Myth Stakes: Furniture is Negotiable

Furniture is NOT negotiable.  Furniture is for selling your house.

This is a myth that really drives me up the wall because I see so many great people self -destruct their sale over the “furniture”.  Yes, I intentionally used quotation marks on “furniture”.

As long as you own your house furniture is for sleeping, sitting, storing and living on.  Everyone recognizes it is your furniture; your taste and they really don’t care if it fits, works, and is beautiful or crummy.  It is yours and yours alone.  Do with it as you wish nobody cares.

Furniture is like your car.  The minute you buy it and put it in your house it depreciates significantly.  Like your car it is intensely personal.

The moment you decide to sell the “furniture” becomes of paramount importance.  There are several key points about the “furniture” you must understand if you are going to have a sale at maximum value.

• The furniture MUST enhance the sale of the house.
• The furniture can NOT be ok.
• The furniture can NOT be a liability.
• Just because you love it does not mean anyone will love it.
• If it is not helping the situation it is definitely hurting the situation
• Less is always more.
• Often an empty room or house shows better than one filled with “furniture”.
• Your house or even a room is NOT a storage place for everything you own.
• The more personal your taste and décor the lower your chances of attracting a buyer.
• Don’t give the buyer the burden of giving the furniture away.
• The furniture is not a negotiable item.

The moment you decide to sell your furniture has one purpose and only one purpose.  It must enhance the sale of your house at the highest possible price in the shortest possible time.  Anything else means the furniture is a liability to you.  No matter how much you love the furniture it is a liability.

Why do you think there are so many design your home shows on television?  It is because the vast majority of sellers fail to sell their houses because of the design problems.  Design problems is TV talk for old tired furniture, too much furniture, too personal a style or taste, too functional and totally uninspiring.

I remember once listening to a seller say “I always wanted to live in a barn.”  Well guess what she succeeded, the house looked like an old barn filled with “furniture”.  What was so amazing to me was her complete lack of understanding why her house did not sell.

Being gentle I asked, “how many people she knew had a dream of living in a barn”.  Her answer was “just me”.  Finally, she understood.  She threw out 98% of the “furniture” invested in a few pieces that enhanced the property, painted, de personalized and created WOW and sold shortly thereafter for top dollar.

Furniture MUST create the WOW factor.  As soon as the front door is opened there must be a WOW moment.  The buyer must be anxious and excited to go inside and see if this is his and her paradise.  Anything less than a WOW moment and everyone is wasting their time and you are losing money.

Wow factors lead to top dollar easy to negotiate offers happy sellers and buyers.  No WOW no deal or tough deal.  Why?  Because the buyer is settling for less than what they want and nobody spends $100,000 or $5,000,000 to get less than what they want.

Less is almost always more.  We all accumulate things.  Many of these things, “furniture” are individually lovely and collectively over powering.  The key to proper staging of a house is to make the buyer excited about living in the house.  The buyers have to see their family and friends in the house.  If it is too filled with furniture they cannot see their house because of your “furniture forest”.

The entire house must WOW.  If you have several rooms that are great and you pile all the excess furniture into the garage or basement or another room you have killed the goose laying the golden egg.  The furniture in every room MUST create a WOW.

You are not doing yourself or the buyer a favor by leaving non- WOW furniture.  What you are doing is turning off a prospect, ruining a potential sale, creating an opportunity to negotiate over who is going to give away or haul off the “furniture”, you are negotiating from a weak position where your choices will be lower your price and or lose the deal.  This is not a good strategy.

Invest a few dollars in paint and cleaning up.  Stage your house to increase the WOW that will lead to a sale and top dollar.  Make your house their home!  Reduce your time on market by creating value and excitement AND you will get your property sold.

Did you learn how to get top dollar?

Are you ready to stage your house?

Would you like some free staging ideas?

Will the Real Reality Please Stand Up?

Do you remember the game show What’s My Line?  It was one of the earliest and most successful TV shows.  A panel asked questions of three guests and had to determine who the real person, the one telling the truth was.

