Basic Data vs MARKETING in MLS – There IS a Difference

Basic Data vs MARKETING in MLS – There IS a Difference

Basic Data vs MARKETING in MLS – There IS a Difference

People say it all the time when they're considering putting their home on the market and trying to decide whether or not to hire and agent, and if they're going to hire one, WHICH one will they hire.  Among the many things people generally understand about agents is that most of them will "put the home in the MLS".  While that may be essentially true, what often gets lost in the comparison is the differences in HOW a home might be represented in the Multiple Listing Service (MLS).  

Let me give you an example.  Some time ago I was hired to market a property that had been listed without success by two prior agents.  Despite a very "balanced marketplace", the home had been on the market for 9 months with no offers.  When I took the listing, my research told me there was absolutely NOTHING WRONG WITH THE PRICE!  I recommended that we not change the price at all.  However, I did dramatically change how the home appeared in the MLS.  Here are a few particulars of how the home had initially been represented:

  • Master Bedroom 1st Floor 11' by 10' No walk-in closet
  • Master Bath None
  • Bedroom #2 1st Floor 10' by 10'
  • Bedroom #3 2nd Floor 12' by 10'
  • Recreation Room 2nd Floor 16' by 12'

The home was a Cape Cod with bedrooms on both levels.  When I placed the home in our MLS, among some of the other changes I made, I included:

  • Master Bedroom 2nd Floor 16' by 12' Walk-in Closet
  • Master Bath YES
  • Bedroom #2 2nd Floor 12' by 10'
  • Bedroom #3 1st Floor 11' by 10'
  • Bedroom #4 1st Floor 10' by 10'

Having made no change in price, but changing how the home was "represented" in the MLS, in less than 10 days we had 4 offers, the LOWEST of which was full price. The seller accepted the lowest offer since it was cash and the buyer could close in 2 weeks time!  In other words, the issue that prevented the property from getting offers previously was NOT that the seller had overpriced the property, but rather that neither of the previous agents gave any thought to using the MLS to MARKET the home...they simply did data entry!

And we all know that buyers are visual!  That's what it's so important that properties be well-represented by the photos we offer.  The following are sad examples of some sellers homes are being represented in the MLS.  These are actual MLS photos that various agents thought were "acceptable" for the pre
sentation of their lisings.bad_house_photo1

Take a look at this first one.  I realize that sometimes it's hard to get a good angle for viewing a home, but to be taking it over the roof of a car....and then not even getting the full exterior view?  Whenever photos like this show up in the MLS, the first thought that comes to mind is does the seller know what their agent is doing?  Worse yet, does the AGENT know what the agent is doing!

bad_cluttered_kitchenThis is another one that caught my attention.  Did the seller even know photos were being taken for the MLS distribution?   How much extra effort would it have taken for the agent, even if the seller is not home, to take magnets off the refrigerator, all the pots, pans, bags of goodies, and pretty much everything else off the counter tops, refrigerator, stove, and oven?  In less than 5 minutes, the agent could have removed everything that is distracting attention from what is really important, taken their photos, and put everything back in place.  And what about the discoloration of the cabinet doors above the stove?  Chances are, 30 seconds with a bit of grease remover or cleanser could have given those doors an easy face lift as well!

This has to be the epitome of lazy!  This photo was taken from the inside of a car (notice the rear view mirror), and doesn't even really have the house in thebad_photo_from_car picture.  There are two garages and some open field!  Yes, it was winter, and no doubt cold, and while I'll admit to having taken a few exterior photos from my car...(NEVER for MLS photos...only for my own record keeping and reminders!)...they don't include the rear view mirror, nor do they include a time or date stamp on them!

One of my pet peeves is MLS photos with date stamps.  There's nothing quite like bringing everyone's attention to the fact that a listing has been on the market for a bad_powder_room_datedVERY long time!  Take a look at this.  Not only is the toilet seat up (particularly noticeable since it's a different color than the toilet itself), but the inside of the vanity is on display as well.  And, yes, this one DOES have a date stamp on the photo! 

Rooms being photographed should be, at a minimum, tidy, clean, and "de-cluttered".  No one expects the agent to clean a house before taking photos...but one WOULD expect an agent to encourage their seller to tidy up for photos.  Bad photos can often mean the difference between getting a live showing on a property or not.  And that difference can make a difference between getting an OFFER or not!

The point here is really quite simple:  it's not enough to have an agent who just "puts a home in the MLS".  Today, in many markets around the country, and certainly in the Chicago area market, a listing doesn't JUST appear in the MLS...that content is promulgated to thousands of individual agent websites and to a variety of "partner" sites as well...the most notable among them being Realtor.com!  Having your home WELL REPRESENTED on the MLS can have a huge benefit in the marketing of that home...or, when done poorly, can be a huge detriment!

