So you think you know the real #1 rule of real estate. But you probably don’t! We have all heard the mantra that people like to quote, “Location, location, location.” That IS NOT the #1 rule of real estate! It’s not that location is not important. It’s just not as important as what I am going to share with you in the sentences that follow. And it doesn’t matter if your home is in Aledo, Burleson, Ft. Worth, Granbury, Weatherford, or elsewhere, what I am about to tell you is still true! Funny how this “location” thing has gone viral and every amateur real estate person who has sold three houses in their lifetime thinks they know the real key to selling a home. Having been in the business for 20 years and completed over 800 sales, I have heard all the wisdom of the amateurs, and all of it combined is not worth what I am going to share in a few short sentences. The old Mary Poppins song says, “A spoonful of sugar helps the medicine go down.” If you are a seller facing the difficult task of selling your home, and you are not finding the task to be too agreeable, you don’t need sugar, you need medicine. SO OPEN WIDE… HERE IT COMES! And like most medicine, it may not taste real well, but it will be very helpful!
THE REAL #1 RULE OF REAL ESTATE!
The REAL #1 rule of real estate has to do with this one key word: VALUE. The REAL #1 rule of real estate is this: “OVERPRICED HOMES DON’T SELL!” Simple, but very complex. Again, “OVERPRICED HOMES DON’T SELL!” EVER. Every professional Realtor with more than six months experience knows this to be true. Note that the primary issue is not PRICE, but it is related to price, and it is unseparable from price. VALUE is what EVERY buyer is looking for, regardless of the price range in which they are looking! No one has ever bought a home or a property that they didn’t think was a good value. In 1626, had the asking price for the Manhatten Island been $26, Peter Minuit may never had purchased the island from the Lenape Indians! But it was only $24! A great value! Think of all that might not have been if the value wasn’t there for Mr. Minuit!
If you are a home seller, you need to take a lesson from the Lenape Indians and price your property so that it is a good value to prospective buyers. I have seen many buyers walk away from a home that they liked, because they thought the price was too high, and therefore; not a good value. Price is important only because of its direct impact upon a home’s value. Again, no one has ever bought a home believing that it was not a good value.
FOUR FACTS SELLERS NEED TO HEAR!
FACT #1: You are not objective when it comes to the price and value of your home! Every seller thinks that his or her home is the best and that it is worth more because he or she knows all the improvements that have been made to it. Pride of ownership can be a good thing. It can also keep a home on the market longer that it should have been. Understand that the person walking in has absolutely no (as in zero) emotional attachment to your home, like you have (I repeat; NONE). Your home must grab the buyer’s emotions for him or her to buy it. It has to go beyond ok, to AMAZING in their eyes. Otherwise, they don’t buy. There are alot of other homes out there to look at. Part of that equation is it being priced well so that it appears as a good value to the buyer. It doesn’t have to be a bargain. But it does have to be priced correctly. If its not, you’re just giving house tours to people who won’t buy your home. So my advice is to listen when your Realtor says you might need to lower your price. It won’t be what you want to hear, but it may be what you need to hear.
FACT #2: Your home has to beat out eleven other homes in the buyer’s eyes! The National Association of Realtors has said that the average buyer will look at 12 homes before they decide upon the one they want to buy. That means that your home has to beat out 11 other homes, all with sellers, like yourself, waiting on the right buyer to come along. Every home will sell – IF it is priced correctly. I have sold homes that were extremely nice, and some that looked like a tornado had hit them. The common element in every sale is that the buyer thought the home was a good value, and that they were getting a good deal. No matter how incredible your home is and looks, your buyer won’t buy unless he thinks your home is a good value, and it stands out from the eleven other homes he has seen in your price range!
FACT #3: If your home has not sold, it’s not your Realtor’s fault! After 20 years in real estate (and over 800 sales), I have heard all the reasons why sellers think that if they would just change Realtors, their home would sell. I have heard it from my sellers, and I have heard it from sellers listed with other Realtors, looking to make a change and find that one special Realtor who could get their home sold. When I first entered real estate in 1997, this argument might have held some water. That was because, back then, it really did matter if you listed with a Realtor who did market a property outside of the MLS. Buyers actually paid attention to the local newspaper and the real estate magazines back then. That was because the internet was nowhere near what it is today.
