The post, by Norma Toering of ReMax Palos Verdes Realty, is entitled “Please remove my home from the internet” and can be found on the Active Rain website at the link provided above.  This conscientious Realtor sold her listing and got it closed last week.  Now the buyer, the new owner, wants all traces of the listing removed from the internet.  Many people are private and may be uncomfortable with videos and pics of their home online (even if with the last owner’s consent, decor and furnishings).  But it is nearly impossible to remove all online photos because they are syndicated or pushed to other sites where we agents have no control. 

One commenter suggested that perhaps we need another disclosure so that buyers know and understand that what’s out there on the internet cannot be removed (and for that matter, that agents don’t want to spend many hours to remove them – a challenging task for which there is no compensation).  Having photos on the web is part of marketing and once it’s done it simply cannot be undone (at least not fully and certainly not easily).  I don’t think a new disclosure is a bad idea.  Our purchase agreement forms or contracts inform buyers and sellers that there will be dissemination of information on the MLS regarding the sale status and later the closing price and terms.  It wouldn’t hurt to also warn the parties that once images are disseminated on the internet, they are very likely to remain online a long, long time.

So let’s talk about it.

In other states, such as New York, attorneys are very involved in real estate transactions. Here in California, though, that’s not the case most of the time.  We call on CPAs and lawyers when there’s a problem or a question which is beyond the real estate licensee’s scope.  I’ll provide a few examples.

Holding Title: Probably the most frequent question I get that I’m not allowed (or qualified) to answer is about how people should hold title when buying a home.  The purchase agreements we use (both CAR and PRDS) lay it out best and puts it in bold so that consumers don’t miss it:

“THE MANNER OF TAKING TITLE MAY HAVE SIGNIFICANT LEGAL AND TAX CONSEQUENCES. CONSULT AN APPROPRIATE PROFESSIONAL.” (newest revision of the CAR contract, April 2010)

Most title companies have a nifty little chart that summarizes the pros and cons of the various ways in which people can hold title.  But neither the escrow officer nor the real estate agent can tell you what’s best for you.  We know what’s most common, but that doesn’t mean it is best for you and your particular set of circumstances.  So talk to a CPA or talk to a lawyer (or both) if you do your research and are at all unsure of what to choose! (Old Republic Title has a summary of the most common ways to hold title in a downloadable pdf file, which you can access via this link.)

Arbitration: Realtors or other real estate sales people should not tell you whether or not to initial for arbitration.  We can explain it, but on that point we cannot advise.  (I will share that in my experience, virtually everyone does initial for it, so as a practical matter I explain that it will likely be a counter offer issue in a purchase agreement. Again, though, the ramifications of agreeing to arbitration, or not agreeing to it, are a discussion for a legal professional.)

Distressed sales: In addition to these two areas, right now we are seeing many short sale and bank owned (REO) transactions.  The paperwork involved in them is significantly different than in a regular transaction.  Often the bank involved has addenda which nullify many of the “buyer protection” clauses in the purchase agreement, for instance, more so with REO sales than short sales, but significant in both cases.

And that’s only the tip of the iceburg.  It’s not unheard of that with a bank owned sale, the bank will not provide to the buyer signatures and initials on the contract which make it binding – but they want the buyer to go ahead, put the good faith deposit in escrow, proceed with inspections while the purchase agreement may still be voidable! (In other words, the bank may kick the buyer out of contract.)  Because there’s so much increased risk to buyers in purchasing homes in which the bank is the seller (or in some cases needs to approve a short sale), I advise my clients to consult with a good attorney to make sure that they understand what they’re agreeing to and what the actual risk is.

For home owners doing a short sale transaction, even the bank approval letter may be something to run past your attorney as the language used may indicate whether or not you will be open to trouble from the bank later. In my experience, short sale sellers are the most likely to need but not be willing to pursue professional tax & legal advice. Not so long ago I had a client who wouldn’t even make use of low cost or free legal services, insisting instead that he could find everything he needed on the internet.  That is really a mistake!

Transactional Nightmares: Finally, if a transaction is hitting a bad, bumpy stretch in which the other party appears to be in default (not performing), your Realtor may suggest that you consult with a real estate attorney if other avenues don’t get the desired results in a timely manner.  Every once in awhile, there will be a weird and unforeseeable turn that may put the sale on shaky ground.  It may even be that  who must (or can) do what may be unclear.  Realtors don’t often suggest that home buyers & home sellers call an attorney for a consultation, but if they do, take their suggestion seriously.   A good lawyer (or tax professional) can often get you an answer quickly and soon put your mind at ease and help you to establish a game plan, if that’s what’s needed.

In conclusion, if your trusted real estate agent suggests that you seek tax or legal advice from a qualified professional (or any other professional), it’s probably in your best interest to do so.  Your Realtor will not get any kickback or payment for the referral – it is made only for your own best interest.  While there’s a lot of good information to be found online and in blogs, none of it will be tailored to your precise set of circumstances, so it cannot substitute for a confidential conference with a lawyer or CPA.

