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Tag Archives: honesty

Unique Homes?

Wednesday, 14 March 2012 08:00
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french quarter architecture

french quarter architecture (Photo credit: abundantc)

Everybody likes unique homes… maybe not the same unique homes, but homes that are unique to their needs and desires.  But, when it’s time to move, a unique home can be a REAL challenge to sell.  In effect, it takes finding someone else that sees the same value in the property in order complete a sale where everyone leaves the closing table with a smile.

Financing a unique home can ALSO be a challenge.  Now, you don’t just need to find a buyer that has similar needs and desires for their home, but the appraiser needs to be able to justify it through the use of comparable properties.  Comparable properties might be pretty slim… since the very definition of “unique home” would seem to preclude comparable properties.

What makes a “unique home”?

  • Unusual interior features… maybe a 30 seat movie theater, 10 car garage, recording studio or maybe even a smaller house with a commercial grade kitchen.
  • Architecturally distinct… this can be something as “mundane” as a house that doesn’t fit the character of nearby homes.  A modern, minimalist home in a neighborhood of traditional homes would be unique.
  • Falling Water

    Falling Water (Photo credit: spike55151)

    Different type of lot… like a 10 acre lot tucked into a neighborhood with ½ acre lots, or a ¾ acre lot in an area loaded with 20 acre mini-farms.

  • Homes with historical significance… whether we are talking about a house like “Falling Water” (famous Frank Lloyd Wright design) or the Lalaurie Mansion (a famous home in the French Quarter of New Orleans, purchased a few years ago by Nicholas Cage) or even a home owned by a notable person from history.
  • VERY different homes… a house built to look like a shoe, or an earth-shelter home.  Lots of very high end homes fall into this, just because of the cost and limited market for them.

Selling a unique home involves a lot of challenges, both for the sellers AND for their real estate agent.

  • They may take a substantially longer time to sell than other homes.  They need to have the right buyer… and they have a much smaller buyer pool because of their unique attributes.
  • English: Thomas Jefferson's Rotunda at the Uni...

    Image via Wikipedia

    The sellers will often end up selling for much less than they originally hoped… even if they find the “perfect buyer” because of the problems that can arise during the appraisal and financing processes.

  • In some cases, especially homes with historical significance, there might be substantial restrictions on the buyers (can you imagine what would happen if someone bought Monticello, Thomas Jefferson’s home in Virginia, and then bull-dozed it because they liked the lot?)
  • The marketing costs and effort need to be much higher in order to have a good outcome.

There is a saying in real estate… Price fixes everything… but there are limits to that.  In fact, over the last few years we have actually seen properties that couldn’t be GIVEN away.  In Detroit, there were homes that were livable (not nice, but not caving in, either) that failed to sell for $100.  The value of the underlying land was less than the cost of removing the house… and there was no demand for the house.  The parallel in unique homes is that there might not be a noticable local demand for a house with that particular style.  To sell a specialized home to a general buyer often means that the unique features are completely discounted, or may even be a liability.

So, “price fixes everything” may actually not apply in the case of some unique homes.  Marketing might also not be able to overcome some obstacles.  However, to get the best outcome, a combination of aggressive marketing, realistic pricing, and a realistic timetable are the solutions.

I have dealt with several unique properties… garage homes being the most predominant.  The require a different type of service than many real estate agents are willing to provide.  There is a substantial portion of the real estate community that “plays a numbers game” when it comes to listings.  They figure that by listing a lot of properties, they will get a percentage that sell.  By lowering their marketing costs and concentrating on funneling more into the listing end of the equation, they will get more sales on the closing end of the equation.  They are much less interested in changing the equation to get a higher percentage fo the properties sold… and they have little patience for dealing with interesting and unique properties.

If you have an interesting property that you want to sell… or you are looking for an interesting property… around Atlanta, especially in Gwinnett County and around Lake Lanier, give me a call.

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Wayback Wednesday… Price ≠ Value

Wednesday, 29 February 2012 08:00
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This was actually one of my favorite posts… and oddly, I wrote it around the time of our last Leap Year.  However, it is possibly even MORE true now than it was then, back during the beginning of the crash, as things were unwinding.  At that time, foreclosures hadn’t accelerated, banks weren’t too worried about getting their inventory through the system, and they were still thinking THEY were the ones in control of their market.