This argument holds absolutely no water today, because the internet has changed everything about how real estate is marketed! Buyers today are doing research online before they even call or email a Realtor. Oftentimes, they know more about the properties we go to see than I do, because they have spent hours researching the neighborhood, public records, Google maps, covenants, tax values, and school districts. When ANY Realtor lists a home in the MLS today, it goes on the MLS, as well as other major real estate websites like Realtor.com, Zillow, Homes.com, and Trulia, as well as other sites like MSN, AOL, Yahoo, and others. So the truth is that ANY buyer looking for a particular kind of property will have ABSOLUTELY NO PROBLEM finding that property, REGARDLESS of which Realtor the home is listed with. Unless you are a FSBO, exposure in not a problem! The MLS guarantees maximum exposure! If your home isn’t showing or selling, your issue isn’t your Realtor, IT’S THAT THE PEOPLE LOOKING ONLINE DO NOT FIND THE PRICE OR VALUE INTERESTING ENOUGH TO COME VIEW YOUR HOME, OR MAKE AN OFFER ON YOUR HOME. This is true if you are one of my sellers, and it is equally true if you are listed with another Realtor, regardless of the color of the sign in your yard, or how much experience he or she may or may not have. Here’s the truth: Most Realtors are like gumballs – different colors on the outside, but all the same inside! Any Realtor can sell your home when it is priced correctly – so list with the Realtor who has the best program for the least money!
I once had a beautiful home listed for $329,000. It had over 3000 sf and was on a golf course! It was in perfect condition, but we had no offers. The sellers lowered the price to $319,000, but still no offers. Our listing expired and the sellers decided that I was the problem, so they listed with the #1 company in the area at the same $319,000. Well, this #1 company couldn’t get it sold either so the sellers eventually dropped the price to $299,000. They finally sold for $285,000, after being on the market for over a year and a half! The Realtor was not the problem. The price and value were the issue, AS THEY ALWAYS ARE! The REAL #1 rule of real estate is always true, regardless of which Realtor lists the property. Overpriced homes don’t sell. I could give other examples; some of which were my listings and some of people who left their Realtor to list with me. In today’s world of real estate with automatic un-paralleled, over the top, vast and immediate exposure of listings worldwide, your home not showing or selling is in no way your Realtor’s fault, whether you are listed with me or any other Realtor! Some Realtors still advertise in the magazines and newspapers, but it is not to find buyers! It is only to impress sellers and get more listings! If it actually brought in buyers, you would see all Realtors doing it, but it doesn’t, because buyers are looking online, not in newspapers or outdated real estate magazines.
FACT #4: Your home will sell when a buyer finds it attractive for the price, but not until then! You can be assured of this: buyers are seeing your home online! There is no doubt about that. NONE! The internet guarantees that to be the case in today’s real estate world. In 1997, it was part of my job to expose buyers to properties that I thought would be a good match for them. I got out my little book that was printed every two weeks and showed them what was available, because they had no way of knowing. Today, buyers email me a list of properties that they want to go see. They have studied the homes online and narrowed down their options to the ones they believe will meet their needs. Price and value are at the top of their list and nothing makes their list unless they believe the price and value are what they are looking for. If your home isn’t showing much, IT’S BECAUSE THE BUYERS WHO ARE SEEING IT ONLINE DO NOT THINK THAT THE PRICE AND VALUE MATCH THAT OF YOUR COMPETITION IN YOUR PRICE RANGE. Remember, the REAL #1 rule of real estate is: “OVERPRICED HOMES DON’T SELL!” The REAL #1 rule of real estate WILL NOT be overlooked or ignored.
THREE THINGS THAT DON’T MATTER AT ALL!
Over the years, I have heard all of the reasons why a seller needed to keep his or her price above what the current market would support. Below are three of the most common reasons sellers give on why they won’t lower their price:
REASON #1 – “I paid more than that for it when I bought it.” Many sellers think the fact they they paid “x” amount for the home some years ago, means that they now deserve “x + y” amount for the property today. But that is not automatically the case. Buyers don’t care one bit what a seller paid for a home, and what a seller paid for a home years ago has absolutely no impact whatsoever on how much a home is worth today. All that matters today is what the home will bring in its current condition, in today’s market. The market changes. Sometimes that is a good thing, and sometimes it is not. TODAY’S MARKET CONDITIONS are what determines what a buyer will pay for your home, NOT how much you bought it for years ago. A home’s value, usually goes up, but not always, and the market will tell a seller if he or she is overpriced. If a home stays on the market for a long period of time, that says something.