Each guest began by saying I am the real Tom Smith and then gave a few clues to the panel.  The two guests who were not Tom Smith were allowed to mislead the panel while Tom had to tell the truth.

It was always fun and entertaining.  Most of the time the panel did not guess the real person, the truthful person.  The other guests were amazingly skilled at telling a lie that seemed to be the Truth.  At the end of the Q and A the moderator always said, “Will the Real Tom Smith please stand up”.

It was always interesting to see how invested the panelists could be in their wrong answer.  Often it was clear that this was not fun to the panelist.  They “knew” they were right.  They were so sure they had guessed the truth.

We all create our own realities our own systems and structures that allow us to function in our own world and the greater world.  99.9% of the time we even share the same or similar realities with friends, family, associates and just people in general.  This is a great safety mechanism that keeps all of us functioning harmoniously most of the time.

One of the places where the system really breaks down is in the world of real estate.  Often it is ego that convinces us as a seller or buyer that because it is “mine” it is intrinsically more valuable.

Sometimes it is just wishful thinking that causes us to create a reality that is at odds with the market place.  Sometimes we bend the facts to suit our wishes.  Often we just do not want to face the reality of the market place because its truth is so uncomfortable, frustrating, disappointing or just plain negative.

Staying in our “own reality” is very comforting on the surface.  Yet deep down there is a little voice that keeps on saying this is not working out.  You are going down a road away from your goals instead of the road that goes to your goals.  The louder this little voice has to shout in order to be heard the more shocking the awakening will be.

Nobody likes to take a loss or make a mistake.  Nobody likes to lose money or lose a deal.  Anna and I have helped more than 4,000 people buy and sell property for many years.  The more people we helped the more we learned that all of us, each and everyone of us have bought or sold real estate and it did not always work out as anticipated.

The fact that things happen is not a mark of Cain; it is a reflection that life is a changing situation.  Sometimes things work out better than expected, most of the time they work out as expected but via a different path.

The issue is dramatic in real estate because far too many people believe their “own reality” for far too long a time. This almost always has a very negative consequence.

Some years ago a neighbor asked us to list his house.  We refused saying it was 25% above the market.  He of course gave us the same long list of reason he had given himself to justify his position.  We gently told him we wished him well and hoped he was right and we were wrong.  Well the market changed due to the stock market crashing.

After the property had devalued by 25% the neighbor told us he was ready to accept “our” price.  We said it was not “our” price it was a market price.  Since the market was now 25% lower, he had to reduce his price and additional 25%.

You guessed it.  He refused to do so.  Finally when he was under tremendous financial pressure, he priced the house to market and we listed and sold it in about 45 days.  He still made a profit and he left over $100,000 on the table by not pricing to market originally.

This is not just a seller’s problem.  We have seen buyers make the very same mistakes.  They always “know” the market will come down, or “the seller will take a lot less, or the neighborhood is not worth it.

I can remember in 1990 showing a client looking to buy a $1,000,000 home.  As we went past several homes worth 1,500,000 to $2,000,000, he repeatedly would point to a home and say, I could have bought that one in 1985 for $400,000 or that one in ‘86 for $700,000.

I asked him why he did not buy as these home had at least doubled in value in 5-6 years.  He answered, “They were too expensive, they were not worth the money.”  I was dumb founded.  His truth, his reality had costs him hundreds of thousands of dollars.

The next day I suggested he get another realtor because I recognized his reality would never let him buy.  Today those homes are worth between $3,000,000 and $5,000,000.  To my knowledge he never bought, he literally spent a few days each year with a realtor pointing out the houses he “could have bought”.

My mom would say he was smart smart dumb.  He had made a lot of money; he was a multimillionaire back when that meant real money.  Yet when it came to real estate he could not permit himself to see what the market reality was.  He lived in his world with his truth and it cost him dearly financial and emotionally as he never bought his dream home.  Often we just are not as smart as we think we are.

Be a learner.  Be open to what others are saying.  Ask questions.  Be a critical thinker.  Push the thinking of others and be sure to have them push your thinking.  Push your own thinking.  Listen for the wisdom of what is being said.

