches from a Seller’s to a Buyer’s market is difficult to pinpoint. The trend toward a Buyer’s market is easier because the days on the market are increasing.

When this happens, there are more homes on the market competing with each other for the available number of sales per month.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

In rapidly increasing or decreasing markets and when the competition is stronger, the subject property should be priced slightly ahead of the market. Only in a rapidly rising market, can a home be priced slightly ahead of what the market indicates. However, when the market is declining, the home should always be priced slightly below what the market indicates. It takes a certain amount of time to get the home exposed to the market and it needs to have the competitive price advantage at that point. If it doesn’t get this initially, the property will be trailing the declining market and generally never achieves that advantage. Principle - The Greatest Activity Occurs in the First Weeks of the Listing Period REALTORS® are working with buyers who have seen what is currently on the market and are waiting for something new to be listed. Most activity will take place in the first three to four weeks of a listing. The excitement of a new property on the market will create an urgency for both buyers and agents to see it as quickly as possible. In many instances the home will receive its highest and best offers during this time.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

The buye

rs that will

look at

the hom

e during the

first few

weeks

are more experienc

ed because they

have been

looking longer. They have a better understanding of the process of buying a home and are generally ready to act. After that initial period, the only people to look at it will be new buyers in the marketplace. The number of showings will slow down which means there are less potential buyers looking at the property.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Principle - Length of Time on Market Adversely Affects Value

“Listing price is generally thought to be a major factor in time on the market and studies show that a higher listing price results in a longer time on the market, that housing liquidity depends on market participants’ search effort that is partially determined by listing price, and that it is expensive to overprice a house initially.”*

Additional characteristics mentioned in the study that affect value

Age of home was consistently negative

Each additional bathroom specifically in the Northeast and Southwest

A fireplace has a positive effect on price except in the West

A basement added significant value to the selling price

Perceived school quality has a positive effect

Value of a garage is consistent across the US *A research project sponsored by the National Association of REALTORS® dated December, 2003 called The Composition of Hedonic Pricing Models: A Review of the Literature by G. Stacy Sirmans, PhD, Professor of Real Estate, David A. Macpherson, PhD, Professor of Economics – both from Florida State University.


Paton-Showley Group

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574.527.6022 mobile or 574.269.7878 office

Principle – Buyers Compare Homes with Others on the Market Buyers will compare the different homes that they see to determine value. If two or more homes of the same size are on the market in the same area, for the same price, the one in the best condition will probably sell first. If two or more homes in the same condition are on the market in the same area, at the same price, the largest one will probably sell first. If two or more homes of the same size are on the market for the same price, in the same condition, the one with the best location will probably sell first. If two or more homes of the same size are on the market in the same area, in the same condition, the one with the best price will probably sell first.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Principle - Positioning Attracts the Greatest Number of Buyers The Pricing Pyramid shows the effect of positioning a home in the market in relationship to how many potential buyers will be attracted. If a home is priced at market value, it will likely attract a little over half of the prospective buyers in that market. Not all will be interested because it won’t be the right style, size, location, or a myriad of other reasons. If the price is 10% lower than market value, more people will be interested because it is a good value. They will be willing to make concessions in amenities for price. If the price is 15% lower than market value, almost all of the potential buyers will consider it. It is a bargain and a good investment. On the other hand, if the home is priced at 10% above market value, fewer buyers will even consider it. They know values and must be willing to pay a premium for the benefit of getting the home that most precisely meets their needs. Following that same line of reasoning, if the home is priced at 15% above market value, it will eliminate the vast majority of potential buyers. It is not to say that the home won’t sell but it will certainly extend the market time because the perfect buyer must be located. The question facing sellers every day when they price their home is “What percentage of the potential buyers do you want to appeal to?”


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

I have an Investment in your home too!

Time in Hours

Cost

First Visit 1 $50

Comparable Market Analysis 2 100

Listing Appointment including preparation 3 150

Office Tour 1 50

Broker’s Tour 3 150

Install sign, brochure box, lockbox .5 25

Prepare marketing materials 2 100

Print flyers 78

Write ads 1 50

Upload t MLS 1 50

Upload to Internet sites 1 50

Cost of advertising – website, magazine, news, etc. 200

Prepare Homebook and deliver to home 3 150

Deliver flyer to property .5 25

Prepare plus cost of “Just Listed” cards 1 90

Prepare plus cost of cards to neighbors 1 90

Prepare plus cost of card to best agents 1 90

Prepare plus cost of card to fiends of owners 1 90

Open houses – 4 @ 2 hours each 8 400

Weekly reports and communications 8 400

Scheduling appointments 16 800

Follow-up on showings 8 400

Contract negotiations 6 300

Follow-up during escrow period 6 300

Meet mechanical inspectors 3 150

Meet termite & pest inspector 1 50

Meet appraiser 1 50

Review settlement papers 1 50

Closing 1 50

Estimated Expenditure $4,538

Estimates are for typical marketing activities during a 12 week listing period All estimates of time are typical marketing activities Hourly wage based on annual income


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Bonuses May Lengthen Time on Market

“A seller offering a bonus commission expects to sell the home for more than market value, thus recouping the bonus, or shorten the time the house is on the market. But researchers' analysis of sales in Montgomery, Alabama, during 1998 indicates that homes sold under a bonus commission actually sold for less than market value and required more marketing time than homes sold without the bonus.

