Tell me lies, because I want to believe…

One of the more desperate lines of all times is, “Tell me you love me, before we leave the bar.” For whatever reasons, many people would rather be lied to that to hear the truth in some situations. I happen to work in the real estate business and I run into that a lot. I lose more business than I care to admit, because of that. It usually comes down to some other agent telling the potential client what they want to hear, even if it is not the truth of the situation. That usually involves the pricing of the listing. Many people just do not want to hear what the true market value of their home is; so they believe the agent who tells them the highest number. Often that is a number well above the current market value; but, that doesn’t matter to them, because the higher number makes them feel good for the time being.

Some people play this game for ego reasons. They can go to work and tell everyone that they live in a house that just listed for $300,000, even though the best estimate of its market value may be $250,000. Many people get into this mode because someone else, somewhere else, told them that they thought their house was worth more than the Realtors were telling them. Usually that person is out of the area, many times out of state, and has no idea about the local market. Sometimes the seller points to a house down the street and says that it sold last year or last month for what he is asking me to price his house at; usually with no idea of the updates or upgrades that the other homeowner had put into the house to justify that price (unlike my client, who many times had not have invested in his home in years).

Sometimes, however, it is a less than totally scrupulous fellow Realtor who knows that if he tells the seller this lie, he will get the listing and he can then start pushing for price reductions when it doesn’t sell. That’s not dishonest, just not the way that I chose to work. When someone asks me to do an market analysis for their home to help establish a market value for listing it, that is what I do. I usually come back to them with two things – a list of things that they can do to increase the value and decrease the time it will take to sell; and, a recommended pricing range, with a lower value for a quicker sale and a higher price to achieve maximum value. Both are reasonable numbers that reflect a balance between perceived value and price, but which also show the time trade-off of the pricing options. I try to explain this clearly, so that they understand the factors and logic that I used to arrive at the numbers. I’ve stopped using the word Comps (Comparables) and chose to use what I call Similar Houses that have sold and that are active to establish a reasonable market value expectation.

Some people take my report and advice better than others. Some may initially feel like I’m being negative about their home by pointing out the things that will likely detract from its value, but I usually give them plenty of advice about the things that they could do to correct some of the issues. For things that it is too late to correct or for those that are too costly to correct as you are getting ready to sell, I try to help them understand how potential buyers are likely to react and what impact on their offers those items are likely to have. Unfortunately the process of selling one’s house is fraught with emotions and sometimes they feel better with the agent who comes in and tells them that he/she loves the house and that there is nothing at all wrong with it. They tell them that they love them before they leave the bar; and they feel good about that.

So, I lose some listings because of that; but, I don’t lose any sleep at night over anything that I’ve said. I often get calls months later from those same buyers letting me know (as if it somehow cleanses their conscious) that I was right and the house eventually sold for what I said it would. How nice of them. I’ve only had one case of someone coming back and asking me to list their house after an unsuccessful time on the market with the agent that they left the bar with initially. I’ve heard plenty of horror stories from people about being bullied by Mr. Smooth, sometimes within the first week or so of the listing. The other thing about agents who work like that is that they are not usually very patient. They want to get in, get the listing however they can, get the price dropped as quickly as they can, get the place sold quickly and get out before the client wakes up to what happened. Others have related how they never saw the agent again after he took the listing; because he was on to the next bar, telling more lies to the next desperate patron.

We all use the old saw “Buyer Beware”; but there should also be one for “Seller Beware”. When the time comes to think of selling your home it needs to stop being your home and become a product. The home that you have known and loved for years will live forever in your memories. You should look at the house that you now need to sell with the same cold calculating eye that potential buyers will be using when they visit. So, you don’t need a lover (someone to lie to you) you need someone to give you professional advice.  If you’re ready for that, give me a call. Let’s get out of that bar and go sell your house.

It's hard to establish a price

I'm working with several buyers right now and, of course, they want my advice on prices for houses that they might make offers upon. Now you might think, "just tell them to low-ball them all." That seems to be a trend lately, but it is not a winning strategy most of the time, especially with foreclosed homes. Banks have changed their pricing strategies and are now pricing very close to what they will accept for the foreclosed houses that they have in inventory. So going in a low-balling an already low, foreclosure price is just a waste of time. It's particularly a bad strategy on houses that have multiple offers. The winning bids on those houses is generally a little above the asking price, which leaves all of the other bidders wondering why the bank didn't take their low-ball bids - well, duh.

