The three Ps -
Put a sign in the yard
Put it on the MLS
Pray that it sells!
It's always interested me we have been transacting real estate in the same way since we had big books, full of pictures. Sure, now we have websites, use social media, take videos - however, the basics have not changed.
Listing a home
Seller asks neighbors and friends and finds an agent.
Agent goes to meet seller.
Agent and seller discuss price. CMAs may be shared.
Agent presents marketing pitch.
Seller signs documents.
Agent puts home on MLS and calls seller every week.
I am often in violent agreement with my accusers, who say I have a 'slant' on the way I look at things sometimes. This is where I wish a smiley face on a blog wasn't tacky. Here's some of my issues with how we list homes:
A Comparable Market Analysis, or CMA, runs the gamut between a simple button push on the MLS, to agents who are good with numbers developing an accurate price, and everything in between.
Most real estate schools have little or no training in pricing a home. It's not generally part of the curriculum, which concentrates on the huge amount of real estate law that needs to be understood, along with local real estate traditions and regulations.
Barriers to entry in real estate are relatively low - agents have extreme differences in education, experience, and ability.
Sellers often set the price - what they want from a home, and newer, less-experienced agents, or those that want a listing will take the listing. Most of us did that in the beginning, before we realized we were doing such a disservice to the sellers. The buyers don't know whether they are facing a home that is priced by an experienced agent or someone who is brand new, or whether it's just what the seller wants. Real estate's the only profession you can think of where someone will list their $300,000 asset with someone next door and fresh in real estate so they can get some experience. I'm all for experience; leading people and watching them 'blossom' is why I exist, I just think we shouldn't train at the expense of our customer's biggest asset.
And then comes the offer...
Sellers are rightly excited to learn that an offer is coming in. In old-fashioned or 99% of real estate, now the fun starts:
The buyers conduct an inspection. This results in an inspection report, on average 30 pages long, with an average of 15-20 items on there that 'need repair'. These are often small items, and the inspector is doing their job by pointing them out.
The buyers are now in the re-negotiation phase with the seller. I teach maximizing profits for sellers programs to agents in all areas, and they say that the average amount requested from the seller is $2,000, or they may ask the seller to fix the items.
The seller now has limited time to fix. Limited time often drives up the price to fix. Imagine a roofer coming in and being told they need to fix something in the next 7 days.
Buying and selling homes is emotional, and arguments over a crooked door often destroys a contract.
Meanwhile, the bank has ordered the appraisal. In a time of sellers having higher expectations, sometimes the home does not appraise. Negotiation round 2!
Around one third of homes under contract do not go to closing, because of the inspection and appraisal hurdles. Sometimes the hurdle is a real one, sometimes one of the buyers uses the reasoning that they wanted 'house B' anyways.
Certified Pre-Owned or CPO homes is a different approach to buying and selling homes. The basic premise:
There are two main hurdles in a real estate transaction, that cause around one third to fail in old-fashioned real estate
The Inspection. Solution? Have the inspection upfront. Yes, it may cost $250-$400. Once your home is under contract, buyers will often not come and view your home. When your home is under contract, the majority of buyers will conduct an inspection. On average, they will ask for $2,000 to get items fixed. Or, they will ask you to get them fixed and you will have a limited time to do it.
The Appraisal. Solution? Have it conducted by an appraiser upfront, ask for a marketing appraisal, and attach it to the MLS.
CPO saves a BOAT load of stress! The best way to show you how it works is to show a fictional example of a transaction. Consider an example of the monetary difference:
An example of an old-fashioned real estate transaction without CPO
- Home for sale $250,000
- Buyer makes an offer at $240,000 which is accepted
- Buyer has inspection, and asks for $2,000 towards repairs, which seller agrees
- Home does not appraise by $1,500, and sellers agree to $1,500 decrease in contract price
All other costs aside, Seller's side now equates to:
$10,000 less than sale price
$2,000 towards 'repairs'
$1,500 reduction in price
Here's an example of how CPO can help.
- Buyer Agent puts in a lowball offer in on the home as requested by the buyers.
- Listing Agent mentions that there is an appraisal available and shares with buyer agent.
- Buyer Agent shares with buyers, who did not know it existed, and agree to get closer to asking price.
- Buyers conduct inspection, and find a couple of things on there, as most have already been fixed. Buyer Agent tells buyers how clean the inspection is. No credit is requested
The sellers and buyers experience much less stress. Problems with home are already addressed. The buyers have more peace of mind that the home is offered at the true marketable value.
If you want to find an agent trained in CPO in your market, maximize your home's value here