Real Estate Information

Whether market conditions favor buyers or sellers, a few simple negotiating tips can give you an advantage and reduce the stress of selling your home.

SECRET #1: Don't Be Emotional

I know that's easier said than done, but the party that remains calm throughout the negotiation has a serious advantage. Make sure you are that person! Many sellers choose to be insulted by offers they feel are too low. Be insulted by the buyers who DIDN'T make an offer on your beautiful home, not the ones who did. No matter the price, they have paid you a compliment by writing an offer. Accept it for what it is and begin the negotiation.

SECRET #2: Don't Judge the Buyer by their Offer

They've read lots of articles and received advice from many well-meaning friends, and by now they feel obligated to start low and see what they can get. Let them. Their next move will tell you whether they are for real, but for now, you don't have enough to go on. Your first counteroffer, however, will tell THEM whether YOU are for real. This is your most important move, because your goal is to find out what the buyer does next. If you counter extremely high to make up for their extremely low offer, the most likely outcome is they walk away and the negotiation is finished before it starts.

SECRET #3: Make a Strategic Counteroffer

Remember, your goal here is to get the buyer to respond--hopefully with a signature of acceptance, but even if they counter again, you need to see what they are made of. Your counteroffer should be in the ballpark of the market value of your home. Forget where the buyer started. Forget where you started with your asking price. Stay focused on reaching an agreement in the neighborhood of true market value. If they come up $2,000 you can tell them to have a nice life and you don't have to reply again. If they show you a significant move toward a fair price, then you can play your next card and hopefully you reach agreement. After two rounds, everyone starts to forget Secret #1 and get emotional.

SECRET #4: Answer a Concession with a Concession 

Now you are in escrow, and the buyer is still negotiating. Some of that is necessary, but if you give a concession, it's a good idea to ask for something in return. It's a little like a hostage negotiation at this point. They ask for a pizza, you get a hostage released. You get the idea. If they know you will always ask them for a return concession of some sort, it tends to discourage them from asking for more.

Stay focused on the goal, which is to sell your home, and remember these 4 secrets. A good agent on your side can be your best friend.

A home is one of the largest and most emotional purchases most of us make in our lives. Here are a few key points to keep in mind as you negotiate for your Dream Home.

Negotiating Begins Long Before the Offer is Written

Every interaction between buyers, sellers and their agents has a bearing on the outcome of an attempted home purchase. Every question the listing agent or seller answers can give you a clue as to their motivation. (It's good to remember this whether you are asking or answering the questions.)

Let the Seller See that you Love Their Home

Playing hard-to-get is good strategy when buying a car or furniture, but not when buying someone's home. Often, one of a home seller's secret goals is for the new buyer to love their home as much as they do. The seller and the listing agent are evaluating the likelihood that the buyer will remain committed all the way to a successful closing. Go ahead and let some passion show.

Make it Personal

I remember selling a home which received 8 offers. The first buyer to see the home was the first to write an offer-on the first day the home was on the market. The following day, they had flowers delivered to the seller.

The seller selected them over the other buyers who wrote offers, two of which actually offered a higher sale price. It wasn't just the flowers, of course, but the level of excitement and commitment which convinced the sellers that these people would still be there at the closing date. (The flowers didn't hurt.) At the same time, one of the agents who wrote an offer came across as arrogant to the seller. Choose your agent wisely.

Here is a Bonus Tip, as long as we're talking about multiple offers: On the subject of multiple offers, many buyers refuse to participate. They fear getting emotionally involved and not being able to stop offering more money. Remember that sometimes in a multiple offer situation, the other buyers are less qualified and perhaps have offered a price less than what you would be happy to pay. If you like the property enough to have wanted to make an offer, consider making the offer but set a firm limit on price and stop when you get there. If you have the discipline not to get involved at all, trust yourself to stop when you want to. If you don't get the house, you're no worse off than if you didn't try, but what if you actually get the house for an acceptable price?

There is a Time to Stop Negotiating

The final secret is one that the expert negotiator will have a difficult time with.  Whether this home purchase is for your personal residence or an investment, if it is the ideal property to buy, remember that saving $10,000 on a home you don't get doesn't really save you anything. Ask yourself whether this home will be remembered as the one that got away, and understand that $5,000 or $10,000 measured against the personal enjoyment of your family or any future gain from owning this particular property may not truly matter. Sometimes you win by getting the house.