I have heard some sellers say that Realtors try to get sellers to list at the lowest possible price, just so they can collect their commission checks. I don’t operate that way! In fact, I tell my sellers that if they have the time, they may want to price their home on the “high side of reasonable” and see what happens. They usually do that, and then they forget that I told them that was only if they had the time. I realize that sellers have hard earned equity in their homes and they need every dollar that they can get when their home sells. I am 100% all for that! But the issue in not me being opposed to a seller getting a larger profit on the sale of his or her home. The issue is the seller pricing their home SO THAT IT WILL SELL so they can then realize their profit, but OVERPRICED HOMES DON’T SELL and homes that sit on the market cost the seller both time and money, not to mention frustration (ok I mentioned it)!
REASON #2 – “I put “x” amount of improvements into the house.” Great! I hope you enjoyed your improvements, but your improvements don’t necessarily transfer into an even increase in your home’s value. Just because you put in $10,000 of improvements, that doesn’t mean that you will get all of that $10,000 back when you sell the home. In fact, you are not likely to get it all back. Even a kitchen remodel, which is one of the best improvements you can make to a house, doesn’t return all of its cost to the seller when the home is sold. You have to figure that the time you spent enjoying the improvements is part of your payback, because you are not likely to get all of your money back when you sell.
REASON #3 – “I need “x” amount out of this house to buy my next home.” Again, the buyer could not care less about what you need out of this house to buy your next house. He isn’t going to pay you more than current market value, AND YOU WOULDN’T EITHER! I have heard this from numerous sellers and this argument never is worth anything. What you “need” has no impact at all upon your home’s value, and there isn’t a buyer out there who will give you a dime because of what you need. One more time, the ONLY THING THAT MATTERS IS CURRENT MARKET CONDITIONS!
WHAT THE MARKET IS TELLING YOU!
If you are a seller, and your home is currently on the market, the market IS telling you something. It is either whispering or shouting something to you right now. Here are two things that the market MAY BE TELLING YOU:
WHISPER #1 – GIVE IT TIME. Maybe your home has not been on the market for very long, and maybe you haven’t had many showings yet. Give it time… Some markets are very hot and properties move very fast. Others may be good, but homes don’t move as fast as in other markets. Real estate is 100% driven by the “supply and demand” principle. If your home has not been on the market very long, or if you have a bit of an unusual property, such as a home on acreage, where there are not as many buyers as there are for other properties, you may need to give it time.
SHOUT #2 – YOUR HOME IS OVERPRICED! If your home has been on the market for quite a while, and the market is good, the market may be shouting to you that your home is overpriced. There are two scenarios where the market may be telling you this. The first is when you have had a lot of showings, but no serious offers. This is telling you that people were interested enough to come and see your home, but no one has been willing to make an offer because either they found something that they liked better, or because they thought your home was overpriced, and most people will not make an offer on a home they believe to be overpriced, because they are afraid of insulting the seller. The second scenario is when your home has been on the market for awhile, and you haven’t had many showings at all. Remember that people all over the US and beyond can find your home EASILY on the internet, so in today’s world exposure is NEVER a problem. If someone is looking for the kind of home that you have, you can rest assured that they will find it on the hundred or so real estate websites out there that are showing every property listed in the MLS. Under this scenario, the market is telling you that people know about your home, but they are CHOOSING to not come and see it. They are looking, searching, and researching online, but for some reason, they choose not to come and view your home. The only reason for this boils down to the fact that they are finding more interesting homes in the price range in which they are searching, which means that your home is overpriced, and not the value they are searching for. Remember, the REAL #1 rule of real estate is: “OVERPRICED HOMES DON’T SELL!” EVER.
Every year, there are numerous homes that expire and don’t sell. Those homes typically make the cycle and end up on the market again the following year. The one reason for that is because they were priced above their value, so a buyer wasn’t willing to pay the price the seller wanted. Those homes had the exposure, but not being priced correctly, they wouldn’t sell, so the seller was left to try it again the following year, or lower his price like my clients who I mentioned previously. There really isn’t any other answer. THERE ARE USUALLY MORE SELLERS THAN THERE ARE BUYERS! That will be the case this year as well as next year.
SO NOW WHAT?
So now that you know the REAL #1 rule of real estate (which is that OVERPRICED HOMES DON’T SELL), you have a decision to make. If the market is not the problem, and exposure is not the problem, and your Realtor is not the problem, that only leaves two other options. Either your home is the problem, which means that your price is too high for the property that you have, or your home is not the problem, but your price is. Either way, you have a choice to make. You can either make improvements to bring your home’s condition up to the price so buyers will find your home attractive, or you can lower your price to match your home’s condition so buyers will find your home attractive. Buyers buy homes they find attractive, and they buy them when they see them to be a good value. What is your time on the market telling you? Is it whispering, or is it SHOUTING?
And will you listen to what the market is telling you?