You Never Get a 2nd Chance to Make a Great First Impression!

You Never Get a 2nd Chance to Make a Great First Impression!

You Never Get A 2nd Chance to Make a Great First Impression!

Remember your first day at school, or your first date, or your first job interview?  Someone special in your life probably quoted those words to you ... "you never get a second chance to make a great first impression!"  And those words hold true for real estate as well.  When you're preparing to put your home on the market, first impressions matter.  What's really important to remember, though, is that you need to be making A LOT of great first impressions if you want to get your home sold, and most assuredly if you want to get a decent price for it!

Buyer's Agents

bad_kitchen_photo

Actual photo from the MLS

Yes, their impressions matter ... big time!  Buyer's agents, particularly the more experienced ones, see a whole lot of properties, and therefore have a great basis of comparison.  They become very aware of the "gems" on the market.  Their livelihood depends on it.  And agents are also very conscious of, not just price, but value!  If agents don't perceive that your property offers good "value" to their clients, they're likely to encourage those clients to pass you by.  

Prospective Buyers

More and more buyers are doing their home searching on the internet.  It wasn't too long ago that a prospective seller's focus was on their "curb appeal" and the overall condition of their home.  Today, with so many buyers doing their research online, and many of them actually directing the agent as to which homes they want to see, making that great first impression online has become just as critical as that first impression when someone walks up to your front door.  As a matter of fact, NOT providing a great first impression online may well result in prospective buyers not even bothering to come to your front door.  This image is of how one property is being represented online.  What kind of impression does it give you?  Likely it's not one you'd want to give if you were selling your home!

Appraiser (assuming your buyer needs a mortgage in order to purchase your home)

When the real estate market was booming, it seemed as though sellers didn't have to worry quite as much about this one.  If a lender had a warm body to loan to, they seemed to bend over backwards to make sure that buyer got to the closing table, even to the point of being lax with the appraisers, not really holding their feet to the fire when it came to determining value.  However, with lenders tightening their belts, guidelines for appraisers have become much more restrictive.  This makes it even more critical for sellers to do everything they possibly can to help the appraiser see the seller's home in its very best light.  This is particularly critical because, even if the buyer sees the value in the home, even if the buyer's agent sees the value in it, if the appraiser doesn't, generally the buyer's loan won't get approved!

Taking the time up front, before putting your home on the market, to help your home make its very best first impression can save you weeks, even months of lingering on the market, and even earn you higher offers from prospective buyers.

TIP:  Pretend you are a prospective buyer (or better yet, solicit the help of your most "critical" friend) and go through your home, inside and out, and make a list of everything you (or your friend) noticed that you would want either corrected or adjusted for in the price if you were going to BUY the house.  Now ... correct it.  Some of those things will be very small (but they are still detractors ... buyers typically over-estimate the cost of repairs and cosmetics and they downwardly adjust what they'd be willing to pay for a home they saw as "needing work")

The Lure of the Short Sale

The Lure of the Short Sale

The Lure of the Short Sale

short saleIn many markets around the country, and certainly here in the western suburbs of Chicago, properties for sale as Short Sales have become very prevalent, even among Bloomingdale, Bartlett and Carol Stream homes for sale.  Prior to 2008, we rarely, if ever, saw short sale listings.  Sadly, they are now fairly abundant.  As a matter of fact, according to our MLS (MRED...Midwest Real Estate Data), of the 1140 attached and detached single family homes currently listed for sale, roughly 15% of the listings in Bloomingdale, Bartlett, and Carol Stream are indicated to be Short Sale listings!  And this DOES NOT INCLUDE those properties that may just be one more "price reduction" away from having to be disclosed as short sales!

"Why sadly?" you ask?  Well, there are many reasons having generally to do with things like the impact on the neighborhood, the impact on the seller's credit, and the like.  But sadly also because of what short sales do to the perception buyers have of the marketplace in general, and of what buyers who choose to involve themselves in the short sale process are put through by the bank or banks involved.  This is truly a seduction...the "come hither" lure that short sale pricing offers prospective buyers.  But, as they say, all that glitters is not gold.  As my Dad used to say, "there ain't no such thing as a free lunch!"  Here are just a few of the many reasons why short sales are to be considered only after exercising great caution:

