Tips for Home Sellers
One of the most powerful tools in real estate is the truth. It can be surprisingly unpopular, though, as some home sellers and home buyers may not want to hear it or to tell the whole truth as required by law (and that may apply to their real estate agents as well).
Listing agents and sellers
Real estate agents sometimes accidentally miss the mark with pricing, and may tell a home seller a price that is too high, which of course usually causes the home not to sell – in fact, the main reason why a home won’t sell is having a price that’s too high.
Sometimes, though, the seller does not want to hear the agent’s honest assessment of value. Some sellers insist on a high price and may even challenge his or her agent to back it no matter what. I once had a seller tell me “I want to hear your enthusiasm for my price”. I could not do it in good conscience, and allowed that client to cancel the listing. I wasn’t going to lie and just say what that home owner wanted to hear.
Other times, agents may be afraid to tell the home seller the hard truth about the property condition, such as the need to paint over garish colors or replace tired, worn carpeting. It’s harder to tell the truth if sellers either bite your head off or cry when you are truthful with them. Buying and selling is stressful, and emotions can rise to the surface easily. If getting top dollar is important, it’s imperative that sellers welcome the truth, not fight it or pressure their agent to tell them what they want to hear.
Here are some of the hard truths for home sellers to understand:
Pricing is the most important part of “marketing a home for sale” that sellers and their agents do. Over-pricing is the #1 reason why some homes don’t sell. A property has the best chance of selling at highest value and quickly when it’s priced right from the start. Here’s a quick list of the most common pricing errors which Silicon Valley home sellers should avoid because they often lead to over-pricing.
Five Pricing Mistakes to Avoid
- 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).
- 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, ideally in similar condition and architectural style, and on top of all that sold very recently. Don’t compare a patio home or zero lot line home with a house on a normal lot where the owners can walk fully around the property.
- 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!
- 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.
- 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 selling or staying on the market? The buyers are are sending signals, so listen to them! Are there 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.
Appraisals vs CMAs
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“.
Further reading suggestions:
See my short video with tips for hiring a Silicon Valley Realtor.
Or check out other posts on this blog tagged Sellers Tips
The probable buyer’s value for a home is very similar to market value, as a home is only worth what a buyer will pay. If the seller wants more, it won’t sell.
Sometimes it can be tricky to estimate what a home might sell for. I usually talk with my seller clients about trying to find the probable buyer’s value. The seller may have a range of prices that he or she anticipates and would accept. So too with the buyer, whose range will likely be lower than the seller’s. The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.
Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000. The buyer would like to purchase it for $960,000. The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two. If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.
But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.
What causes property values to go above or below what would seem to be the probable value? Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
Expired, canceled, and withdrawn listings are all frustrating situations for both home sellers and the Realtors they worked with. After considerable effort, and likely also significant cost. the property failed to sell. What happens next?
What is the difference between expired, canceled and withdrawn listings?
Let us begin by discussing the difference between canceled, expired, and withdrawn listings and how each impacts your vulnerability to being swamped with messages from real estate agents.
- A withdrawn listing means that the property is still listed for sale with a real estate agent or broker but is no longer listed on the multiple listing service (MLS). It’s still a valid listing and other agents should not approach you about working with them since you are still in a contract to sell your home with your current agent.
- An expired listing means that the contract for your listing has come to an end and the listing is no longer in place. Other agents may approach you since there is no valid listing in place.
- A canceled listing is one in which the seller and agent or broker agree to terminate the listing. Since the listing has ended, other agents are free to contact you.
In a nutshell, if your Silicon Valley home’s listing becomes either canceled or expired, real estate sales people may contact you, but if it is merely withdrawn, they are not supposed to reach out to you because you still have a valid listing in place. Continue reading
Silicon Valley home buyers, sellers, and their real estate agents rely heavily on the professional advice, insights and opinions of home inspectors, whether it’s for the property generally (house, townhouse or condominium inspection) or for some other component, such as the roof, foundation, chimney, pool, heater, etc. One of the most frustrating – and sometimes maddening – experiences for everyone involved happens when inspectors disagree and their inspection reports provide conflicting advice.
Either extreme is bad, either “calling” something when it’s fine or missing something if it’s not. Often resolution is accomplished by having yet another inspector come out OR by having the two who disagree meet at the property to sort it out.
Here are some real examples I’ve experienced first hand over the years while selling residential real estate in Santa Clara County:
- Over-called: General property inspector called for “further inspection” of heater, roof, or chimney because he said something’s wrong. Further inspection ordered by buyer or seller, and paid for by consumer – but the professional for that aspect of the home says it was just fine. Is it fine or not? The home buyer or seller is out some money and one of the two reports says there’s a problem with it but the other says it’s OK. (This happened a few times where the general inspector “called” things that experts said were in good working order. For that reason, I had to stop recommending him to my clients and began working with another inspector who wasn’t so over-eager that he called things which were not bad. When inspectors disagree with one particular inspector often, it’s time to find someone else.)
- Crawl space nightmare: many homes have crawl spaces and if yours does, it’s important to either go down there yourself or have someone else do it for you periodically to check conditions there. My buyers were purchasing a home near Carlton Elementary in Cambrian (Los Gatos border) and the pre-sale pest or termite inspection (the only one available) was from a company with the absolute worst reputation in the valley, and that report said that there was not one thing wrong in a 50 year old house (highly unlikely!). We ordered new inspections, both home & pest. Both my inspectors found a lot of damage in the crawl space, amounting to about $10,000 in damage not reported by first inspector. The seller’s inspector had claimed to go into the crawl but it was evident that either he didn’t go or he didn’t do it thoroughly. The seller wanted his inspector’s company to do the repairs but we negotiated for a more reputable provider and got it.
