Selling your home is at best a little stressful; after all, it’s YOUR home. It reflects you; it’s personal. Being told you may have to change the way it looks or that your desired price is too high can be painful. A skilled realtor can help mitigate the stress by Selling: The Smart Way.
Be Knowledgeable and Objective About Your “Product”
As the listing realtor need to know the home and property intimately, it pluses and minuses, not only how it looks, but underneath the covers. This is why I recommend Seller immediately order home, roof and pest inspections and pool, spa, well, septic system if present. The sellers must know their product too so they are not surprised by a potential buyer bringing forth negatives the seller and realtor should have known about. When the seller and the realtor are surprised, the seller usually loses!
If buyers “feel” good about the property and can “see” themselves living there, the buyers will then want to look “under the covers” and check out the condition of the roof, windows, floors, plumbing, electrical, HVAC, hot water heater, kitchen appliances, termite damage and, with older houses, the foundation. They want to know if the house is up to code and if there are any legal issues outstanding such as work completed without permits. Although Sellers, by law, have to disclose, it takes objective professionals to reliably assess the condition of the aforementioned items. A realtor pro has the insights and ability to explain to Sellers the pros and cons of getting the inspections immediately so they can best prepare the property within their financial bounds prior to putting the property on the market. This is Selling: The Smart Way. The Listing Realtor should be well-connected to a stable of reliable inspectors and trades people to call upon.
Research the Market and Likely Buyers
It is critically important for the listing realtor to have a good feel for the demographics of potential buyers, who are attracted to the area, that is, what they value in a house and property. Some key areas are the floor plan, the age of the kitchen and bathrooms, type of floors and windows and indoor and outdoor amenities. In addition, interior colors, furnishings, landscaping and curb appeal can make a significant difference on how a buyer “feels” on the property. Interior and outdoor staging, without question, impacts value and Days On Market (DOM). If staging is done well, the sale will go well; if staging is done poorly, buyers will react coolly.
The key to getting the best price for your home is to determine who are your most likely buyers and what THEY value. Positioning is in the mind of the buyer — and knowing the likely buyers and their wants is essential to prepping your home to get the most you can within the constraints of getting a solid return on your home prep investments. Remember too that prices are also impacted by mortgage rates, inventory and seasonal demand. A true real estate pro is skilled pulling this critically important information together.
Top realtors stay in touch with the market by touring as many houses as possible to understand the relationship between property features and condition and price given all other factors being equal. A pro will also try to find out who bought the properties if at all possible and if the property appraised. With this information in hand you will be in the best position to determine the Fair Market Value (FMV) of your property, based on what you decide to do to prep your home and property.
Major Point: Although some buyers have imagination and can see what has to be done to make this property their own, and are open to making that happen, MOST buyers in the valley are newcomers to the area, many from outside the US, who can see the property differently and don’t know vendors or what is involved in making home improvements. Therein is why the words “MOVE-IN READY” are so valuable.
Decide On Home Prep Investment Based on ROI
At this point, the realtor will know where the minuses if any are and what it would cost to make things right. The realtor will also have some sense about the health of the furnace, air conditioner, water heater, water softener, roof and appliances, the big ticket items.
At this point, the realtor has to provide data to the seller that will identify who the likely buyers will be and what they tend to value in terms of home condition, colors, floor plan, ceiling heights, kitchen and bathrooms, natural light and amenities.
At this point I lay out three or four scenarios for my sellers.
Install of smoke and carbon monoxide detectors per the law; have home, roof and pest inspection done, deep clean home including cabinets, drawers, windows, carpets and flooring.
This scenario budget is dependent upon the sellers’ financial resources and will vary accordingly. Includes all Scenario 1 items. Make major home (Section 1) and pest damage repairs including fumigation, repaint areas showing significant wear & tear or need more neutral colors, make all low-cost repairs that are visible including damaged carpets and flooring; pressure wash driveways, walkways and patio; repave walks and driveway if major damage and unsafe or eye sores; clean out garage and pressure wash floor.
Includes all Scenario 1 and 2 items plus updating of kitchen and bathrooms as required, paint throughout as required, install plantation shutters as required, install new or refinish wood floors; paint exterior walls and trim as required;
It is important to remember first impressions count and when buyers get out of their cars they look at the home’s exterior, the front yard landscaping and the condition of the driveway and walkways.
For each of the Scenarios, I show the incremental cost and the associated FMV and ROI for each scenario. It is not surprising that the ROI increases with each scenario because we are erasing the negatives and accentuating the positives.