With all market-value-related factors accounted for, properties listed with a bonus to the selling agent sold for a discount of 3.6 percent to the market. A separate analysis of the same data shows that homes listed with a sales bonus required an average of 35 additional days to sell. “

Volume 11, No. 2 – April, 2004 Tierra Grande, Journal of Real Estate Center at Texas A&M University, Spotlight on Agency by Jack C. Harris http://recenter.tamu.edu/tgrande/vol11-2/1670.html

"Beware that some devious agents will at first suggest a very handsome price. Then, after they have the listing and the house hasn't sold, they'll come back with a pitch to lower the price." Consumer Reports

Approaches to Value

1. The value indicated by recent sales of comparable properties in the market, with adjustments for age, condition, and other characteristics

2. The cost of reproducing or replacing a property minus accrued depreciation

3. The investment value represented by the net earning power of a property based on the capitalization of the income stream.

An appraiser uses three approaches to value for real estate. The third approach is not as appropriate for residential real estate being used as principal residences. While the cost approach certainly gives a perspective to the value, it is common to see a notation on appraisals for homes to say that most weight given to the market data approach.

http://recenter.tamu.edu/tgrande/vol11-2/1670.html


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

Comparable Market Analysis A CMA shows what similar homes have sold for recently. They should be of similar size, age, amenities, quality of construction, and area. While some CMAs also include what is currently on the market for sale and what has expired, most consideration should focus on the sold properties. Appraisals don’t give any weight to what is currently on the market, only what has sold and closed. Average square price is a benchmark but not a number that can be arbitrarily multiplied by the square footage of the subject property. In a given area, a home larger than the average will have a lower per square foot value. Homes smaller than the average in the range will have a higher per square foot value. This is due to having to spread the common cost of the main systems in a home such as kitchen, roof, HVAC, plumbing, etc. Average number of days on the market is an important item to concentrate. If a trend can be identified that the days on market are increasing, it could indicate that there is beginning to be an over-supply of homes which could mean a softening of the market and slowing of appreciation. Real estate agents developing a CMA for a property have the same information to draw from which is generally the Multiple Listing Service but sometimes includes other sources such as company sales and independent sales that the agent is aware. If the property will compete with the new homes that are being built in the area, it is important to know if they were considered in the comparables. Some MLS’s don’t have that data available. The data in a CMA is factual and interpretation is aided by experience. Sellers should have confidence in the judgment of their agent to help guide them to the proper pricing of their home in order to maximize the net proceeds from the sale of their home.

The seller sets the price of the home… …but ultimately, the buyer determines the value.


Paton-Showley Group

[email protected]

574.527.6022 mobile or 574.269.7878 office

The Century 21 Integrity Real Estate Group is made up of several agents who each bring to the table their unique and broad sphere of influence. We have several agents whose primary focus is helping and serving their clients and friends in selecting lake homes, residential communities, and homes with acreage that will fit their needs. We strive to always be a step ahead of our competition by going the extra mile when it comes to our service. Our marketing is key to our success rates. After years of studying and trying different marketing approaches, we feel that we are able to narrow down to a precise focus the marketing that will work specifically for your home. We customize each marketing campaign based upon your specific needs. We also have a proven website that continually brings us leads as well as significant presence on realtor.com, lakehome.com, lakeproperty.com and many more. We have a standard for advertising and marketing to which others compare themselves to. Also we bring years and of experience, negotiation, and service to your front door. By selecting Deb Paton-Showley and the Paton-Showley Group to be your agent, you have now stepped through a new front door of service. She is dedicated to serving you and your family to provide you with the end result of successfully selling your home. She believes that her vast knowledge of the lake and the history of the area will be largely valuable to clients looking to purchase your home. She is a third generation Lake Property Specialist. Most importantly when you work with Deb, you are treated like a friend. She is a team player and always looks forward to the opportunity to serve you as well as other agents in the process of selling your home. Deb specializes in residential homes as well as lake properties. She is an expert in New Construction and currently represents Eagle Crest Subdivision and Shadow Lakes Residential Community (2008 Parade of Homes Location). Her service does not stop with the sale of your home. She has consistently produced multi-million dollar sales volume and currently serves as a Board of Director for Kosciusko Board of Realtors, is a member of Kosciusko and Fulton County Builder’s Association. She is old fashioned in beliefs as she believes dedication to hard work in combination with today’s technology and a winning attitude are an attribute to her success. "To paraphrase Will Rogers, Deb Paton-Showley knows what she is doing, she loves what she is doing and she believes in what she is doing."

Representing Your Best Interests in Real Estate

positioning your home to sell in today s market you… · adjusting your price is not the only...

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