English: To Let in Dover As the estate agent w...

Image via Wikipedia

There is a HUGE misconception among real estate consumers.  Many want to connect “price”, like the asking price from the seller, and “value”.  They feel that if they can buy a property for 10%, 30%, 80% (whatever) off of listing price, that they have a “great deal”.  The problem is that there isn’t a magic number that makes a property a “deal”.  As highlighted in the original post, the lower priced property in a subdivision, with the same floorplan and amenities, might not be as good of a deal as a higher priced property.

As I mentioned at the beginning, it may be more true now than it was four years ago.  Then we were seeing some foreclosures, but they weren’t making up half of the market.  They were on the fringe…  Now, they are often the bulk of the sales.  But more importantly, sellers have capitulated…  And because of that, sellers knowing that they have to compete in the price arena with banks and short sales, they have priced for a fight.  The bonus is that they are often homes that AREN’T loaded with the possibility of hidden issues.  They haven’t been sitting vacant for months or years on end.  They often don’t have a myriad of “deferred maintenance” issues (that’s real estate agent speak for “not able to keep up with the maintenance”).

Of course, that isn’t always the case… but the message is just as true now as it was then, pay close attention to the total cost, not just the price tag… or the discount on the price tag.  Look at the value.

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Wayback Wednesday… Long Distance Listing (or Selling) Agents

Wednesday, 01 February 2012 08:00
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A couple of years ago I was dealing with this situation… actually cleaning up after it.

I had a client that had an offer on their house with an out of town agent (the agent was the buyer’s niece).  She was very nice, but she couldn’t be there for any of the 6 inspections we had, nor could she be there for the closing.  In effect, her clients were largely unrepresented in the sale… they were constantly asking me (the agent that is contractually bound to represent the best interests of the seller) how they should proceed or what would be in their best interest.

It came to a head at the closing…  The closing attorney got a bit testy with them for continually asking me to explain the forms to them.  He asked where their agent was.  They replied that their niece wasn’t able to come up from Valdosta.  He then asked if she was there for inspections or anything else.  One of them stated that she usually was able to help them via phone, but that often they had to rely on me.  The husband made a comment that I had declined answering some of their questions.  The attorney busted out laughing.  After a moment, he said that since I was contractually tied to the seller, there were few questions I could answer for them, and that I should NEVER have ventured an opinion about any issue they faced.  The wife chuckled and gave her husband an “I told you so” look.  The closing attorney held up the check that was going to their agent and asked what she had done to earn it…  She hadn’t answered their questions, she hadn’t shown the property, she didn’t even find it and send them information on it.

There are a lot of agents that tag their listings with language like “If I show this property to your client, commission will be X%” (generally about 1/6th of the offered split in the listing).  I don’t usually employ such language because I want to get the listing sold for my client, not punish other agents for not doing their job.  But, I understand the reason.

The bottom line is that employing an agent (whether on the buyer side OR the seller side) that isn’t in the area doesn’t result in solid representation.

Check out the original post here…

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Wayback Wednesday… The Bigger Price Myth

Wednesday, 25 January 2012 08:00
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This is one of those things that I hear about all of the time.  I face it all too often.  I go on listing appointments and either an agent before me, or one that comes later “buys the listing“.  Of course, not literally, but figuratively.

They tell the seller what the seller wants to hear… regardless of reality.  They tell the seller that they will sell the house for more money.  It is an appeal to the ego… and sometimes even defies logic.  But, it gets the listing.  Obviously, the seller generally wants to hear that their house is worth more.

It usually happens for one of two reasons… the innocent one and the not so innocent one.

The innocent reason is that the agent just doesn’t know any better.  Through inexperience or bad data or poor technique working with the data… or even misreading the market climate… they arrive at a price that isn’t really realistic.  And the window for a price is pretty small.  At 20% over real value, the house likely won’t be seen in the current market.  At 10%, many of the prospective buyers will dismiss the house even if they come look at it (most buyers won’t make a serious offer more than a few percent off of the list price).  Even at 5% over reality, many prospective buyers won’t offer… or they will push it to the back of the line.