Those are the actions that will serve you well in the world of real estate.  Those are the actions that will make you financially and emotionally successful in real estate.

What Is Wrong With This Picture?

Remember as a kid playing what is wrong with this picture or find the mistakes in this picture?  It was an activity designed to sharpen your focus, teach you to concentrate, teach you to be observant, teach you that details are important and similar skills.

I loved the game.  The skills I learned led me to a professional career in real estate first as a lawyer, builder, developer and agent, as a teacher coach and motivator and mentor to realtors on a global scale.

These endeavors require focus, attention to detail, listening attentiveness, communication skills, the ability to see both the large picture and the details and to keep your eye on the goal.

I want to share a true story with you.  After you read the next few paragraphs stop and think of all the things that you believe are wrong with this picture.  Make a list if you like.  Then continue reading and I will share what I believe is wrong in the picture.

This particular picture was painted by one of the most successful realtors in America.   The same picture has happened to us many times.  It will keep on happening so long as people insist their “reality” is the only reality and the “market” exists for others but not for them.

The phone rings:

Caller, I am selling my house in Chicago and moving to your neighborhood.

Realtor, great, how can I help?

Caller, you can’t I am doing this myself.  I have bought and sold three times.  I know what I am doing.

Realtor, why call me?

Caller, send me all your 4 bed 3 bath single-family homes.

Realtor, Ok, what price range, what neighborhood?

Caller, everything, I am not telling you anything about me as I don’t want to be bothered by you.

Realtor, well how about giving me your name?

Caller, I told you I do not want to be bothered by you. Here is my email and after this I am blocking your emails.

Realtor, well have you sold your current home?  I can coordinate with your agent.

Caller, I am selling it myself and saving the commission. I told you I know what I am doing.

Realtor, What if you like one of the homes I send to you?

Caller, I will call and represent myself and tell the seller that the commission must come off the agreed upon price.

Realtor, if you like a house I send you will you be a cash buyer or a financing contingent buyer?

Caller, That is my business, not yours.

Realtor, Well what is your timetable?

Caller, my Chicago home has only been on the market 9 months, I have plenty of time.

Realtor, May I ask if you have had offers?

Caller, none but I am waiting for that special buyer, you only need one you know.

Realtor, Well have you had the house appraised?  Are you listed at fair market value?

Caller, Appraisers are in cahoots with the banks and the tax office.  I know what my house is worth. It is on the main street, thousands of cars go by each day, and someone will see my sign and pay me my price.

Realtor, Why don’t you call me when your house is under contract and a closing date has been set?  I will be glad to send you my listings then.

Caller, But I want them now!

Realtor, I understand, but the average time on market for my listings is 4 months because my sellers are truly realistic.  They understand the importance of pricing to the fair market value of the property.

Caller, Are you saying you are not going to send me what I want?

Realtor, No.  I am saying that my current listings will probably be sold before you have a contract and are ready to buy.

Caller, I cannot believe you are not going to cooperate with me and do, as I demand.

Realtor, I will be happy to help you when you are ready to buy.  Thank you very much.

This scenario happens every day many times a day.  It has happened to us probably at least once a month, every month for twenty years.

When you read the dialogue it is tragically and sadly funny.  I hope that it borders on the absurd for you.  If it doesn’t you need to reread it and think hard about What is Wrong With This Picture.  I assure you I have toned this down.

Answers to:

What is Wrong With This Picture?

