Tuesday, June 19, 2007

Develop a Buyers Eye

by Osman Parvez
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What' a good strategy to sell your home in a short time for the highest possible price?

Simple. Be sure to price the property for current market conditions and use an experienced agent to get the word out to the widest possible number of buyers.

Over the years, we've found that sellers often want two things that, if not properly managed, may conflict. Most sellers, rightfully want maximum value from the sale of their home. But they usually also want a quick closing. That's where it can sometimes run afoul. Rather than develop an effective marketing strategy by having a local real estate agent research the market carefully and provide an expert opinion of value, they choose to "test the market" with a high asking price. What they don't know is that testing the market has a high probability of creating a stigma about the house that results in a longer sale period. The seller could end up leaving money on the table to attract buyers.

Testing the market may work in rapidly rising markets but in normal (or down) markets, buyers will more than likely ignore your listing if you overprice the home. By the time you realize something is wrong, dozens of potential buyers have walked past your home, never to return. A stigma has developed and those buyers that might have purchased it will probably not be back for a second look, even if you drop the price later.

When the strategy of "testing the market" doesn't result in a quick sale, it usually turns into a "price walk-down" instead. A month or so after initial listing, the seller reduces the price to attract more interest. Meanwhile buyers who see the listing wonders why it's been on the market for so long. High days on market leads potential buyers to think , "Is there something wrong with this house?" Why has it been on the market for so long? It's a common question.

Before you think, "No problem, I'll just refresh my listing with a new contract and reset the days on market," understand that when buyers discover this (and they will) their suspicions will go into overdrive. There are only a couple of good reasons to refresh a listing. Without major and obvious improvement to the property, refreshed listings almost always make the seller look dishonest.

Here's a simple strategy we like to use. Do your homework before listing the property. Get to know the local market intimately. Here's one way you can develop a "buyers eye."

Take a look at the following table:



The image above is a screenshot from a tool I developed with the help several clients. It's designed to help evaluate property in a more objective way. First, usually before we start looking at homes, we sit down to develop a list of criteria important to a buyer(s). Then we discuss the importance of each and apply a weight to the item. Later, as we go through our listing appointments, the buyers have sheets similar to the image above on which to mark their score (on a scale of 1-10) for each home. At the end of the day, the clients have a concise record of their opinion and can compare it against prices.

When you are getting ready to sell your home, have your agent schedule appointments for you to walk through the competition. Put on your "buyer vision." This will help you consider how a potential purchaser of your property might view these other homes. Have your agent determine true days on market for each. When you're done with the competition, don't forget to look at past sales. Obviously you won't be able to walk through sold listings but read the descriptions of the property from listing sheets provided by your agent. Look carefully at photographs for detail.

This is how you can really get to know the market. Taking notes and evaluating the property as objectively as possible will help you when it's time to decide the asking price off your home. When you're ready, look over your notes on how the properties compared. Do the differences justify the prices? Note the higher days on market (real DOM) for the listings that seem overpriced. Although price isn't everything, in a buyers market your home must offer value for the price you're asking.

When you develop your marketing strategy, consider how you can highlight value to buyers. Is the selling point that your house in near Pearl Street? Maybe you can justify your price because you have a better location, older well established trees in the backyard, or a completely remodeled kitchen. Make sure the marketing strategy you develop with your agent communicates the key selling points of your home to the widest pool of potential buyers. Take an afternoon and personally view the competition with your agent before listing your home.

Remember, most buyers are driven by their emotions. After becoming emotionally attached to a house, they will look for non emotional reasons to support their purchase decision. They will consider most homes within a price range from your listing before they make a decision to write an offer and attempt to justify the purchase price of your home. You should do the same before listing your property.

One final point. When you're interviewing agents, watch out for the ones who use unrealistic selling prices to get your business. You will eventually make the decision on what price to ask for your property but the market will ultimately determine the value of your home. Some agents may "high-ball" the value of your home during a listing presentation in order to win your business. Don't fall for it. Choose an agent with the highest level of professionalism, deep understanding of legal issues, strong ethics, who understands and follows the local market, has effective communication skills, and most importantly who is willing to work hard for you.

If you have any comments or questions, please feel free to click the comment link below. You can also reach us at 303.746.6896.

Image: headcase


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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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