The “not so innocent” reason is that the agent KNOWS that the sellers will list with them if they give a higher price estimate.  It is a LOT more common that most sellers would think.  In fact, there is an entire sub-industry in real estate involving strategies and support for these agents.  One of the popular strategies is to build in price reductions at predetermined intervals.  The sellers should ask a simple question… “If you are confident of the price, why would you build in price reductions?”  Of course, the market DOES shift, sometimes unexpectedly.

The idea, as stated in much of the materials supporting this strategy, is that the agent can tell the seller, “OK, we’ll try it at your price, but if nothing happens in 30 days, we’ll cut the price to ____.”  There is always the chance that there will be a buyer that will drop out of the sky, with cash (since the asking price might not clear an appraisal) and no desire to have an appraisal of their own done.  But… not that likely.  And that is where the issue I take with this as a deliberate strategy begins.  We know, from tons of studies, that over-priced houses generally end up selling for less, after spending more time on the market.

It goes like this…

  • The house starts off as over-priced, so it gets fewer, if any showings.
  • After a period of time, the price starts to ratchet down… but it has already missed that magic window (when a house is first listed) when the most buyers look seriously at it.
  • Since it has been on the market longer, the buyers that DO run across is wonder WHY it has been on the market so long.
  • Vicious cycle…
  • Price gets cut more to get showings.
  • When the offer comes in, it is lower than it likely would have been to start with.

Here is the post I wrote about this very issue a couple of years ago.

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Wayback Wednesday… Over-Pricing and Under-Offering

Wednesday, 18 January 2012 08:00
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If there were two issues I’d have to put at the very top of my question pile, there would be the ones…  In the original post, I started with the Sellers… so we’ll start with the Buyers this time.

Buyers want a great deal.  We all understand that, and as a real estate agent, I’m supportive.  Even the Sellers get it.  But there are two problems.  The first one I wrote about in a couple of years ago, here.  Buyers, in their zeal to get a great deal, offer too low to start with.  The find a property where the price has been cut to the bone, and then they offer WAY lower.

The problem there is that the seller, whether institutional, or a “regular” seller, doesn’t see the low-ball offer as being serious… then they attach the same feeling to the buyer that made the offer… they aren’t serious.  And the seller, if they send back a counter offer, reply with a counter offer that shows that… like maybe knocking $100 off the price.  Negotiations stall.  That doesn’t help them get the house… and it wastes everyone’s time, including their own.

A few years ago, when I originally wrote the post, there was blood in the water, so to speak, and it was still an issue.  Now, especially at the entry-level end of the market, that is NOT the case.  It is actually a Seller’s Market for homes that are priced well.  I am seeing an increasing number of listings selling for VERY close to list price within days.

Sellers want to get the most from their house.  It doesn’t matter if they are a corporate seller or someone moving to take advantage of a job opportunity… or even a seller doing a short sale.  Of course, just as the sellers aren’t terribly concerned with the needs of the buyers, buyers don’t really care about the needs of the seller to get top-dollar for their property.  And buyers aren’t looking at many over-priced properties. 

They know which properties are over-priced, too.  More and more, I’m seeing buyers that are VERY sophisticated in terms of knowing the value of a particular property, usually before choosing to look at it the first time.  If it isn’t priced within a few percent of where it should be, they probably won’t even look at it.  Not 10%… not even 5%.  More like 2-3%, closer on higher priced homes.

The end result, is that the home sits on the market for a while with few, or even no viewings, much less offers.  After a while, the sellers reduce the price, but by then the home is stigmatized.  The price drops more.  In the end, the home sells for less that it might have sold had the original price been more competitive. 

 

What about short sales?

They are the new wrinkle.  And I didn’t really address them the first time around.  But some similar rules apply…

Sellers, price realistically for the market.  Don’t worry about what the bank will accept, worry about a price that will get an honest contract.  Realistically…  Not too high OR too low.  Anything else is a waste of everyone’s time.

Buyer, offer realistically.  A rule of thumb I use on short sale offers is that if the offer isn’t going to be within a couple of points of the list price, don’t bother.  If the list price is insanely high or low, don’t bother.  If you can’t afford to sit on the offer, waiting as much as six months for the bank to get their act together, don’t bother.

I know that is harsh, but it is reality.  I actually have a partner that is VERY successful at getting short sales sold.  It isn’t easy or fun for anyone…  But, it might beat the heck out of some of the alternatives for the seller, and offers great opportunity for the buyer.

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