Thoughts Ideas and Giggles

When setting a listing price for a home, accurate information and evaluation of that information is critical.  The nuances of the neighborhood, knowledge of the comparable properties, current issues facing homeowners and buyers all come into play when setting a market value of a property.  Realtorscarry on a thorough discussion with their sellers, explaining all of the factors that affect their home's value.  The discussion can take the tact of why the property is worth more than the sellers thought, but more often than not, the Realtor is explaining why it isn't valued at the same amount that the sellers thought.  Of course, there is an emotional tie for the sellers...fond memories and endearing features of the property that add value for the present homeowners, but are simply a perk for a buyer.  So, after long deliberation, the Realtor and property owners come to agreement on an acceptable listing price.

However, does the Realtor have the same discussion on the seller's expectations after the property goes on the market?  For the Realtor, an ideal situation would be the property selling in a reasonable amount of time at very close to asking price.  From a seller's perspective, receiving an offer too quickly and at asking price translates into not asking enough for the property.  When the property is listed, it is critical to include this conversation.  If we do our evaluation correctly, and market the home properly, the property should sell quickly and close to, if not at, asking price.  The sellers should not be surprised by an early offer - rather they should congratulate themselves for hiring a Realtor that was professional, knowledgeable and thorough enough to do exactly what the sellers required of them. 

I received a call this morning from a prospective seller. I had already previewed her house, learned her situation and told her I would meet with her again to discuss value and marketing.  The home is truly unique...a beautiful small Victorian in an area where there are no other Victorians.  It has a separate rental unit.  To get to the additional bath and laundry room, you must go outside and back into the lower level.

In our discussion this morning I learned much of her expectations, agents reactions and follow-ups and where the two did not meet.  She had met with a minimum of 5 agents that I am aware of.  Here were some of her words:

"Some agents are so lazy...they didn't call me back."
"One agent set  price by asking me what I owed...then figured the value from there."
"Agents would not tell me what I should list it for and then what they thought it would sell for."
"One agent doesn't even know the area."
"Four of the agents came within $25,000 of the same value."
"I am not sure I am going to sell the house."
"The agent who sold the house next door sold it for way too little."

Now, all agents reading these comments, I am sure, are shaking their heads at a few of her comments.  Some were valid complaints and others were lack of knowledge of the market or unrealistic. During our conversation, it became very clear to me that I wasn't the right agent for her.  I had told her at our first meeting that I was not as familiar with Victorians as some other agents.  During our conversation, I learned how important this understanding was to her.  For this reason, I told her that while I could educate myself regarding Victorians, I felt I would not be the right Realtor for her and encouraged her to interview 2 agents that I thought would serve her needs well (one in our office and one in another brokerages office).

My point in this is that this seller is fairly typical in many respects.  She trusts neighbors opinions of value more than her Realtor, she was looking for some absolutes in an uncertain market and she is looking for a Realtor who will tell her what she wants to hear rather than what she needs to hear.  

She will need an intricate conversation regarding expectations and the present market.  A Realtor worth hiring is not going to promise an ultimate sales price.  She will need to see comparables that are realistic comparisons to her property.  She will need to believe that the Realtor knows the area and how to market such a unique property. Finally, she will need a Realtor who she feels she can truly trust...the ultimate goal of any relationship between client and Realtor.

A new energy efficient law goes into affect on January 1st of 2010.  Air conditioning manufacturers will be required to produce only air conditioning units that use a new R-410A Freon.  The existing R-22 Freon will be phased out and by 2020, will be discontinued completely.

Here is the hiccup...units using R-410A Freon will not be compatible with units presently using R-22 because R-410A requires wider piping. After 2020, anytime a unit needs new freon, if it is not compatible with the R-410A freon, it will have to be replaced, along with any lines in walls. 

Starting next year, air conditioning repairs might start getting expensive...2020, it will be guaranteed.

The value of a Realtor is most apparent when asked to place a market value on a property.  There is no other aspect of real estate that requires as much research, knowledge and continual attention paid to the housing inventory.  If sellers question why they should pay a Realtor instead of selling their home themselves, setting the correct market value is one of the most important reasons.  The National Association of Realtors has researched the value of a Realtor and have found that sellers, on average, will realize 16% more for their homes by using a Realtor.  I believe that a good portion of this percentage is the correct pricing of the property.

A qualified Realtor will spend a good amount of their time viewing properties within the areas they specialize.  A Realtor should know every property...it's idiosyncrasies, features, and challenges.  Simply reading the information on a computer printout, even with photos, will not take into account awkward floor plans, odors, cleanliness or the surrounding neighborhood.

Some neighborhoods are simpler than others.  In a "cookie-cutter" neighborhood, where there are a few floorplans and all were built within a short period of time, a Realtor should be able to come within several thousand dollars of the final selling price.  In older neighborhoods where houses have been altered, added on to, where their condition could be original to the date they were built or completely remodeled last year, two houses built at the same time with similar square footage could have a market value that varies $100,000 or more.

Another challenge of placing a market value on a property is the present economy.  For example, I specialize in the Land Park area of Sacramento.  The heart of Land Park is made up of upper end properties.  In completing a market value of a home I am listing, there are no comparable properties that have sold recently.  Also, there are no pending sales that are comparable.  Since properties are selling tens of thousands below the asking price, I certainly can't take active properties into account. In this instance, I have to rely on my knowledge of the area and what I believe a property will ultimately sell for.  I will make adjustments for properties that have sold, even though none of them come close to the features of my listing. After working this neighborhood for over a decade, I will have a "sense" of where this home should be priced.

In the end, the buyer will set the value when they offer a contract that is negotiated to a satisfactory conclusion for all parties.  The Realtors job is to get that offer to the table.

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