  • Short sales are not "normal" transactions.  And they are not PRICED as normal transactions.  Their prices are reduced, often very significantly, as an INDUCEMENT to encourage buyers to take the RISK that the transaction may well not ever reach the closing table.
  • Short sales at this point offer buyers roughly a 50/50 chance of ever making it to the closing table here in the Chicago area market.  In the past 12 months, according to our MLS, there have been 7,420 CLOSED short sales.  Currently there are 15,131 short sales on the market, roughly 1/3 (4,884) of which are under contract awaiting approval of the seller's bank (or banks).  During that same period, 14,543 short sale listings were terminated as unsold.  In other words, twice as many short sale listings were cancelled or expired as those that actually closed.  Point of information...some of those cancelled short sale listings may have gotten relisted and perhaps sold, or they may be among those still on the market.  However, MANY of them are now simply in the process of going into foreclosure!
  • When buyers consider two similar properties and one of them is a short sale, they tend to believe the "normal" sale property should be valued the same as the short sale.  This creates a very distorted perception of the value of property.  It's important to remember that real estate pricing in general has two primary components:  the property itself and the motivation of the seller.  Distress, whether it's of the property or of the seller's financial situation, places downward pressure on pricing.
  • Due to the fact that banks have, for many years now, been encouraging people, even those who originally had significant down-payments on their homes, to use their homes as "cash stations", borrowing from their perceived equity to buy cars, take trips, do home improvements, send their kids to college, the reality is that many homeowners, perhaps even most homeowners, have more than one mortgage or lien on their home.  In the case of short sales, that means there is likely more than one lender who must approve the short sale.  If you ever consider placing an offer on a short sale property, the very first question you should ask is "how many lenders are involved in this short sale?"  If the answer is more than one, be aware that the deck is stacked significantly against any sale reaching the closing table!
  • Because of the typical time frame of the short sale transaction where it is not uncommon for the transaction to take from 90 to 180 days to get from contract to closing table, if the buyer needs to secure a loan to purchase the property, they are unable to lock in their mortgage rate until the seller's lender/lenders approve the sale, making it much more difficult to know how much their eventual monthly payment will be.
  • Because of the uncertainly of timing, buyers who are pressed to make a move by a certain date, and who are not prepared to make a double-move, are not good candidates for short sales.
  • It's not uncommon for buyers to miss out on really great buys that are "non-distressed" properties while waiting for that short sale to get approved by a seller's lender/lenders.

Certainly there are other pitfalls to be wary of when considering making an offer on a short sale.  Take a look at our short sale info for buyers and short sale info for sellers here on this site.  Buyers who choose to venture into that arena should do so only with eyes wide open.  The better informed they are, the more facts they have in their arsenal, the better armed they will be to NOT be among those who come up short in the end!

In a Buyers Market How Much of a Discount Should I Get?

In a Buyers Market How Much of a Discount Should I Get?

In a Buyers Market How Much of a Discount Should I Get?

It's human nature, I guess.  In many parts of the country stories abound about the great deals buyers are getting, so when it's your turn to find a home, you expect to get a deal, too, right?  There's no doubt that qualified buyers are gold right now, which, of course, gives them leverage when they're shopping for a home...and they know it!

Let me ask you a question, though:  How do you define "deal"?  When you go to the department store and find an outfit you like...it's on a rack with a big sign over it saying "20% Off", does it make you feel good?  What if you found out that the price of that outfit had been raised by 25% the previous week.  Now how good does that "20% off" feel?

When buyers are looking for houses, of course they begin by looking at a variety of homes in their price range to get an idea of how much their dollar will get them.  But the same thing happens over and over:  when the buyer finds a home they've fallen in love with, they want a "deal".  Frankly, this market is offering up some really nice homes at great prices (even many that are not short sales or foreclosures) so it's likely buyers are finding good deals by default.  The notion persists, though, that "deal" translates into "discount off asking price".  Frankly, that notion is very flawed.

Take a look at this scenario, for example. single_story_house2

Seller "A" has a home to sell, and let's assume it has a current market value of $100,000.  It's a cute little 3 bedroom single story home in nice shape and the seller has decided to put his home on the market at $95,000 in hopes of getting it sold soon.  Seller "A" has decided on a strategy to price his property "below market value" in an effort to secure a quick sale by a ready buyer.

There is no question in real estate that motivation is critical!  The more motivated a seller is, the greater the advantage is for the buyer.  

Seller "B" has a virtually identical home to sell...also a cute little 3 bedroom home in nice shape with a current market value of single_story_house$100,000.  This seller, who figures he has "time on his side" and wants to have "room to negotiate" decides to put his home on the market for $115,000.