These 4 tips will give you a nice advantage in your next negotiation. Next week we have Negotiating Tips for Sellers. That should give you an advantage, also!

Pricing is an art, not a science, Part II

If the key to optimum exposure for a property is pricing it correctly, then choosing the right range is an essential element of the process. With a fixed price, a seller can make only two mistakes: asking too much or too little. Both are costly.

Pricing within a range is easier for several reasons. First, remember that value is in the eye of the beholder. An exceptional view or an extensive remodel are two variables which can add a great deal of value to a property, but how much, exactly? The seller and the buyer will undoubtedly have vastly differing opinions. On the other end of the spectrum, how much discount should be considered for a location backing to a freeway or the existence of deferred maintenance? A wide range will include the property's true value, even if the seller doesn't know quite what it is!

Key #1: Select a Wide Range.

A wide range means more buyers will find it in their searches. Pushing the boundaries in both directions allows both parties to dream a little before accepting the reality of "market value". Agreements are more difficult to achieve in a transitioning market because buyers and sellers both overestimate their position and negotiating power.

Home prices have declined in recent times more than most sellers are willing to admit, yet less than most buyers are willing to admit. The wide range allows both sides to come to the table with their opinions of value intact, and agreement is much easier to reach with both parties at the table! Good range guidelines are 10% in either direction. Example: $575,000- $635,000.

Key #2: Position the Target Price in the Upper Half of the Range.

One of the keys in selecting the range is not to be predictable or obvious with the sales price goal. Often, a buyer who is sincere about a property will pay more than the seller would have selected as a fixed price, yet never realize it. In a competitive marketplace, sellers using a fixed asking price are forced to price their homes below the competition if they need to sell, even though the property may offer more value than the other available homes. If they choose a price higher than the competition--even if the value is supportable, buyers may never see it or consider it.

The high end of the range should allow for fair compensation for the amenities, and the low end should reflect the value of homes on the lower end of the scale. Often, a range will encompass the pricing throughout the neighborhood, and the free enterprise system will result in a sale price that honors both parties.

Key # 3. Stay the Course. 

With any concept that is slightly unfamiliar, the natural tendency is to give up if success is not immediate. A home sale today is a process that has a beginning, and middle and an end. A proper pricing strategy should result in showing activity, some "second looks", and then written offers. If any of the three do not occur, a change may be in order, and a range is twice as easy to correct than a fixed price. The top number can be tweaked, as can the bottom number, or both! Stick with the concept and fine-tune, and you will achieve the success you deserve.

Pricing is an art, not a science. One of the keys to successful pricing is to understand that the value or market appeal of a property varies constantly. Supply and demand, interest rates and loan programs available, property condition and location all contribute to the value of a particular property. Add to that the exposure a property receives and the negotiating skill of the agents involved, and the result is a wide range of possible sale prices.

So if value is a moving target, how can we ever expect to find it? The answer lies in the fact that a home is not worth one specific price. Rather, there is always a range of value within which the buyer and seller each have a "fair" result.

In the correct price range, buyers will find the property and are encouraged to make whatever offer they feel is fair. The seller has the option to accept it or make a counteroffer.

Buyers benefit by having access to properties which they might not even notice if a fixed asking price was higher--or lower--than the range buyers are searching. For example, if a buyer searches 600-650K, a home priced at 599,900 essentially doesn't exist--and it's a property that might be perfect for them.

Sellers like the idea that more buyers will know about their home, but they are afraid they'll receive "tons of" low offers. In a marketplace where a multitude of homes fail to sell, receiving offers is a good thing, and buyers will also make low offers on fixed-price properties!

The point is that a sale can't occur if an offer isn't made. When a buyer accepts the seller's invitation to offer within the range, a buyer who wants the home and a seller who wants to sell will often reach agreement, and do so in a less adversarial manner than if the buyer lowballed a fixed asking price.

Range Pricing, used correctly, dramatically reduces market time due to the increased exposure the property receives, and can make the difference in some cases between a property selling or not selling at all. Everyone wins!

Whatever you may hear or believe about the San Diego real estate market, homes are selling! Then again, some homes are sitting! So what causes some to sell and others to sit? Here are 5 Keys to a Successful Home Sale:

1.       Exposure. Being in the right place at the right time isn't the goal these days. Being enough places enough times is what it takes. With 87% of buyers using the internet extensively in their home searches, exposure on the sites where buyers shop is essential. Our listings are featured on the sites shown on this chart, which results in an abundance of qualified appointments.

