As I wrote in Part 1, “I think of selling your house as a six part process: 1.) knowing the local real estate market, 2.) figuring out the FMV and determining a realistic sales price, 3.) developing an effective advertising plan, 4.) negotiating diplomatically but firmly to arrive at a price that pushes your buyer as far as they are willing to go, 5.) drafting the legal contracts as well as drafting unambiguous language that gets the property sold without legal problems, and 6.) avoiding the many traps for the unwary.”

Today’s Coverage: 2.) Figuring out the FMV and determining a realistic sales price.

The single most important step in the process of successfully selling your home is coming up with a true FMV (fair market value). Price your house wrong on the market, and it may get stale, and either take much longer to sell at a lower price, or not sell at all this year.

A Realtor can get a beautiful CMA (Comparative Market Analysis) from the MLS (Multiple Listing Service). If you’re not a member of the MLS, you won’t have access to all that data, so a FSBO (For-Sale-By-Owner) will have to resort to what are probably less accurate and more labor intensive methods to do a CMA.

I have a strong conviction about arriving at the listing price, whether a FSBO or listed with a Realtor. I believe it must be an accurate FMV. An experienced Realtor using the MLS can arrive at an accurate FMV, but it takes hard work to make the necessary adjustments up and down for the comparables to arrive at the best FMV for your home. Because it is so hard for a FSBO to do this accurately without a lot of training and a current data base, I recommend hiring a licensed appraiser and paying him for what is the equivalent of a bank appraisal. It is extremely effective to show a prospective Buyer how you arrived at the asking price. They can’t really argue with it. It is well documented, has color pictures of the comps, includes all the amenities and the values, and has an authoritative bottom line number.

This same appraisal is typically good for six months and probably can be used by your buyer with their own bank. While some appraisals take weeks to get done, your appraisal is already done and the Buyer can take it to the bank. What a great way to reduce unnecessary delays, especially with VA loans. The appraisal will cost $400, more or less, but just tell the Buyers that while you have done them a favor by getting it done in advance, you expect to be reimbursed at closing as it is normally their cost anyway. By the way, some special types of HUD loans or VA loans may require a bank appointed appraiser of their own choosing, but your appraisal still has all the benefit of accurate pricing to market and sell your home.

I recently listed a home that had previously been listed for six months with another broker with no activity whatsoever. I sold it in about 30 days after listing, and I would attribute this success to effective marketing AND the right listing price. The listing price was $25,000 below a current bank appraisal, and I made it clear in the marketing that price was already negotiated and firm.

Wrong pricing can be devestating. I noticed in my MLS that a 2.5 acre lot with a mountain view sold this past month for $139,000. What is interesting is that the original listing price was $239,000. Wow! What a discount! It would seem the original price was grotesquely over FMV by $100,000. Guessing what the FMV is on your property is just plain dumb. Don’t do it. Pricing is not science, but neither is it throwing dice. Admittedly there is a subjective aspect, but there is a great deal of solid mathematics involved, too. You have to know how to do the math.

It may be obvious, but another great thing you accomplish by getting the appraisal done in advance is to reduce the offer/counteroffer/counteroffer exchange. Explain that the appraisal eliminates the uncertainty for them about what the FMV of the house is, eliminates the need for the games that Buyers and Sellers often play without an appraisal, both trying to take advantage of the other. This is very effective!

Courtesy Sequim & Port Angeles Real Estate, LLC
Chuck Marunde, J.D. Owner/Broker/Realtor

I think of selling your house as a six part process: 1.) knowing the local real estate market, 2.) figuring out the FMV and determining a realistic sales price, 3.) developing an effective advertising plan, 4.) negotiating diplomatically but firmly to arrive at a price that pushes your buyer as far as they are willing to go, 5.) drafting the legal contracts as well as drafting unambiguous language that gets the property sold without legal problems, and 6.) avoiding the many traps for the unwary.

Today’s Coverage: 1.) Knowing the local real estate market.

Buyers sometimes come from outside our area, and if they are from an area where real estate is priced substantially higher, they might over pay for a property. The reality is that buyers are getting very well educated these days, and they are learning to negotiate hard. The Internet has become a very powerful tool educating both buyers and sellers, evidenced by you reading this.

Buyers are able to view many homes on the Internet and compare features and prices. By the time a buyer looks at your home, they have looked at hundreds of homes on the Internet, and physically viewed a dozen or more homes in your market. The better you know the market, the better you will be prepared to negotiate the sale.

Knowing the market involves knowing several critical components to getting your house sold. It will be helpful to know:

1. the fair market values of comparable houses;
2. the differences between those comps and your house in great detail;
3. how and why you have adjusted the comp prices to arrive at your price;
4. the shortcomings or negatives of your home–objectively;
5. considering all of this, how your home looks on the market to prospective buyers;
6. how to stage your home;
7. the market timing or the “when” of selling your home.