1. Selecting the list price of the home based on what you want or need rather than on what the market will bear (the “probable buyer’s value” of your home).
2. Using dissimilar “comps”.   The best comparable properties will be within a mile  of the subject property, within 10% of the home’s size and 10% of your lot’s size,  in the same school district and ideally in similar condition and very recently sold.
3. Hiring an agent who tells you an inflated price and then using that number. Look at the numbers yourself.  A better practice is to first select the best Realtor and then arrive at a pricing strategy together. Many agents are pressured by homeowners to tell the owner what he or she wants to hear.  This is truly counter-productive! 
4. Not factoring in negative issues which could impact your home’s value, such as proximity to busy roads, high voltage power lines, the look of nearby homes and yards, non-permitted work or additions, etc. Ignoring it – or believing that buyers will – means you will be perpetually too high in your assessment of your home’s value.
5. Failing to include the current competition in your assessment of your real estate’s value.  Are there a lot of homes like yours on the market? Are they just not selling? If so, the buyers are telling you that the whole lot is overpriced!  Are there lots of short sales and bank owned homes selling nearby? Unfortunately, those are going to pull your home’s value down, so those need to be included in your assessment. It is very important to establish the probable sales price of your home by looking at the competition as well as the pending sales and recently sold homes.

Formal appraisals are not the same thing as a competitive market analysis (CMA).  An appraisal only looks at the already sold homes (and perhaps may factor in the current market climate, but not to the same degree at CMA would do).  A good CMA will provide data on the active listings, pending sales and nearby solds which are similar to the subject property.  It ideally will be very honest about any negative (as well as positive) elements that alter the likely sales price of your home.  A home’s appraised value may NOT be its market value! 

If you’d like to chat about selling your home in San Jose, Los Gatos, Saratoga, or nearby, please call or email me.  When we meet, I will give you a complimentary copy of my book, “Get The Best Deal When Selling Your Home in Silicon Valley“.

Should you jump in as a San Jose area seller now? 

Maybe, but if you do it, do it right!  The dirty little secret that no one talks about is that most Santa Clara County homes for sale are not selling.  They sit on the market, popping up on MLS searches for month after month.

There are quite a few common myths that home owners believe about selling their property. Believe these, and act accordingly, and your chances of selling are dramatically damaged:

• my price is high, but buyers can always “make an offer”
• it’s a seller’s market, my home does not have to be perfect
• if I fix up the home to sell, the buyer may not like the changes
• it was like this when I bought it, so I don’t have to improve it now
• I have lived with (fill in the blank) forever, there’s nothing wrong with it

Getting the staging and pricing right matter tremendously.  Today let’s just focus on staging.

Buyers often spend everything they have to get into a new home, and usually they can’t afford to improve it once they move it.  So the first thing to understand, if you are selling your home in Los Gatos, Saratoga or San Jose, is that your home needs to look “turnkey”.  This is what 90% of the buyers need.  If your home isn’t move-in ready, you will automatically eliminate most of your home buying audience!

Let’s look at some photos to drive the point home.  I won’t say where these were taken, only that it’s a Santa Clara County home for sale right now.

When buyers and their Realtors first arrive at your home, they get a first impression of what kind of shape your house is in.  What does the landscaping say? What does the driveway say?

This driveway has a lot of cracks.  Buyers view it as money they’ll have to spend to make it look right.  Real estate agents know that this is a “red flag” that the foundation may also be damaged and cracked.   Either first experience of your home is not positive.  If they’re doing a drive by, they may or may not come back to see what’s inside.  Usually a cracked driveway alone won’t kill showings, but if the rest of the front of the home is bad, that may be enough to stop traffic.  If they don’t see your home, they won’t buy your home – so getting good, qualified traffic is top priority.

The next impression isn’t better.  Here are the windows which also face the street on the same home. Are they dirty?  Has the seal on the dual pane windows failed?  No matter what – it’s a horrible “first impression”. 

Sure enough, when I went inside, it was consistent: the inside what just as bad as the outside.  The kitchen was “beat up” looking.  It had been cheaply remodeled and was treated badly by its owners.  Whoever buys this house probably will have to gut and replace the current kitchen. Below is a large, closeup of a kitchen drawer that exemplifies what’s seen in the home. 

What to do?  A seller could have refaced the cabinets (and replaced the countertop with an attractive formica or Corian countertop) to clean it up.  Few buyers worry about the inside of the cabinets – it’s the outside that they care about.

The back yard is the least important of all the areas to worry about, since buyers are braver about tackling a part of the property that isn’t visible to the world and that they can avoid going through for awhile if needed.  Even so, it’s best to at least cut down the tall weeds!

Most homes are not this bad, of course, and it doesn’t take nearly so much effort or money to really get a home in shape to sell.