2.       Price the property in a range. Studies show that properties offered within a range of value, as opposed to a fixed price, receive 5 times the number of hits online, whether by agents searching for a home in the Multiple Listing Service, or by buyers searching on their own. Before the buyer can consider buying a home, they have to find it in their search. Correct use of range pricing is even more essential than choosing the optimum fixed price. There are 3 key steps to follow when selecting a range, which will be covered in next week's blog post.

3.       Staging. "Selling condition" is different than "living condition". If pricing is the reason buyers look at a home, staging is the reason they make an offer. Accentuating the positive features and amenities of a home can either cause a home to sell faster or for a higher price. Following the recommendations of a skilled agent or professional stager almost always accomplishes both.

4.       Negotiating. Many people think negotiating begins when the offer is received. The truth is that much of the positioning has been done prior to the offer being written. With every telephone or email communication between the listing agent and a prospective buyer or their agent, the seller's negotiating power is either strengthened or weakened. The savvy negotiator realizes that every question posed could be intended to expose the seller's motivation or vulnerabilities. It is essential to evaluate the negotiating expertise of the agent you select.

5.       Problem solving. After 25 years of selling residential real estate, we still encounter some unique circumstance in every transaction. A real estate sale is entirely more complicated than most people realize, and even many agents underestimate the long-term consequences which can occur. Certainly, some challenges are common to many sales, some are foreseeable, and most are avoidable. The first step in navigating challenges is not to panic. Listen to the entire situation and ask questions. A skilled agent can evaluate and communicate all available options to both sides of the transaction. In many cases, both sides want to solve the problem, and if they get past the initial panic, solutions can often be found.

Success is not an accident. Attention to these five keys and the selection of an experienced Realtor can turn the odds to your favor, no matter what the market conditions.<-->

After 20 years with another firm, we have just joined Windermere Exclusive Properties. Steve Rodgers, the former president and CEO of our prior company, recently signed on as a partner and the new president of Windermere Exclusive Properties in San Diego.  Steve has such energy, innovative ideas and integrity that my husband and I were actually the first agents to join Windermere under Steve! Real estate is about people, not houses, and Steve treats everyone with respect and integrity. That's an organization we want to be a part of and to contribute all that we've learned over the past 25 years in real estate. Whatever challenges face the real estate industry in Southern California, 2009 will be an exciting year and I know we'll be using innovative marketing to sell properties and bring customer service to a new high.

Recent data suggest real estate market pessimism may be overblown. Even economist Karl Case, father of the S&P/Case Shiller Home Price Index, admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. An example: Home prices actually increased slightly in eight of 20 Case Shiller markets between March and April.

Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve. 

Transaction-related indices may be skewed at present by a far larger than normal share of subprime-derived default and distress sales. In the San Francisco Bay Area, for example, more expensive homes (those priced over $721,548) have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.

Even new housing construction numbers suggest an improvement, according to Case. He notes that housing starts, which fell to 975,000 in April from 2.27 million in January 2006, have fallen by similar percentages three times during the last 35 years. Case observes that each previous time this has occurred the market has staged a surprising upturn within a quarter. Only a slide into a recession would temper his optimism about the potential for a similar recurrence of this trend.

To read the full story, please click here:
http://online.barrons.com/article/SB121581623724947273.html?mod=googlenews_barrons&page=sp

A Wall Street Journal article dated 5/6/08 states that “The Housing Crisis is Over”

While dire headlines suggest that the housing crisis is intensifying, Cyril Moulle-Berteaux thinks April 2008 will mark the bottom of the U.S. housing market. He isn’t saying that prices will return to that of 2005, when the downturn began, but that the trend is no longer getting worse. He reminds us that the current housing bust is nearly 3 years old. He says the factor that will stop the decline is what started the bust: affordability.

“During the 1990s and early 2000s it took 19% of average monthly income to service a confirming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of the monthly income.  For first-time buyers, it went from 29% of income to 37%. That just proved to be too much.”

“Since then, house prices have fallen 10-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time buyer,  to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s.”