Buyers are out looking at properties, and Buyer "A" loves the pricing that Seller "A" is offering, and after some negotiations winds up agreeing to asking price...he's agreed to pay $95,000 for that house.  Shortly thereafter, Buyer "B" comes along and places an offer on Seller "B"s house.  After considerable negotiations, Buyer "B" agrees to pay $102,000...more than 11% discount off asking price!

Let me ask you a simple question:  Which buyer got the best "deal"...the buyer who paid ASKING PRICE for his home, or the buyer who got more than an 11% DISCOUNT off the asking price?

The bottom line here is that the amount of the discount off an asking price (if there even is any discount) is irrelevant!   It may sound better when you talk to your friends and can say "I got the seller down 11%" or "I got him down $10,000", or whatever.  But is that what really matters?  What constitutes a "deal" is how much below an item's value you paid, not how much below it's asking price!

What makes a deal a deal is not the amount a buyer is able to get the seller to discount from their asking price.  What makes it a deal is how the "market value" of a home compares to what a buyer actually pays.  Paying the full price of $95,000 for a home valued at $100,000 sounds like a deal to me!  Tell me what you think?  Have you negotiated a purchase or sale recently?  I'd love to hear your thoughts!!!

I Know You Want to Sell Your Home, BUT……

I Know You Want to Sell Your Home, BUT……

I Know You Want to Sell Your Home, BUT……

It used to be so easy (well, easy might not really be the right word, but at the very least it used to make a lot more sense!!  If you owned a home and decided to move...to upgrade, or downsize, or relocate, or whatever you planned to do after selling, the process, though not really simple, was generally pretty manageable.  You'd do so basic due diligence to find out the current market value of your home, decide how you preferred to handle the sale, perhaps interviewed one or more agents, did a basic overview of the market for the type of home you'd like to move TO and make sure you were financially qualified...and then you'd just DO IT!

In today's somewhat precarious real estate market, though, what used to be considered "due diligence" falls substantially short of the level of research necessary before taking that leap of faith.  In many areas around the country, and certainly here in the Chicago area suburbs, values of properties have dropped, in some cases substantially (though perhaps not quite as substantially as some buyers seem to think!).  Today, it's simply more important than ever to really understand the market as it pertains to your own situation because there's the very real possibility that the local market might not necessarily bear what you believe your home to be worth.

So, that being said, what steps are important to take before putting your home on the market? housing_market

  • First and foremost, be very clear on exactly what you currently owe on your home.  That doesn't mean just your "first mortgage".  What are all the liens on your home?  That includes first and second (or more) mortgages, home equity loan/s, home equity line/s of credit, any outstanding judgments and absolutely anything else that translates a debt for which your home was used as collateral
  • Have a thorough CMA (Comparative Market Analysis) prepared on your home by a qualified, experienced Realtor you trust.  They should provide you with extensive details on comparable properties to yours including their original prices, their asking prices when sold, their final sales price, how long they were on the market, what adjustments would be appropriate reflecting the differences between their home and yours.  If there are any available, they should also provide you with interior photos of those properties and any details regarding room sizes and locations, property included, etc.  In addition, the agent should provide you with comparable listings of homes that are currently on the market (which would, if you listed your home, be your competition), as well as those that have gone off the market unsold, including as much details and as many photos as possible.  You need as clear an idea as possible of the marketplace in your area.
  • In examining your competition and recent sales, determine whether those properties were "normal" sales, foreclosures, pre-foreclosures, or short sales.  It used to be that, if your property would be a normal sale and there was a foreclosure in your neighborhood or nearby market, the foreclosure would simply be "acknowledged" in your CMA, but no real weight would have been put on its pricing because it was a "distressed" sale and not really representative of the market as a whole.  However, in many areas and price ranges, those "distressed" properties (or owners) now represent a significant portion of the marketplace.  In other words, distressed properties may well not be exceptions to the market...they may actually BE the current market.  Even if your home is not a distressed sale, when all or most of your competition IS, you must price your home accordingly if you realistically expect to get it sold.

