SELLERS: 5 Musts for Generating Multiple Offers
Posted under: Market Conditions,
Home Buying,
Home Selling
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June 13, 2012 3:21 PM |
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67 comments
As you might have heard by now, multiple offers are the new black.
Well - kind of; if your own home is on the market or soon to be, it can seem like you break your back to prepare your home and it lags and lags on the market while all the cool kids houses and their sellers sit idly by, making champagne toasts while they are inundated with more offers than they can shake a stick at.Let’s bust one myth: getting multiple offers rarely happens by luck alone. That’s good news for you, as it means that generating multiple offers is more of a science than an art. And that, in turn, means there’s a whole lot you can do to replicate these results with your own home’s listing.
Here are five elements I nearly always see in listings that get multiple offers:
#1. Listed low. As I alluded to last week, homes that get multiple offers are often sold in what industry insiders call an auction atmosphere. If you think back to the last auction you saw on TV or participated in online, you’ll remember this basic element of Auctions 101: the starting price is lower - sometimes quite a bit lower - than the final sale price.
In fact, it’s the low list or starting price that gets people excited about the possibility of scoring a great value, whether they’re bidding on an antique Chinese pug figurine on eBay or on your home. And when it comes to your home, it’s that same, low-price-seeking excitement that will cause many more buyers to show up and view your home than would have come at a higher price point.
In real estate, more showings are an inescapable prerequisite to more offers.
Now - I’m not at all suggesting you give away the farm, just that you price your home from a retailer or auctioneer’s perspective, rather than the all-too-common backwards reasoning to which home sellers so often fall prey. Work with your agent through the comparable sales data - as recent and as comparable as possible - and then do your best to list your home as a slight discount, not at a slight premium, compared to the recent neighborhood sales. That will get buyers’ attention.
#2. Easy to show. Walk a mile with me, if you will, in the shoes of the average home buyer or their agent. Let’s say there are 50 homes on the market which meet your rough specifications in terms of bedrooms, bathrooms, square footage, price range and location. You can narrow it down to your 30 top priorities to see. But you only have time to see 8 today. Now, of those 30 top priority properties, about 15 are short sales or foreclosures and you can get into them anytime you want. And the other 15 are split down the middle - half of them are available to be seen with nothing more than a single phone call. The other half require you to hurdle an arcane obstacle course of phone calls, 24 hour notice requirements, strange hours of availability and more phone calls to get an appointment to see the place.
Which would you go see, and which would get ruled out?
I am not exaggerating one iota when I tell you that your home could be priced well and marketed well, but if you make it too difficult for buyers to get in to see it, the statistical probability is that they will (a) find and choose another home from those that are more easily accessible to view, and/or (b) assume you are not motivated to sell, get irritated and pass on your home as a result.
Want multiple offers? Make sure your home is available to be shown on demand, or as close as possible to that. Inconvenient? Yes. Frustrating? Sometimes. A challenge to keep the place clean at all times? Assuredly. But, my dear reader, no one ever promised you a rose garden; decide what your priorities are and, if you decide that getting top dollar for your home is at the top of that priority list, then also decide to be willing to deal with the inconvenience involved in churning up multiple offers and getting your home sold.
#3: Immaculate look and function.The homes that get multiple offers (outside of the foreclosure arena, anyway), are those with look, feel and function that can be described in one word: covetable. You’re not trying to create a situation in which your home barely edges out the listing down the street in the hearts and minds of your target buyer. If you want multiple offers, what needs to happen is for multiple buyers to fall deeply in love with your home - enough to brave the competition and put their best foot (and top dollar) forward.
Today’s buyers are no dummies. They’ve just lived through the worst real estate recession anyone can remember, and they’re much more frugal that buyers were at the last peak of the market. To boot, mortgage and appraisal guidelines and their own smart sense of frugality prevents them from just hurling dollars at any old place. Accordingly, they are not easily tricked into competing for a home by a slipshod paint job and a few pieces of Pottery Barn furniture.
To generate multiple offers, prepare your home by ensuring it is:
*immaculate from the inside out - basements, garages and crawl spaces included
*decluttered and staged to the nines - including fresh paint, carpet and other things that need replacing
*in fine mettle - make sure things like doors, windows and systems buyers test (e.g., stoves, faucets, heating and air conditioning) are not creaky, wonky, leaky or otherwise dysfunctional - and if you’ve done any major home improvements or replaced any appliances or systems lately, market that fact to show off the move-in readiness of the place.