• Attitude is everything.  The caller wants help and is using an approach of I am going to beat you into helping me.  Did it work for you?   I hope not.  It rarely works for anyone, yet it is popular.
• The caller is trapped in his own reality.
• The caller makes it clear he has no need to learn because he already knows everything.
• By selling himself he probably will under value his house by 10-15% and take twice as long to sell as when using a good realtor.
• Just as he expects to “save” the commission when buying, when people make offers to for sale by owners, they take the entire commission off the offer price.
• Over 90% of for sale by owners never sell even in extremely “hot” markets.
• A busy street is a liability to value not an asset to selling.  Nobody has ever asked us or any realtor to find them a house on a very busy street, or next to the interstate ramp, or the train tracks.
• Determining market value is a complex combination of science and skill.
• When you represent yourself in any endeavor you are working counter to Abraham Lincoln’s wisdom, that when you are your own lawyer, you have a fool as a client and a fool as a lawyer.  We have bought many properties for ourselves over the years.  We always use a realtor even when we “found” the property ourselves.  Does a surgeon operate on himself or herself?
• Appraisers may be highly skilled and can be very useful to owners, realtors and buyers.  While the data is historical rather than of the moment it can be very useful especially in stable markets.  A good appraiser may be very useful especially if the property is unique.
• Do not delude yourself into thinking repeating something 2,3 or even 20 times means mastery.  In life there are those who are life long learners, people who grow wiser daily.  They are at the postgraduate level of life’s school.  There are also people stuck in repeating 1st grade of life’s school over and over.

There are more, many more things wrong with this picture.  I hope by this point you saw the major ones and learned while enjoying this foray into another’s “Reality”.

How many things wrong did you find in the picture?

What are the three most important things you learned from this “reality”?

Did you realize that sellers make the same reality errors as buyers?

Myth Stake: You Have Many Chances to Make a Great First Impression

This is one of my favorite Myth stakes.  It is epidemic among sellers.  There is a Myth stake variation that sends the same message with a twist; My Things are Great Yours Are Junk.

These Myth stakes costs sellers hundreds of billions of dollars a year because they result in a “NO Sale”.

Sellers you get only 1 chance to make a great first impression!  Let me repeat myself, sellers you get only 1 chance to make a great first impression.

Your first impression does not begin with “curb appeal”.  It begins way before the potential buyer comes to you home.  Your first impression begins with the valuation you and your realtor place on the property.

Buyers are very smart.  You must honor and respect their intelligence.  You cannot make assumptions based on your ego.  If you think your property is better than every other property just because it is yours, you will not be receiving a great big check.

Buyers know the market better than most agents!  Yes, that is true simply ask any really good agent and they will agree with me.  Buyers know the market because they have been going in and out of many homes.  Each time they see property they immediately categorize it as the best, or not in the running.  Buyers are not interested in 2nd or 3rd place.  There is only 1st place and no place.

The first evaluation and prioritization the buyer makes is to compare the valuation to the features and benefits of the property as described in the marketing.  Even if the value is great a poor marketing presentation will turn off the buyer.  The greatest marketing in the world will never sell an over valued property.

You and your agent have valued the property to market and your agent has created great marketing pieces.  The property is still not ready to be shown to buyers because your agent has not attracted buyers for you.  Marketing pieces, the web, websites, brochures, magazines, are tools to attract buyers.  They are the means and not the ends.

Your agent needs an effective marketing plan so the tools can produce a result.  The most effective campaign is for the agent to have a huge database of people who are interested in owning on Bonaire.  In all areas of marketing, focused marketing always produces better results than unfocused marketing.  In marketing a laser is a much better tool than a shotgun.

Now you are ready for the buyer to visit the property.  You must, absolutely must, have the property “standing tall” “spit shinned” looking “more beautiful than a bride”.  It must be perfect, anything less is a wasted effort.

The property must cause them to fall in love.  The buyers must be able to see themselves living in the house.  They must be able to see it as their home not your house and especially not your home.

I know you love your family photos on the walls, the children’s first hand prints on the walls, all the knick-knacks and happy times memorabilia.  We all love to surround ourselves with these happy positive images of our family.

The buyer is not interested in your family!  The buyer is looking at the property to buy for his family.  If you want to make a sale you must make the home the buyer’s home not yours!  Think about it, you have already decided to sell and move on to your new dream.  So pack your memories and memorabilia and get them out of sight.  Make the home ready for its new owner.

Everyone has his or her own taste and style.  Everyone does not like the same things.  Anything and everything that is unique should be changed to something more neutral and acceptable to the largest number of potential buyers.