What's particularly hard these days is providing pricing recommendations for normal, owner-occupied houses on the market. Most are priced a bit above the market average, which is itself subject to influence from foreclosed houses. So, recommending something less than the asking price in these cases is the right thing. However, it is a much finer balancing act to reach just the right price for one of these homes - one that the owner will accept (begrudgingly most of the time) AND that an appraisal will support. The appraisers are the main problem right now, since they are still appraising with future value drops in mind and they are taking more and more of the foreclosed home sales into account in their calculations.

You really end up in a quandary if the appraisal comes in $10-20 thousand less than what you have bid. That's not all that unusual these days. There is a saying in real estate that a property is worth what someone else is willing to pay for it. That would be true if mortgages and appraisers weren't involved - if real estate were a cash transaction. But it's not. So, the question on an appraisal that comes up short is, "who is gong to make up that difference?" Usually the seller will be expected to concede some or all of the value difference, but sometimes a compromise is reached where both sides contribute to the shortfall in appraised value. I've had sales go both ways. I've also had sales fall apart because no solution could be found and the disgusted seller just took the property off the market.

Now, I understand that appraisers are just doing their jobs, and factoring in the continued devaluation that the market is still experiencing. I've had to tell sellers that "this is all you can get in the market today" or buyers, "I know you really like the house and feel that it is worth what you bid, but the bank takes an impersonal, business-oriented approach and this is all that they will loan on it." It's a very disappointing position to be in from either side of a deal. Will those values come back some day to support the price that the appraiser couldn't get to right now? Of course they will, but how long that will take is anybody's guess. So. I'll keep plugging along, doing the best that I can to figure out what a fair price would be for specific homes and then working out compromises when the appraisals come in. I just hope this whole housing mess bottoms out soon, so that we can get back to a more sane approach to things.

Analyzing Activity in the Milford Market

I tend to be a numbers person. I track a lot of statistics about my little piece of the market - what's sold, what's on the market and for how long and things like that. Our manager shared a little report that focuses just on our office and the Milford area market that we serve and it reinforced something that I've been telling my clients for some time - the heart of the current market is down in the $150-200K price range. What this report showed was the percentages of where our listings are priced and more importantly which price ranges are getting the most showing activity and thus the most sales.

There were 20 price bands on the report starting at under $50k and ending up at the Over $1,000,000 level. Because of the way the numbers were divided into those 20 buckets, the ranges weren't all on nice neat borders, so the $150-200K band ended up being $155,554 to $208,330., but that's close enough to support my point. That band represents just about 25% of our office listings ( 24.47% to be exact). It also represents 25.1 % of all of the showings that we are recording for properties and that category has the highest activity level (percentage of properties in each price band that get showings) at 24.7%. The next highest price band in all those categories is the one right below it - the $102,777 to $155,553 band, which makes up 14.6% of our listings and accounts for 21% of all showings. Taken together, houses from about $100 to about $200K make up 39% of our listing inventory and 46% of our showing traffic.

Those statistics are consistent with my own anecdotal observations in the market, both in Milford and elsewhere. I suppose a part of it is that so many of the foreclosed homes fall into that price range now and foreclosed homes is what most buyers are asking to see. The other confirmation for me that came out of this report concerned the slow activity in the $300-400K price band. Houses in that price range make up 23.7% of our listing inventory, which is a healthy slice, but they generated only 18.6% of our showings. (NOTE: due to the report price range boundaries, I had to use homes in the range of $261,108 to $419,438 for this price band, so the numbers are bit higher than the real 300-400 price band would have been) That has been a very slow price band for about 18 months now, since it covers a lot of the "move-up" houses that nervous middle management types have been holding off of buying.

The real "heart" of our market is between$102,777 on the bottom and $313,884 at the high end. That roughly $200K range represents 64% of our total market inventory and generates 70.5% of our showings. And showing eventually generate sales. As I compare these statistics to one that I keep on my Web sites they all fall into place. The lower price bands tend to have great numbers of homes in the inventory, but also tend to have lower Days on Market numbers, meaning that they turn over faster. Because there is more turnover in the lower bands, other statistics like the median sold home price tend to be held lower.

So, what does this means to you? Well if you have a home that would likely be priced somewhere between $100K and $300K it means that it's still a good time to be on the market, with lots of showing activity. If you house would price above $300K it means that you;ll need to be as aggressive as you can on price and be prepared to be a bit more patient and persistent. Your agent may also have to try some different marketing approaches to generating more showing traffic. It's also important, if you are gong to get less showing traffic, that you make the most out of what traffic you do get; so, listen to your agent's tips on how to best prepare your house to make the best impression on showings.