Decide on Asking Price
One of the most sensitive areas in the sales transaction is determining the asking price. Every neighborhood, school district, house and property is different. To establish a basis for the property’s Fair Market Value (FMV), a diligent Listing Realtor will run comps for the immediate area to see what properties in the area have sold for in recent months. And by tracking prices over time, the agent can show Sellers how prices are trending. The comps also show what the average Price/Square Foot is, which is the equalizer, since the comps differ in livable space and lot size. Once applicable comps have been identified, the agent has to compare floorplans, currency of kitchen and bathrooms and a variety of other factors to determine the FMV. In addition to running comps there are several data services that have built fairly reliable algorithms that estimate FMV. All these sources should be used to increase the confidence level in the FMV calculation. With the comp analysis completed and FMV established, the next and final pricing exercise is to set the asking price. In some cases the FMV would be used, but in other cases, especially with lower priced properties, it may be advisable to go with a lower price to draw more offers. Buyer Agents adjust their offer prices based upon the projected number of offers. The more offers there are the higher the offer prices. It is not uncommon in Santa Clara County for houses selling for less than $1M to be listed below FMV and sold for more than FVM. It takes a savvy Listing Agent to navigate the pricing strategy.
Exploit All Mediums to Promote
Technology has dramatically changed real estate marketing in the last 10 years but it still starts with preparing a complete, accurate and appealing description of the property that is posted on the Multiple Listing Service (MLS) database, which real estate agents reference for listings. A Listing Agent needs to make sure the property description hits the most valued points and is well-written, which means it sparks interest. Every piece of data that can be posted on MLS, should be posted so Buyer Agents are quickly armed with complete information they can quickly share with their clients. Time is of the essence. It is not uncommon to see important information left off the MLS or just plain wrong. Listing Agents need to be sensitive to the needs the Buyer Agents so the latter can move quickly and with confidence. Providing Buyer Agents with all the information they need to qualify and then promote a property is the sign of a smart Listing Agent.
Once a property is on MLS, it is accessed by a host of real estate Internet sites such as Zillow, Realtor.com and Trulia, which give their users access to the property. Some buyers also use generic search engines such as Google, Yahoo and Bing to find houses. No matter the search technique, for a property to be quickly found its description must contain keywords, the words that buyers would normally use to search, to get buyers to the houses they want in seconds. In today’s world, Listing Agent have to know how to leverage search technology via keywords to obtain the broadest exposure for their listings.
Of course, technology alone won’t sell your home. People connecting with people make things happen. In addition to exploiting technology the Listing Agent must use agent house tours and meetings, email and open houses to connect with buyers and other agents. This agent-to-agent connection not only gets things moving faster but can make for a smoother, faster transaction and escrow process because an existing working relationship and trust between agents can work wonders.
Negotiate Smart Contract
There are two basic approaches to handling offers. The traditional approach is to review offers as they come in. This is generally the way it’s done when the Listing Agent expect offers to trickle in over time. The second approach is to set a date and time for all offers to be submitted. The Listing Agent will determine the right approach depending on the level of interest they expect. In addition, most Listing Agents in Silicon Valley now require a Lender Pre-Approval Letter and Proof of Funds (bank statements) accompany the offer purchase agreement. Offers come in and need to be reviewed. There are several major data elements that help determine an offer’s risk vs reward ratio. The reward is obviously the offer price. The risk is in the financial strength of the Buyer and the exercised contingencies of which there are three major ones stated in days: loan approval – days it will take to get the loan approved; property investigation – days needed to establish the condition of the property; and the appraisal contingency — days to obtain the Lender’s appraisal. Other important considerations are the amount of the downpayment and liquid funds, which show financial strength, and lastly, how many days the Buyers are requesting for Close of Escrow.
It’s a must for the Listing Agent to educate the Sellers about offers and facilitate the offer analysis process, thereby helping the Sellers choose the offer that best meets their risk-reward goals. In some cases, none of the offers meets the Sellers’ expectations and so the Listing Agent will initiate a counter-offer process and guide the Sellers in improving the offers that are closest to meeting their goals. This is an extremely sensitive process and requires good communications between the Listing and Buying Agents. Once the parties agree and sign the counter offers and purchase agreement, the Buyer and Seller are in contract subject to the exercised contingencies.
Closely Manage Escrow Process
Going into contract, starts the escrow process with the assignment of an Escrow Officer, who is always associated with a title company in Santa Clara County. The Escrow Officer manages the process agreed upon by Buyer and Seller per the purchase agreement. During this period the Buyer makes the Earnest Money Deposit (EMD); all contingencies are removed or the contract becomes null and void; the loan including the appraisal is processed and the loan contingency removed or the contract is cancelled. If the Buyer has a property investigation contingency, inspections are made with Buyer having the option to cancel. Also during this time, both the Listing and Buyer Agent do a visual inspection and the Buyer purchases the mandated homeowner and title insurance as well as home warranty insurance. The Escrow Officer pulls all the tax information together, makes the appropriate allocations, ensures that all actions required by the lender, sellers, buyers and agents are completed in a timely manner; and makes the proper allocations of all the monies to all those party to the transaction. It is essential that the Listing Agent has intimate knowledge of the escrow process and makes sure things are getting done per the escrow calendar and that problems are resolved as quickly as possible. The Listing Agent’s job is not complete until a satisfied Seller has money in hand.