There isn't much that can prepare you to deal with the current real estate market we are in. The double digit mortgages of the 1980's, WRAP mortgages and the early 1990's when in many markets appreciation took a holiday! The current real estate market is a credit crunch that is testing everyone patience! We have would be home sellers that purchased homes with no money down and borrowed against future value only to find out there was no appreciation. There are home sellers that purchased with money down, but tapped into the equity to maintain their lifestyle - cruises, trips cars and purchasing second properties easily comes into mind. The hard thing to explain to many homeowners is that just because they owe a lot of money, it cannot come out of their home. The solution to a home seller's problem is not a for-sale sign. Many agents will accommodate the seller by placing a for sale sign on a property with a price of $450K in a $350K neighborhood because the agent cannot bring themselves to tell the truth. How does that help the homeowner if the home never sells? The reality is that home prices are set by the laws of supply and demand. Real estate agents cannot just pick the price out of the air. Property values must be justified via appraisals. If you borrowed against your equity - I hope you put some aside for a rainy day!
- Not every home increases in value.
- Some homes can decrease in value.
- Some sellers have to bring cash to closing to pay what they owe.
- What improvements have you made to the home in your ownership?
PS. Paint, roof repairs, replacing leaking hot water heaters do not count! That is maintenance!
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Every home will increasiein value over time. I think that things are not near as bad as the media is making it. I am going to stick with this career. I hope we do not see the 80's and 90's markets but if we do we know that there is a pot of gold at the end of the rainbow. The market will shift and shift again. Enjoy the ride!
Dinah Griffey (Windermere Peninsula Properties) Thanks for sharing such positive thoughts!
I cannot tell you how many listing opportunities went to other agents that did not have the courage to tell the truth. I tell sellers straight up - I'm going to tell you what you need to hear not what you want to hear. When they tell me so and so said my home would sell for $$$$ I tell them - the lied to you to get the listing. You have a choice - if you need to sell you can believe what you want to hear or you can simply look at the data (facts don't lie) and know what your home is worth - which is better for you? Clearly - the listed with the agent who lied and months later after losing a lot of $$$$$$$$$$$ who gets the call?
Kathleen Daniels (San Jose ~ Silicon Valley Real Estate ) Thank you so much! You hit the nail on the head. The important thing in this market is to always be the professional, and always tell the truth. In the early 90's I made a fortune on home sellers, that called me back to sell their home after being on the market unsuccessfully with several other agents that just told them what they wanted to hear.
Jim, it is always about reality, and good REALTORS can educate homeowners on reality.
Great post. I love the sentence.....that roof etc are maintenance items. Sellers always believe their home is worth more than their neighbors home.
right on -- you can even use Cyberhomes to look up values of the home but the best feature is where you can refine the value -- when the homeowner refines the value and enters in what they paid for their remodels and when they did it -- It will calculate the depreciated value of that addition. Not all improvements go up in value - most go down.
It is tough when the seller wants the sell price to be a number they feel they need instead of what the market value is.
JIM - This is a big problem with homeowners. Too many of them try to price the home for what they "need" to get instead of what the public is willing to pay.
Funny. I get calls every week from a home owner who claims his home should sell for more than the comps in his neighborhood because he has put on a new roof or replaced the refrig.
I explain to them what brings added value - square feet, etc. Replacing systems and roofs, even siding if needed, is just maintenance. There is a community here, Bowie, where the original homes have asbestos shingles and the homes with siding have added value.
Maintenance helps sell, doesn't add value.
When I started to see cars given away with a home purchase, it was a clear sign of the troubles we are now in...
your friend in Charlottesville!
Sellers want top dollar but don't seem to want to spend a small amount of money to make it look presentable...how can you command that if it looks 100K in less the adequate condition?
Sellers sometimes don't have a realistic view on the value of their home. There are two different points of view in the market price: (1) the value the seller believes his/her home is worth, and (2) the value a potential buyer places on a home. Bottom line: The only value that matters is what the buyer is willing to pay.
I lost a listing because I wouldn't list at the price the seller wanted. They went with another Realtor who did and after that home expired they went with another Realtor.. They are still priced too high and will eventually seek out their third Realtor. ... and the beat goes on!
Gary Woltal - REALTOR® Dallas Ft. Worth (Keller Williams Realty) I agree. In recent years many homeowners not wanting to hear the real truth have hired agents that literally buy the listing, and live the lies. There is a lot of rejection in being a true professional, but of those that listen there are solutions!
GITA BANTWAL, REALTOR BUCKS COUNTY, PA HOMES (ReMax Centre Realtors) A few years ago I was contacted by a homeowner that gave me a list of items he had fixed. I asked him "What would your home be worth if you did not fix a leaky roof, or replace the broken hot water heater?"
Scott Hoen, ePro, MBA (eMarketing Services) Personalized improvements may totally reduce the properties worth also.
Randy L. Prothero - Hawaii REALTOR® (Century 21 Liberty Homes) When you tell a home seller like this what market value is, the response is "That won't work!" It is sad!
Adam Waldman - Long Island REALTOR® (RE/MAX Best) I agree. I know there is going to be a lot of disappointment in this current market.
Lenn Harley, Homefinders.com, MD & VA Real Estate Lenn I totally agree that "Maintenance helps sell, doesn't add value."
Charles McDonald / Your Trusted Broker for Charlottesville Real Estate (RE/MAX Assured Properties) So true Charles!
Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates) When I drive up to a property the day before I meet the sellers, it is amazing at what a drive by the property will tell you. Foreclosure lawn, weeds growing out of the gutter, shutters hangin off the house, and 20 soggy newspapers in the driveway.
Jon Wnoroski, Summit County Realtor (Geneva Chervenic Realty, Inc.) In the early 90's, I took a lot of listings on the 3rd time on market. There comes apoint where the seller's are so whipped they start to actually listen.
So true, the seller only remembers how much homes went up last summer and feel that their home sould be worth that much more this year. In our market in Fort McMurray, Alberta things are still good, more homes on the market this year and the days on market is up to 61, but the price is stable,, but still high.
Pat Dardis (Royal LePage True North Realty) You bring up a very valid point. Most sellers only believe homes must go up in value! We know better!
No longer can the homeowners use their home as an ATM. We may never see this again.
Jim... You've hid the nail on the head! I've had to tell sellers that it doesn't matter what they "need or want" for the house... the buyer doesn't care. I also run into issues with "maintenance" items that they want to include as "improvements" a new roof is not an improvement. Outstanding post as always.
Jim:
It is like a stock chart, if you look at along enough period, it eventually works out.
Sometimes when you buy at the all time high and then a pull back ensues, it could take quite a few years to get it back.
The most recent example was the 1986-88 top. If you bought then it took well into the 90's to get even and eventually about double the 86-88 top highs in the 2005/06 top.
It all depends on when you got on the bus and when you need to get off.
Best
Richard
John Walters (Specialized Real Estate) Boy I hope you are right!
Debbie Summers (RE/MAX Central - Lake Mary, FL) Thanks! Conveying this to a seller is one thing, the reality of it sinking in is another.
Richard Stabile Bergen County New Homes Builder Realtor (REMAX real estate associates) Great analogy. Too bad that most sellers are stuck in denial, and are paralyzed by their own fears!
Jim, Agreed with the maintenance items, a $5000.00 car with a new engine is worth, yep, $5000.00
Im so happy to hear the words "maint. items" bless you. It will get better but you know there's alot going on behind the curtain that everyday people dont see. If you are losing listings by telling the truth
Get a certified appraisal marketing report from a local appraiser- you get to stay the good guy the appraiser breaks the news to the seller. Most appraisers offer them at a discount and realtors can usually recoup cost at closing. Helps with marketing the property and helps when you feel your breaking the homeowners heart.
http://activerain.com/lithia01
Jim, Good post. Fortunately I haven't had many people who need to bring money to the table in order to close.
I reblogged this at my blog "Just Real Estate". It's my blog of my favorite real estate related ActiveRain posts.
JIm,
One of the best 'straight talk' posts on the subject I've read!!! Thanks, Fran
But Zillow sayssssssssssssssssssssssssssssssssss
LOL Sorry I had to!
I pick my clients just like my clients have the right to pick me.
Learned that lesson early in my career. I don't like it when listings expire so why take one that is doomed from the beginning.
I'm with Renee. Even though I love listings, I would rather have no listings than take one I know is overpriced. It hurts the sellers and my reputation.
Get Us A Home Realty - Frank & Jodi Real Estate Brokers When you make the comparison to a car...it makes so much sense.
Michelle Patrick (Lithia Appraisal Services, Inc.) I like that approach and use it alot. There is no need for the real estate agent to play the bad guy. Let someone else break the news.
Tim Maitski~editor of MaitskiREport.com (HomeAtlanta.com) We have had a few, but we are also not doing as many deals as usual. I still think this is a better solution than a short sale or damaging one's credit.
Fran 'The Title Man' Gaspari Title Insurance-PA & NJ (Patriot Land Transfer, Inc.) Thanks Fran, I really appreciate that!
Renee Burrows - Las Vegas NV Real Estate (Nevada Realty Solutions) I like your phrase "I don't like it when listings expire so why take one that is doomed from the beginning." Very smart!
Lake Norman Real Estate ~ Diane Aurit (RE/MAX at the Lake) That is a great common sense approach to business.
I can't even think of thie times I have lost a listing because I was not "offering" enough for the house... But, I don't buy listings. I guess if I wanted a LOT of stale inventory that owuld be the way to get it.
I'm happy with just a little stale inventory.
Jim,
Thanks for the post. Never ceases to amaze me that so many home owners confuse basic maintenance with added value improvements.
Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) Lane, I agree totally with you!
William Collins, Broker Associate (ERA Queen City Realty) What is more scary is their agents do not know the difference either.
Hi Jim Right on the mark on this post..no wonder it picked up a well deserved star. I bolted at the fact that agents have an impact on the price but when competition sets in I guess they can have an impact.
This post is a great one to print out and present at a listing. Great job. BLW thanks for the visit and comment on my post and I LOVE Atlanta. My daughter worked at the Atlanta Zoo while her husband went to Emory University. Atlanta is one of my favorite places.
It's funny how all the commentators on this post and most agents in discussion groups agree that we should be truthful with sellers about pricing. Most agents will tell you that they will not take an overpriced listing..........
Why then why are so many agents doing it?
You know what's worse than a seller who won't take your research, sales data, experise and advice on price?
A seller who says...I don't really have to sell it!
Mike Jones The first group I know are inexperienced agents... they do not really know what to do. Selelrs that do not have to sell, I will not list. No motivation.