Do not fool yourself that the buyer desires to paint over your walls, redo your tiles and floors, change your cabinets and vanities, and install new fixtures and more.  If you are thinking in those terms you must value the property accordingly, and that means lower.  If a lot of work needs to be done it means a much lower asking price and probably lots of price negotiation.

Only “sharks” people who buy distressed properties are looking to redo, rebuild, repaint etc.  Believe me you definitely do not want to be selling to a “shark”.

Make sure everything is in perfect operating order.  If the buyer puts on an electric switch and the light does not come on three thoughts arise immediately.  The seller thinks the bulb is burned out.  The agent thinks, I hope it is only a burned out bulb.  The buyer thinks the house has major electrical problems lets go to the next house on the list.  This is human nature.  You would react exactly the same way in that situation.

You are asking the buyer to pay you a lot of money.  Money does not fall from trees, as my mom would say.  You have to work hard and be smart to get paid.  My dad says the rich are rich because they are smart.  Smart people do not waste their money, they are careful with it.  You must respect and honor them.

Every step in the selling process is a Moment of Truth.  Every step has a Myth stake associated with it.  These Myth stakes are defensive mechanisms that some people use to justify failure.  Failure is unacceptable to us.  It should be unacceptable to you.  Together we will do what has to be done to make your sale happen.

What is your reaction to these thoughts?

Are you interested in selling or buying on Bonaire?

Do you realize Myth stakes are worldwide?

It is another fantastic day here.  We are having a ball.  Three people have called in the last day about listing their property on Bonaire.  As soon as the paperwork is done we will tell you all about them.

Rose Colored Glasses and Real Estate

I love rose- colored glasses.  They make everything so bright and clear and shinny.  Rose- colored glasses have no place in real estate.

Rose- colored glasses cause more financial hardship and pain to their wearers than anything else in real estate!

I am an optimist by nature in fact I am a super optimist.  I am a firm believer that our attitude sets our altitude.  Anna and I have spoken and written on this theme world- wide.  We have done numerous professional training sessions to motivate sales forces.  Are we going in a new direction?  No we are not.

Rose-colored glasses are a symbol of hope.  We strongly believe that you must always have hope.  At the same time if all you have is hope there is a very strong chance your dreams will never materialize.

If you want to be successful in your real estate dreams you must combine and balance hope with a huge dose of looking reality squarely in the eye.

At the end of the Vietnam War the American government did extensive interviews with all the returning prisoners of war.  Most countries do the same and the results are always the same, regardless of the war, the countries involved, the background of the prisoners, their treatment.

The big question is why do some soldiers survive and others perish?

The answer always is, those who have hope and only hope are almost certain to be overwhelmed by disappointment as their captivity continues.  Those who have hope combined with a healthy dose of reality almost always survive.

Prisoners who said, I know I will eventually be released, I do not know when but I will be released, lived.  Those that said I hope I will be released next Christmas, Easter, and July 4th etc. were constantly disappointed as their hopes were shattered.  They did not do as well.

Many buyers and sellers do not look reality squarely in the eye.  Sellers must learn that buyers have lots and lots of choices.  We live in a world economy especially when it comes to vacation homes.

The buyer is looking at a multitude of choices on a global scale.  If you don’t think so just turn on your television and see the dozens of shows promoting vacation homes.  In the past three weeks I have seen on Bonaire TV shows promoting vacation homes in Spain, Italy, Majorca, Sicily, Greece, Turkey, Israel, Morocco, Kenya and South Africa, Vietnam, Thailand, The Philippines, Bali, Australia, Pacific Oceana, New Zealand, Nicaragua, Costa Rica, Mexico, Belize and Chile

If I can see so many shows on Bonaire TV about so many resorts in so many countries, think how huge the competitive market is. These shows were about tropical oriented living.  Golf and all inclusive hotel resorts are additional competitive markets.

Sellers you have to give the buyer many good reasons to buy your property.  The reasons have to be qualitative and quantitative.  You must offer the highest quality, the highest value and lots of it.

