REAL ESTATE DOLLARS AND SENSE

As described in my book “Selling Your Home For Top Dollar”, there are five primary factors that determine the value of your home. Those factors include location, market conditions, physical home condition, home preparation and price. Let’s unpack each one of these in more detail, shall we? 1. Location, Location, Location… It’s a well-known fact that different neighborhoods within a given city command different price points. Proximity to beaches, good schools, employment centers and public transportation all play a significant role in the desirability of a home, ultimately affecting its market value. Additional factors such as crime rates and lot placement within a neighborhood are also factors that affect the perceived value of a home. Since a home’s location is fixed, special attention must be paid at the time of purchase to weigh the above factors carefully.

2. Navigating Market Conditions Supply/demand imbalances, rising vs. falling interest rates, increasing vs. decreasing unemployment numbers and expanding vs. contracting economic environments are all considerations that must be accounted for when pricing one’s home. The above factors determine if a given housing market currently favors the buyer, the seller or neither. Shifting markets or markets in transition require special attention in order to accurately predict the market’s reaction to your home once it hits the market. 3. Assessing Home Condition The condition of a home is a critical component in determining its market value. Deferred maintenance will negatively impact the desirability of a home and its perceived market value. Conversely, well maintained homes with upgrades made to high value rooms and flooring will be well received by the market with a sales price that reflects this. High value rooms typically include the kitchen and bathrooms (particularly the primary or master bathroom). In addition, upgrades made to lower the carrying costs of ownership (i.e. owned solar panels, new windows, new roof, etc) will also be well received. Keep in mind however, that upgrades made that cater to very specific design styles or tastes may have the opposite effect. When selling your home, the goal is to cast the widest possible net when attracting potential home buyers. This is done by choosing tasteful upgrades in color schemes that have wide appeal. Not doing so will leave buyers feeling like the home requires too many changes to match their style, resulting in lower priced offers or worse, no offers at all.

4. Home Preparation and Presentation A common mistake of home sellers is to not fully appreciate the process of preparing a home to hit the market. Staging with purpose is widely considered to be one of the most effective marketing strategies for increasing the value of your home. Staged homes spend 50% less time on the market and can often drive the sale price of your home north of list. The reason is simple – buyers do not always have the time in a short 15-20min showing to adequately envision your home’s full potential. Staging eliminates this problem by setting up the home with the sole purpose of highlighting its full potential to prospective buyers. Furniture used for staging should be done in keeping with the adage “less is more” to allow buyers space (literally and figuratively) to envision themselves and their families living in your home. Homes are presented in their best light when they are freshly painted in a neutral color, de-personalized and de-cluttered. Walls should be outfitted with a few select art pieces without overwhelming the senses. Window coverings should be size and weight appropriate for the windows. Oversized or heavy drapery reduces the amount of natural light coming through the windows and can make rooms appear smaller. Countertops should be cleared, and family photographs should be scaled back or removed entirely. Buyers should smell the slight fragrance of a lit candle and hear the sounds of water features and relaxing music in the background. The ultimate goal is to get buyers to fall in love with your home – buyers in love pay more for homes - it’s that simple.

5. Establishing the List Price Of the five factors discussed here, price, by far, is the number one factor that will determine the success or failure of selling your home for top dollar. An underpriced home leaves money on the table while an overpriced home will sit on the market unsold for months, ultimately requiring price drops. Signaling problems with the property and desperation, price drops are the equivalent of “blood in the water”, only, instead of attracting sharks, they attract low-ball offers. Ironically, overpriced homes only function to sell other people’s homes, not yours(!), as other homes on the market are perceived to be “great deals” relative to yours causing them to move quickly. Overpriced homes also run the risk of running into appraisal issues during escrow. Let me be very clear – overpricing a home never ends well. When pricing a home, it is critical to analyze similar homes in the area that have recently sold as well as homes that have been recently withdrawn from the market. It is also important to analyze the active homes on the market that are likely to provide competition for your home. When performing this analysis, it is critical to adjust for any advantages (i.e. a renovated kitchen) as well as any disadvantages (i.e. a smaller lot size) that your home may have relative to the competition. Note that both examples given above (i.e. a renovated kitchen and a smaller lot sizes) are not evident in the commonly used price/sqft metric for home valuations and must be accounted for using a different approach. The goal when selling a home is to solicit more than one offer from a ready, willing and able buyer. While this may seem obvious, there is a more mechanical reason for this. As one would expect, in neutral or buyer markets, soliciting multiple offers can be more challenging than in seller markets. When only a single offer is received and a seller wishes to make a counteroffer, they would do so using what is known as a “Seller Counter Offer (SCO)” contract. The SCO contract signals to a buyer that their offer is the only offer at this time. Alternatively, when more than one offer is received, a seller may make their counteroffer using what is called the “Seller Multiple Counter Offer (SMCO)” contract. This contract indicates to all buyers that multiple offers have been received. Regardless of what is being presented in the seller’s counteroffer, it is not difficult to see why buyers almost always respond more aggressively on both price and terms when presented with SMCOs relative to SCOs. For the above reasons, current market conditions, property location, property condition and recent sales in the area must all be used jointly to price a home at or just slightly below market value to ensure that multiple offers can be solicited. In my 15+ years of experience, this strategy has been successfully proven over and over again in selling homes for the highest possible price. Homeowner Bias: Lastly, any article discussing price would not be complete without at least touching upon what is commonly known as “homeowner bias”. Homeowner bias is a completely normal and natural phenomenon that causes us as homeowners to believe that our homes are worth more than what the market will bear. Afterall, we have raised our families in our homes building lifetime memories that we cherish. We have spent countless hours and money on their upkeep and improvement. Our homes have value to us well beyond any monetary dollar amount. And unfortunately, some real estate agents exploit this fact by suggesting excessively high list prices to homeowners just to secure the listing only to suggest price drops later (which by now you should equate to “blood in the water”). When selling your home, it is critical to recognize one’s own biases as the homeowner and to work with a real estate professional that is data driven and who will focus on the factors described above to get top dollar for your home. While the link below will get you free access to an electronic copy of my book “Selling Your Home For Top Dollar”, if you are interested in receiving a physical copy, reach out to me – I’ll make sure that my team sends you a (signed!) copy (a $24.99 value including shipping and handling) absolutely free!