Are there any general “rules of thumb” for preparing your home to sell? Yes! The vast majority of times, these items are needed to be done to maximize your home selling price:

1. Decutter – often we live with too much stuff in our homes, in our garages, in our bookshelves, closets and cabinets.  How much? Usually, to sell, about 1/3 of everything must go!  (Donate it, sell it, store it, but get it out of the home!)
2. Repair – if your door sticks, your bathroom fan’s too noisy, your faucet drips, get them fixed.  Small annoyances add up to a bad impression.
3. Clean – this is no time for dirt, rust, streaks or mildew!
4. Make it light – trim back bushes that grow in front of windows, pull back curtains (or perhaps eliminate them), add lights to dark rooms. Whatever the need is, make sure it’s handled so your home is light. Dark homes are a turnoff to buyers.  They often cannot imagine what it will take to lighten up the house.
5. Focus on an inviting front of the home, add color, make the pathways clear of hoses, debris, etc.   Declutter.  Add colorful annuals near the front door.  Make sure your front door is impeccably clean (it may need refinishing, repainting or replacing). 

I co-authored a book, “Get The Best Deal When Selling Your Home in Silicon Valley“, and would be happy to give you a copy of it when we meet to discuss selling your home (no obligation).  Or you can find it online or in local bookstores.  The book contains many more ways to get top dollar when you sell your Silicon Valley house or condo.  Please email or call me today to discuss selling your home in Los Gatos, San Jose, or Saratoga.

The trick is in figuring out how much room you really need to negotiate and at what point you’re dramatically hurting your chances of selling by overpricing. Where’s the tipping point?

Let’s do some mythical math – let’s say a 4 bed, 2 bath home in Los Gatos or Almaden Valley is worth approximately $1,000,000 (depending on terms like “As Is”, the loan type or all cash, free rent back, etc., the probable sales price range might go from about $975,000 to $1,025,000). 

If the home’s likely value on the market is worth about one million, many agents will suggest listing the home at about $999,000 in order to get buyers who may not search over the $1 million mark and to drum up interest, traffic, and hopefully at least one offer.

Saavy and experienced agents know that most homes sell fairly close to list price in today’s market (Almaden Valley houses are selling, on average, at 99% of list price and Los Gatos homes are selling at an average of 97% of list price), so most would not want to go beyond that percentage – whatever it is – since we also know that most homes are not selling.  Five percent over probable list price is ususually the upper limits of what may be wise positioning.   In the case of our mythical million dollar home, the highest that some agents would see as potentially viable might be $1,050,000 – but many others would not venture that high, feeling it creates a big risk of the home sitting on the market too long and ultimately selling for much less if the home is perceived as shopworn. They might place the upper limit at $1,025,000 or close to there.

Sellers, though, sometimes see the numbers but want to list their home higher – perhaps 10% higher or more over probable market value.  Why is this so often the case?

Sometimes it’s a misperception of how to get the highest price for the home.  “I’m not in a hurry… I can wait for a good offer” is a common retort.  The fallacy is that waiting will bring more offer – in most markets, it will bring less. The exception is in a rapidly appreciating market, waiting may cause the market to simply catch up with you.  If you’re really not in a hurry, wait until the market is where you want or need it to be before selling.  Putting your home on the market and waiting 4 or 6 or 12 months for it to sell is most often frustrating, not fruitful.

Sellers may hire the agent who tell them the highest price. If you were to interview 3 or 4 real estate licensees and ask about the market value of your home, they should all be fairly close if they’re looking at the same comps.  If all but one are in a “band” and one is much higher, beware.  That agent may be attempting to get your listing by providing you with a price that can’t truly be justified.  In the business, we call it “buying the listing”.  (I have lost a few listings by simply telling the truth about pricing, only to see the home get listed at a crazy high price – and never sell at all.)

Another reason seller may err with overpricing  is that being emotionally attached, home owners occassionally feel that certain improvements or changes that they made create more value than most buyers will accept.  For instance, if your home is wallpapered in very, very expensive and imported or antique wallpaper but the buyers hate it, it is not an “improvement” per se.  Same with high quality but out of favor colored carpets.   Feeling very attached to a house, its memories and meaning can make it very difficult to view selling the house as a business decision.  But to maximize what you take away from the property financially, that’s what’s needed.  At the extreme, some sellers may become defensive and angry if they ask a Realtor or an appraiser “what’s my home worth” and the answer doesn’t measure up to expectations.

It is very important to have the assistance of professionals who can give you unbiased (neutral) information & advice.  A dangerous plan is to tell your agent what the home should be worth and then insist that he or she agree with you under pain of not being hired (or getting fired).  As a fiduciary, your real estate agent should give you correct information – even if it’s not what you want to hear.  Ultimately your best help in pricing, and hopefully in working with an offer when it comes, will be by teaming up with someone knowledgeable who can give you good information, data, and advice so you can make the most of whatever market your home sale happens to be in.

To answer the original question, then, agents suggest pricing a home at market value because that’s one of the key things you need to do to increase the odds that your home will sell.  They are providing good advice.  This alone – pricing it “at market” – isn’t enough to sell a home, but it’s probably the most important part of any marketing plan.