Buyers also must look reality squarely in the eye.  Sellers are not going to tie up their property while you look for a mortgage.  You must have cash in hand or financing in place before you begin to look for your vacation home.  You must be a cash buyer as far as the seller is concerned.

Buyers you must be prepared to pay fair market value.  If you do not offer fair market value someone else will.  You are not the only buyer in the world.  Just as the seller must be prepared to accept fair market value you must be ready to pay it.

Buyers do not expect that the seller will sell for less than fair market value because that is what you would like.  There is no deal, no sale, until seller and buyer feel comfortable that each is getting and giving fair market value.

Taking off your rose-colored glasses means putting your ego aside and focusing on the goal of buying and selling real estate.  You cannot get hung up over the lamp being included or excluded.  There are ways that a great realtor will handle those issues so they do not even become issues.

In real estate as in life, don’t let the small stuff ruin your life.  Deal with it and go on.  This realism is crucial to buying and selling real estate.

If you are realistic you will be prepared and if you are prepared you will be successful in your endeavors.

If you are realistic in real estate you will be successful in real estate.

Did this clarify matters for you?

Did this answer important questions for you?

How can we help you?

It is a cool and partly cloudy day, really nice.  I have to take some property photos and help with sending out our newsletter and magazine.  The weekend is also supposed to be beautiful and I am planning for time in the garden.  The recent rains are making some many plants bloom.

Join us in a life of abundant health happiness peace and prosperity.

A Moment of Truth

How to Select Your Realtor

This will be the first of a non-sequential series on Moments of Truth.

What is a Moment of Truth?  A Moment of Truth is the instant in which we make a decision or take an action that has the potential for radically altering our life journey.

Moments of Truth occur in all aspects of life.  Many moments are shared by almost all of us.  The first time you say, “I love you” is a Moment of Truth.  “Will you marry me” is another.  “We are going to be parents/or you are going to be a grandparent” are Moments of Truth.

As in astrophysics there is the dark matter negative Moment of Truth such as “I want a divorce”, “What do you mean you are pregnant?!?!”  “I got fired today” is another heavy Moment of Truth.

I mention these examples to get you thinking about MOT you have experienced.  Not every MOT is cataclysmic.

In real estate there are many MOT that do not rise to the level of  “I want a divorce.”  Also in real estate there is a compounding effect of MOT.   In real estate if you make good decisions at your MOT you are going to have an extraordinary result.  If you do not make really good decisions at your MOT you most certainly will have a very negative if not disastrous financial and emotional experience.

These are some of the most common MOT in real estate:

• Deciding to buy or sell
• Defining your specific goals wants and needs
• Determining your timeline
• Defining your “guideposts” so you can measure your progress
• Deciding on your financial comfort level
• Defining a process to select your realtor
• Selecting your realtor
• Defining your mortgage process
• Selecting your mortgage broker/lender
• Understanding your own reality (e.g. If you are all thumbs do not buy a fixer upper.)
• Truly learning and accepting the market
• Knowing when you in the “right” house
• Knowing you have the “right” buyer
• Developing a negotiating strategy and following it
• Negotiating from strength not pounding the table
• Negotiating from a win- win position
• Having a “Know when to walk Plan”
• Having a “Never drop the ball Plan”
• ALWAYS BEING FLEXABLE
• Deciding to enjoy the entire process
• Knowing how to and celebrating the closing

These are the big MOT in real estate.  In any particular transaction one can rise to the top and then be almost unimportant in the next transaction.  It is the people and the process that gives stature to and defines the MOT.

A great realtor has lots and lots of experience and knows these MOT and will prepare you for them.  He or she will educate you and walk you through all of the MOT so you will be well prepared and have an enjoyable experience.  That is why selection of your realtor is one of the most important if not the most important MOT.

There are two types of experience.  One is a measure of time.  The other is a measure of quality.  You want a realtor with twenty years of experience and each transaction adds to and improves his or her skills.  This is a quality realtor.  You do not want one who has been in the business twenty years and is still doing things as if it were his or her 2nd or 3rd or even 5th year.  One truly has 20 years of experience the other has at best 5 years experience repeated 4 times.