- My pre-sale chimney inspection, from a reputable inspector, said my listing’s fireplace and chimney were fine (Los Gatos border area, Alta Vista neighborhood). We got the home sold and the buyers ordered a new chimney inspection, and that mason said it was broken. My first inspector apologized for his error (after coming back out and looking at it again, verifying that it was, in fact, in need of fixing) and said he would do the repair at a reduced rate, but he couldn’t get to it prior to close of escrow. We could not use him because this had to be done prior to close of escrow. Since I had referred this man, I felt partly responsible for his error and offered to split the cost of the expensive chimney rebuilding with my clients. My sellers felt that was fair. I never, ever hired that chimney guy again.
- Another house, another chimney: my pre-sale general inspection cleared the chimney in this lovely Cambrian Park home. Buyers ordered a chimney inspection to be sure and a young kid (maybe 18 years old?) came out and said the chimney was broken and needed repairing. My sellers paid for another chimney inspection, and a seasoned mason looked at it and said it was fine. The other agent and I arranged to have our seasoned mason and the boss of the young kid come out and both inspect it with everyone present. They did and said it was, in fact, fine. The young kid was there and I asked him why he “called” it. He responded, “I wasn’t sure so thought it was safer to have it rebuilt”. (At a cost of about $2000 as I recall!) My sellers were out about $100 for their inspection but did not have to rebuild the chimney. Sometimes, when inspectors disagree, it’s because one of them may be inexperienced.
Who is present at home inspections for Silicon Valley real estate sales? The answer really depends on when the inspections are done and who is paying for them.
Timing of the home inspections
Pre-sale inspections: In Silicon Valley, many home sellers get pre-sale inspections of the home (property), roof, chimney, and a pest inspection or termite inspection too as they tend to provide an excellent return on investment. With the seller’s inspections, often the listing agent will be present for either all of the inspection, or, if the seller is there and prefers, only at the summary. Inspectors are not ordinarily left at the property alone in this area – though in some states that is the norm.
Sale pending: When the home is in contract, both the buyer’s real estate agent and the buyer or buyers will be present for the inspections. The seller and listing agent ordinarily are not there, but may be. Being present is a great way for the future owners to really learn about the property, so we Realtors strongly encourage them to attend if at all possible.
More than a written report
A lot of time, there are nuances to the home inspections which you will only get in person and not find on the written report. Some inspectors may volunteer info on how to maintain things in the future, such as tips on keeping rain gutters from rusting. If you don’t attend, you won’t get that education.
As much as possible, Realtors try to get all home inspections to happen at once (same day, same window of time) to minimize the buyer’s time away from work and inconvenience to the seller. In some cases, however, the roof or other inspection may not be able to be scheduled at the same time. Roof inspections normally are not tightly scheduled – the inspector comes during a window of time which is not precise. Since no interior access to the home is required, this is usually not a problem. Even so, it’s nice if the buyer and selling agent (buyer’s agent) can be there to hear the verbal information when the home’s seen.
(Side note: a few years back, I met some Realtors from Utah who said that their inspectors have lock box keys and that they inspect with buyers present but the real estate agents absent. “My broker discourages our being present at home inspections – too much liability”, one of them explained to me.) Continue reading
Although the Silicon Valley real estate market remains hot, and generally is a strong seller’s market, not every home is selling in 2-3 weeks. Most of the time, if the property is unsold after 30 days, it’s time to reevaluate the marketing strategy. The biggest piece of the marketing effort, of course, is price. (Please also see Why didn’t my San Jose home sell? for info on other remedies to real estate not getting pending.) if the home isn’t selling, it may be time to lower the list price or asking price.
Usually, the main reason why a home doesn’t sell is that buyers think that it is overpriced. Sometimes you, the seller, can compensate by improving the condition or some other relevant factor, but often, the solution will be to adjust or lower the price.
How much should you lower the list price?
It really depends on what the market reaction has been – no traffic, light traffic, or heavy traffic? The colder it is, the more likely you’ll need to take stronger measures.
Recently I visited an open house in which there’d been less than a 1% price reduction after 30 days on the market. That very minimal kind of repricing tells a buyer “I’m not budging”, which the buyer may read as “My price is high and I’m unreasonable; move along, this is not the house you seek”.
It’s all about the traffic
First, how much activity is your property getting? How many showings per week?
If you are getting at least 3-5 showings per week, but no offers, you are probably close on price. Perhaps a smaller reduction, combined with some other adjustment (restrictive hours loosened up, scary pets removed, alarm disarmed) may do the trick in getting you more traffic to create a viable offer.
If you are getting NO showings, or close to no showings, you may well be way, way high on your price or have other major issues which need to be corrected. My general advice, below, may not apply in that case as you may need something more to get the qualified traffic in through the door. The more qualified traffic you get, the better your odds are of selling. An atractive price is the bait that can attract those buyers.
Here are two old rules of thumb, which I think pretty much still work today:
- for every week it’s been on the open market, lower it $10,000 (so a reduction in 3 weeks would be $30,000 or a reduction in 5 weeks would be $50,000)
- alternatively, for every week it’s been for sale and active on the MLS, lower it 1% of the sale price (hence at 3 weeks, a 3% reduction would be appropriate and at 5 weeks a 5% reduction would be indicated)
Every situation is, of course, unique, so it’s important to look at the big picture. If buyers and agents are staying away because the home smells of pets or cigarette smoke, or if there are people constantly home during showings (you should all vacate), or if you demand that the listing agent be present for all showings, any of these things can drive away qualified traffic. But if the marketing is good, the home is clean and reasonably accessible, and all the other basics are correct, it probably is price. Sit down and talk with your Realtor to get good guidance. If those who have shown the home have provided feedback, take it to heart – whatever that input is.