Here is where consumer understanding of the real estate industry and the realities of how things work can get a bit sticky.  While "professional standards" requires that agents perform always in the best interests of their "clients", remember that an agent preparing and presenting a CMA is not your "agent" when doing so unless you have already firmly established that they are...preferably in writing.  Why do I make that point?  Think of this way.  In real estate terms, preparing and presenting a CMA is generally a form of "job application".  That entire process is what agents use to get their foot in the door, to get to know you and your priories, to let you get to know them and how they work.  In many cases, perhaps even most, consumers make their decision as to which agent to eventually hire based, not necessarily on who they believe to be the most diligent or professional, but on who gave them the best "price" for their home.  Many agents, as a result, are often "overly optimistic" about the market, presenting a potential seller with a less than realistic impression of the market in the hopes of securing a listing agreement with them.  Remember, generally, agents receive no compensation unless and until they have a closed transaction.  Most agents are not paid for those hours of work in preparing and presenting that CMA for you.  That being the case, it's human nature for them to want you to want to sell...and, better yet, to want to sell and hire them as your agent.  This presents a bit of a catch 22:  If the picture an agent paints of the current market is too distasteful, a prospective seller may decide not to move at all...in which case the agent has invested all that time, effort, and expertise for which they've received, in most cases, not one penny; however, if the picture is too optimistic, the seller may have very unrealistic expectations and may be make additional plans than can either cost them financially or emotionally, or both, and the agent, if they have secured the "listing" in the process, now has a client who is likely destined for frustration and disappointment. 

One other option might be to hire a fee appraiser, but it's important to remember that appraisers do something entirely different than what a Realtor does.  In basic terms, an appraiser interprets historical information...what recent comparable properties have sold for in the past, and apply that information to determine what they believe is the "current" value of a property.  A Realtor's task is to combine historical information and current information (the properties currently for sale and those currently under contract, but not yet closed) and interpret that information with a future prospective...in other words, to give their clients an idea as to what price a particularly property will likely command in the current marketplace. 

OK, let's assume that you've utilized the services of one or more professional Real Estate agents and gotten a fairly clear picture of the current market.  Here are some additional steps you might want to take:

  • This step is CRITICAL:  Using the data from the CMA's you've had prepared, have the agent provide you with an Estimate of Net Proceeds (commonly known as a Net Sheet) which estimates how much you would likely walk away from the closing table with if you were to sell your home.  This begins with an estimated selling price, and deducts all of your likely expenses, including, but not limited to, title charges, prorated real estate taxes (remember, if you're an Illinois seller, taxes are paid in arrears so at closing you'll need to come up with the difference between the amount your lender, if you've been escrowing taxes, has in your tax escrow account and the amount required to bring your up through the date of closing), recording fees, escrow fees, tax certification, release of lien fee(s), brokerage fee, attorney's fee, survey, flood certification, interest proration through the day of closing, etc. 
  • Determine, based on your likely selling price and the estimate of expenses you'll incur (don't forget to estimate moving expenses as well), whether you are in a financial position to sell at this time...will you likely be able to leave the closing table with money available, or, if you were to sell now, would you need to consider doing so as a short sale?
  • Assuming you will have funds available after closing, combine those funds with other monies you currently have available and decide how much of that you would want to apply toward a downpayment on a future property (if your decision to move also includes the purchase of a new property).  With that information in had, get one or more lender "preapprovals".  Your Realtor can most likely recommend a few excellent loan officers who can give you a pretty clear idea as to how much of a mortgage you "qualify" for, and under what specific terms.  Please note that in the recent past, lender underwriting guidelines have changed considerably, so it's important that you stay current as to how those changes might impact your qualifications to purchase, provided you need a mortgage to do so.  Based on a lender preapproval, coupled with your available down-payment, you now have an idea of your maximum purchasing price range
  • Armed with your financial qualifications, determine the specifics of where you'd want to go if you did in fact sell your home.  Think about things like price range (now that you know your "maximum" price range, determine how much you are actually "comfortable" spending each month.  I routinely get two numbers from my buyer clients...the amount they are pre-approved to buy, and the amount they are comfortable spending.  Our search always begins with their "comfort" number), communities you'd like to live in, type of home (is it attached or detached housing), what style of home are you interested in, how many bedrooms and baths do you need, what about a basement, or lot size, etc. 
  • Create for yourself two lists:  the first is your "must haves", the other is your "wish list".  Your initial focus should be on your "must haves". 
  • Have your agent, if your market place has it available, set up your "must have" search parameters in their local MLS (Multiple Listing Service) system so you can receive copies of listings meeting your criteria.  Review those listings online, and choose a few that you feel are the closest match to what you would like to buy.  Remember, at this point you are simply trying to get a feel for whether or not the type of home you would want to move to if you sold your current home is readily available in the price range you are qualified and prepared to spend.  You are not really looking to "find" that specific home at this point, unless you are in a position to purchase that next home without having to sell your current home.
  • Schedule an appointment with your agent to actually go out and visit several homes in person. 

Once all that is done, you'll find you're in a better position to determine whether you really want to (or are able to) sell your home.  The more preparation you do prior to making a decision to move, the better position you will be in to make that move with confidence.