If your realtor is a life long learner and has sold thousands of homes and learned from each transaction you have a great realtor and will have a great experience.  If your realtor has been in the business for many years and has not learned and therefore cannot have sold thousands of homes successfully, chances are you will have a less than great experience.

People wisely only want to entrust their finances and emotions to the very best. Realtors who are life long learners attract lots of clients because they learn and grow their skills.

In real estate a realtor’s total number of transactions is a real measure of success.  It is a very short hand way of knowing the skill level of a realtor.

It is very important to select a realtor whom you trust, is trusted in the community, and trusted by your friends.  Trust is the number one trait buyers and sellers want in their realtor.  Make sure you get references.  Talk to those references.  Do your homework.

Educational, professional and academic recognition are another important skill assessment tool.  Ask your realtor about their achievements.  Websites, brochures, mailings are tools that may lead to success.  You want to deal with the very best.  You want to deal with people who know how to use the tools to achieve success.

You pay the same amount for a good realtor as for a bad realtor except in one situation.  That case is when the agent does not bring you to a successful sale or purchase.  You have paid nothing and lost a great deal more!!!  That is a loose- loose situation and is very sad.

If you want the best doctor you know you will pay the highest fees.  Need the best lawyer, open your checkbook.  Faced with a big tax issue be prepared to pay for the best accountant.  In those professions there is a direct link between cost of services and the skill level of the professional.

This is not true in real estate.  No matter what country you are in there is a “range” usually about 3% for each side for realtor services.  The very best and the very worst receive the same payment.  Take your time and get the best, you deserve it.

How has this helped you?

Would you like to learn even more about this topic?

Will you need a realtor soon?

There is much more that can be written on this topic.  If you want to learn more just let me know.  There are more than twenty key indicia to consider when interviewing a realtor.  We would be happy to help you.

It is another great day.

The Perils of Pricing

The Eternal Battle Between Greed and The Fear of Loss

One of the main battlefields of life where the eternal battle between greed and the fear of loss is fought is in real estate.

Greed the seller wants more than the fair market value.  Greed the buyer wants to pay les than the fair market value. Fear of loss by the seller is if I set the price to high I loose the sale.  Buyer if I set the offer to low I loose the purchase.

We accept this battle in the stock market and other financial areas.  It is relatively easy though certainly economically painful to fight the battle in those areas.  It is easier because there is a well-regulated transparent, open market that sets the “market value” of a share of stock, bond or other financial instrument.

If we want to know the value of a share or bond etc., we open our computer make a few keystrokes and we have our answer.  We may not like the answer but it is a perfect answer.  We instantly know what value the world is placing on our asset at any given moment.

In the area of divorce, disposition of estate assets and the sale or purchase of real estate there isn’t any well regulated, transparent open market that we can go to and “learn the true market value” of a property.

In divorce and estate situations it is still relatively easy to determine the fair market value.  Years ago a wise divorce attorney taught me an easy and full proof and fair system for evaluating real estate.

The solution is a variation of a “Mexican Standoff.” One person wrote down what they believed to be the fair market value of the property. The other person had the choice to buy at that figure or to force the other person to buy at that figure.

The parties created their own self-regulating market place.  Write too low a number and the other spouse would of course choose to buy.  Write too high a number and the other spouse would make you buy them out at the high figure.  There are several variations of the Mexican Standoff, and they all work.

Estates are also relatively easy because the battle is usually not between the heirs, in which case I used the Mexican standoff, but between the estate and the IRS or taxing authority.  This dispute can be resolved using a “battle of the appraisers” approach.

One of the biggest misconceptions in valuations is the role of the real estate appraiser.  The appraiser will always ask the client, “who am I working for and what results do you want”.   The appraiser is not being dishonest.

Appraisal is an art not a science.  The American Appraisal Institute recognizes that a 10% variance in appraisals may be perfectly acceptable.  Imagine on a $1,000,000 property a $100,000 difference would be acceptable.  In a battle of appraisers just hire the best gunslinger in town and you have a win even before the fight really starts.