SPEAKING OF WHICH, do you know anyone who wishes they had bought some rental properties in the early 90’s? With hindsight, it’s pretty easy to say we all should have bought several back then (& a house in La Jolla for $30,000 40 years ago), but could we be in the same type market right now and look back with some regret that we didn’t take advantage of some tremendous bargains right now? And there are definitely some incredible opportunities available right now. We’re beginning to see investors get back into the game, which is also a positive sign.  I can tell you one thing from 24 years of experience in selling real estate: whatever trend the market happens to be in at the moment always feels like it’s never going to end! And it always does. (I guess that’s two things.)

Back to the WSJ article, he makes several other strong points. “In the past 5 major housing market corrections, every time home sales bottomed, the pace of house-price declines halved within one or two months. Home inventories peaked at 598,000 in July 2006, and stand at 482,000 homes at the end of March. This inventory is equivalent to 11 months of supply, a 25-year high, but it is similar to 1974, 1982, and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.”

He predicts inventories will drop even faster to 400,000—or seven months of supply—by the end of 2008. “This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.”

I know everyone thinks agents have an unrealistically rosy outlook on the market, but the author’s predictions find their basis in historical data, so I think it makes good sense! Let’s hope he’s right about everything!

There is so much misinformation being reported in the various media regarding the condition of the San Diego housing market, I should be used to it by now.

But last Thursday, Channel 10 news reported something so blatently misleading, I replayed it 3 times to be sure I was hearing it right! Bill Griffith reported that “In the County, the median price for a home was $370,000 last month. That’s 25% less than that same house went for in June last year.”

Which house was that, Bill? The median is possibly the most useless and overused statistic relating to the value of homes. The definition of median is “the middle value in a set of statistical values that are arranged in ascending or descending order”.  In a market where home values are APPRECIATING, the median price could easily still fall, meaning only that a greater number of low-priced homes were selling in the current time period, but not necessarily that those homes were selling for a lower price than a year earlier.

How basic is this concept!? And how meaningful is this number, really? Not very! As I rant about it to my colleagues and clients, I’m hearing that this same irresponsible and inaccurate statement was reported in pretty much all of the media last week. It’s no wonder the public in general is so confused! 

To make things more confusing, realize that the media reports CLOSED sales, when the best possible indicator of what is actually happening in the market is OPENINGS.  Those are the current, up-to-the-minute, real life agreements that are being reached by buyers and sellers.

In the actual trenches, we’re seeing shorter market times and, in many instances, multiple offers again. Two of the signs of a recovery are shorter market times and the absorption rate being reduced. Both of those conditions are happening right now! Please see a post on this blog referencing a recent Wall Street Journal article which confirms this.

We were at a going-away party for some friends over the weekend, and I heard two highly disturbing things within 10 minutes—both from intelligent, informed people, which really concerned me!

One person is selling her house as a short sale, and she said she was staying out of the day-to-day negotiations and leaving things up to her financial advisor and the bank to work things out. I asked her about her relationship with the “financial advisor”, because there are creeps and scam artists descending upon homeowners in default from every direction. She assured me that she knew him from before her troubles with her home began and she is sure he is on the level. Then I asked if she’s paid him any upfront money. She admitted “a little bit”.

RED FLAG: to negotiate loan terms in any respect in California, a real estate license is required, and a licensee is prohibited from accepting upfront fees. I have heard a dozen stories this year alone about people who are paying fees to people who promise to solve their short sale or foreclosure problems. Some people had paid thousands of dollars to these con artists, over several installments, never receiving any results in return.

Less than 10 minutes later, we were talking with the friends who are moving to Orange County with the intention to rent a home. When we asked if they’ve found a rental yet, our friend replied that he has located one after looking through hundreds of listings posted on Craigslist.

Most of us have heard about the scams taking place on Craigslist, many of them having to do with real estate. A couple of months ago, I got a call from someone inquiring about one of our listings that had just closed escrow earlier that day. He was incredulous that we had closed escrow on the property, and when I asked why this was so surprising to him, he said he was about to put a deposit down to rent it! He had spoken with the “agent” several times and I’m not sure how he found me, but we were both glad he did!

When our friend noticed my reaction to his mention of finding a rental on Craigslist, he assured me that he was dealing with an agent, so everything was on the up-and-up. I’d like to believe that’s always true, but that’s another story. My question to him is, “How do you know you’re dealing with an agent?”

I guess I thought that stories of such con artists were common knowledge and people weren’t falling for these anymore, and maybe both of these people are dealing with someone trustworthy, but I realized it might be a good thing to raise some awareness of unscrupulous predators trying to “help” someone with their real estate needs. Please be careful out there!