WHEN you put your home on the market is a very important decision. First, the market might be in a correction mode, so it could be the worst time. Second, the season or time of the year can be disadvantageous. Third, annual events often create the best and the not-so-good times to put a house on the market, like school starting at the end of August. There are many things that effect timing decisions. You will want to be aware of these, because wrong timing can mean the house does not sell within a reasonable period of time, or it could mean you take a substantial cut on the price. Ouch!

You would also benefit from having a written comprehensive plan. Do you know what you are going to do, and do you know when you are going to do it between now and closing? Chaos is not in your best interest when it comes to selling your home with so much money at stake. Write a good and thorough plan, including the contact information of key professionals you will involve, such as the title company, the escrow officer, inspector, loan officer, and so on. It’s what you don’t know that can come back to bite you. It has been said that we learn best by making mistakes, but it would be a disaster if you had to loose a lot of your money just to learn something about selling real estate. It is the intention of this series to help you avoid that kind of nightmare and to successfully sell your own home. If after studying everything you can get your hands on, you decide your want a Realtor, that is still your option, but at least you would be making a fully informed decision.

Realize that the success of a FSBO is not so much in doing something extraordinarily good: the key is not making any major mistakes. Kind of sounds like a military career, doesn’t it? It means covering all the bases, and not falling into traps for the unwary. This is why a comprehensive plan is so important. It is your road map to success. Without the map, you may not end up at closing with the net proceeds you hoped to get. And then who wants to close a transaction, and later get sued because your paperwork opens you to legal liability.

Courtesy Sequim & Port Angeles Real Estate, LLC
Chuck Marunde, J.D. Owner/Broker/Realtor

In my experience, whenever the DOM (days on market) exceed 90 days, and especially when the DOM approaches 200, the first question everyone focuses on is the price. “Oh, it must be priced too high. Let’s drop it and try to get some attention that way.”

An overpriced listing is like death to a serious home seller, but sometimes the reason a home hasn’t sold has nothing to do with the current price. Elsewhere, I’ve written about the danger of overpricing, and that should be a consideration, but there is a huge factor that may be far more important in “getting attention” from prospective buyers.

How well is your home being marketed? Is your marketing plan reaching buyers (wherever they may be) in this price range and for your area and for the floor plan and features of your home? If your marketing is ineffective, the price is not why your home has not sold. It’s because buyers are not even aware of your home.

Anyone who reads my blog articles knows that one of my pet peeves is ineffective marketing of homes. So many FSBO’s and so many practicing real estate agents think that simply putting a house in the MLS and in some local newspaper ads is all there is to this marketing business. Some think they have the secret key, because they’ve placed a few haphazard ads on the Internet. There’s so much more to marketing and placement. There’s so much more to knowing how to reach prospects on the Internet.

Why does a marketing expert like Jay Abraham get paid as much as $1 million dollars to draft one letter for major retailers? Because they can make an extra $200 million dollars in sales. Well, why not save all that money and simply pay a Boeing engineer to write a letter, or a retired sporting goods store owner, or a waitress? Because they don’t know how. Period. It doesn’t matter if they think they know, they don’t. That’s why Jay Abraham can charge so much. Because he produces results.

A homeowner may think they know about marketing. A real estate agent might present themselves as an expert who can sell someones’s home. If they are wrong and don’t know, who pays the price? The homeowner who is stuck with a house that hasn’t sold. A Boeing engineer may be very smart about engineering, a retired sporting goods store owner may have been very successful in his business, and a waitress may be phenomenal, but are they marketing experts in selling their own homes in this market? Probably not. I’m sure they would admit that. [They might say, "I just want to give it a try." Red flag. Maybe I'll write about how listings go stale once they're overpriced, and no one comes back.]

I recently listed an incredible home with an unbelievable view of International waters. It was listed by another agent, but nothing happened for six months. So my client asked me, “Do I need to reduce the price.” My answer was a probing question, “Was your house effectively marketed to your potential buyers?” His answer was a quick, “No.” He knew it wasn’t. My response, “Then we don’t know if we need to reduce the price yet. First we market, then we adjust price if those buyers are telling us the price is too high.”

If you had a home listed at $425,000, but it was not effectively being exposed to prospective buyers, you could drop the price to $400,000, and still you would have no activity, except tire kickers. You could drop the price 6 months later to $387,000, and still you would have no offers. How much money are you willing to lose until you actually sell it to someone who is just looking for a steal. It isn’t always about price.

Selling your home is effective marketing plus a reasonable listing price. Effective marketing is not for the inexperienced. The difference between good marketing and poor marketing is 60 DOM or 324 DOM. It gets even better than that. The house that is on the market for a long time before it sells will also get a lesser price than the same house sold in 60 days with good marketing.

In today’s real estate market, effective marketing is more important than ever. Either you, as the homeowner, must become an expert in marketing in all its facets if you are to sell your home in a reasonable period of time for the highest price, or you should be darn sure your Realtor is a true expert. Do you know how to discern the difference between a Realtor who is and who is not? [Hint: just because their lips are moving doesn't mean they are saying something that will help you sell your home.]

If you’re selling your home soon, be careful. It’s dangerous out there. There are many Traps for the Unwary, and a poor marketing plan is one of those traps.