The battle between greed and the fear of loss really plays out in buying and selling real estate.  The battle often becomes ugly very ugly.  It gets ugly because of two primary facts.

First there is no well regulated, transparent market, either a person(s) or a place you can go to and say with 99% + accuracy tell me the how much I can sell my home for in 30, 60, or 90 days!

Appraisers are always looking at past sales instead of the market today.  Sometimes the past, history, is an indicator of the future most often it is not.  In the extreme markets of the last five years the appraisers have often been wrong.  When the market was skyrocketing up their numbers were to low.  With the market falling their numbers may be unrealistically high.  As markets turn up the numbers will be too low.

I always tell the appraiser we want the “fair market value price” appraisal.  If the property does not sell in 30-90 days at the price you set, you must guarantee to buy the property yourself.  I have been doing that since 1965 and never had an appraiser agree to the guarantee.

If you were manufacturing a product you could get a marketing person to put together a focus group to give their input.  It does not work in real estate because the members of the group are too small in number and not diverse enough in background to truly reflect the buying public.

The second issue which highlights the battle between greed and fear of loss is that buying or selling a home is the most intensely personal thing most of us do other than selecting a spouse.

We all simply have too much emotion and money wrapped up in our home or future home.  Often sellers say to us, “look at my beautiful blue tile, or green wall etc.”  We patiently explain that the general public is not currently buying blue tile or green walls.  The response always is to either denigrate the buyers or to repeat that it is their favorite color.

We encourage pride of ownership but not at the expense of reality.

As a seller or buyer you must move to the world of where the market is when you are “in” the market.  You cannot wonder if you can somehow squeeze another $10,000, $1,000, $100 or even $1.00 out of the other side.

Sellers must always remember that even in very hot markets 50% of listed properties FAIL TO SELL BECAUSE THEY ARE OVERPRICED!  The goal of all sellers is to sell.  You cannot achieve your goal if your property is over priced.  In normal markets 67% of sellers fail to sell because of over pricing.

Greed has triumphed!  Greed has won the battle of having a high asking price and the seller has failed to achieve the goal of selling and moving on.  What a perfect pyrrhic victory.

Buyers make exactly the same mistakes.  “I love this house and I am sure the market is dropping, or I know I can break the seller down”.  My favorite is “why should I buy at this price I know nobody else will offer so much money.”  Right!  The buyers because they usually need a mortgage have a second chance to lose the deal they want.  They “know” rates will go lower, or they disagree with the appraisal that supports buying the house, or they walk away from a responsible inspection even when the seller is willing to make the repairs.

Once the seller puts their home on the market it should become a house to them, an unemotional thing.  Sellers please stay attached to the memories and not to the “thing” being a house.  Get attached to your new home.  Sell this one and buy the next.  That is your plan and you should follow your plan.

Buyers once you find the house you love it should become your home, an emotional thing, a place to make memories.  Don’t lose it by over thinking and analysis, buy it and enjoy it.  Start filling it with happy memories.

Sellers love to set their price on the property.  The price may be driven by their financial needs or their ego.  It makes no difference.  Any price not reflective of the market is doomed to failure before the ink is dry on the listing contract.  Listen to your realtor.  Ask the realtor how they reached their conclusions.  This is serious business treat it responsibly and seriously.

When I ask a seller if he or she would pay the price they want and why, I usually hear silence.  If you can not justify in cold hard logic why the property you love is worth a certain amount, do you really thing any member of the public is going to justify the price for you?

The same is of course perfectly applicable with buyers.  If you cannot logically explain and justify the terms of your offer, do not expect the seller to do it for you.  Talk with and listen to your realtor and learn what the market says about the property’s value.

Another seller’s greed mechanism is the “it only takes one” argument.  The right response is “it only takes one what” (?) a fool!  And by the way, how many “fools” do you know with $500,000 to $4,000,000?

The perils of pricing will be dashed to dust if you get out of emotion and into logic, if you go from ego to learning and listening.  Is it easy? No and it must be done.  It is something you must do if you do not want to be crushed between the boulders of greed and fear of loss.