#4: Just enough market exposure. If you’re home is so lucky as to get an offer the first day or so on the market, count your blessings. But also calculate your opportunity costs: many buyers can’t get out to see homes that quickly - some are unable to house hunt except on the weekends! In my local markets, I’ve seen time and time again that listing agents who are skilled in cultivating multiple offers often plan from the jump to allow the home to be exposed to the market long enough for all qualified and interested buyers to see it and get their offers on the table.
And what’s more, they expressly message the calendar for market exposure, Open Houses and even the offer date and review timeline in the listing, from the very beginning. Here, it’s very common to see a listing come on the market with a calendar of 1-2 Open Houses and an offer date sometime early in the week following the second one. Ask your agent to brief you on the standard practices for market exposure in your local area.
Allowing for ample market exposure - and including the timeline in the listing - lets buyers know that they will be able to get to the property and get their offers considered, and creates some urgency, as well. Smart buyers interested in properties like this will take care to have their agents contact the listing agent as soon as they think they may want to submit an offer, though; this way, if someone makes a so-called ‘pre-emptive’ offer, you’ll get a call from the listing agent and a chance to compete.
#5: Sellers who are willing to revise. f you think most of the tips here are not for you because you’ve already blown your chance to sell for more than asking - think again! A number of times, I’ve witnessed what I call the Sweet Spot Phenomenon, where an overpriced home sits on the market for months with no bites, sometimes even through multiple price reductions. Finally, the seller lowers the price to the ‘sweet spot,’ and it generates multiple offers and sells for more than the final list price.
There are definitely homes whose sellers net more than they expected because they were willing to revise the list price downward in response to market feedback (i.e., no showings, no offers or lowball offers).
If your home’s been lagging on the market, talk with your listing agent about what sort of price reduction strategy is likely to maximize your net sale price. Hint: many more buyers are attracted by chunky reductions or reductions below a common online search price point limit than by tiny, incremental reductions. For example, you might draw more flies buyers, and ultimately more money, with the honey of a price reduction from $499,000 to $474,000 than with a series of small reductions from $499,000 to $479,000, because there is a set of buyers who may be cutting their search off at $475,000 - so a price cut below that point will expose your home to a whole new group of prospects.
Agents/Buyers: What ingredients do you commonly see among homes that sell for more than asking?
P.S. - You should follow Trulia and Tara on Facebook!
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Comments
So true! If you wonder why your home isn't showing take a look at price first.
2)Sending postcards to the neighbors of "WHO DO YOU KNOW"? BEFORE the listing goes up
Exactly the scenario in which I bot my home. It DOES create a sense of urgency.
1) ultra competitive pricing, below market comparables, 2) get maximum people in the door as quickly as possible, usually this means listing in the MLS on a Thursday so that the house is jammed with buyers and their agents on Friday, Sat, Sun, plus an open house, 3) curb appeal is a must 4) make the inside sparkle and use staging when necessary.
It only takes 15 or 20 minutes to go through a home and you will have an idea if it is appropriate for you or not, and a minimal clutter while showing is better than no showing at all. Just saying!
what needs to be done before it is listed & about the time frame for buyers to see the house quickly
then the property sits.
Anyone know who's buried in Grant's tomb?
There is only one MUST for a Seller "That is the Pricing of a Home!
Key to draw educated buyers and to receive multiple offers.
I am located and headquartered in MIDDLE VIILLAGE,NY 11379. There are 10 Realtors just in my area alone of about 15,000 residents. Plenty of Competition, however I do not use Signs or MLS to sell a Home. The complete opposite of my Competitors, including large Franchises offices. I either have the homeowner agree to a fair Asking Price in todays Market, with a selling amount Targeted range price goal, or I do not take the listing. Why give hope to Owners who still have 2009 prices in mind. However, for myself, selling time is 2-6 weeks with the right asking price.
Maybe out of state, it is all different, but in New York you have to be realistic, or the home will sit for a half dozen months or longer. Since I am the most endorsed and recommended Real Estate Broker in all of Queens, New York, I must be doing something right. Just Google my name: JIM TURANO/BROKER (CONFIRM MY STATS) The rest of the Realtors have signs all over and their own agents complaining business is slow. Just taking an overpriced home that an owner dictates to you a price so you can attain a listing is idiotic.
EITHER BE THE PROFESSIONAL YOU ARE SUPPOSED TO BE, TAKE CHARGE AND DO WHAT YOU DO BEST!
Jim Turano/Broker*middle Village* Realtor -Diverse Real Estate
Guess what sellers, there's enough inventory on the market that if a buyer can't see your home, they will buy another they CAN see.
I only wish there were such things as "I told you so" postcards. It would send them to sellers who, after listening to MY listing presentation, list with another agent at 30 or 40K HIGHER, then suffer the price "improvements", linger on the market (chasing it so to speak) only to sell the house 6 months (or more) later at a lower price that they could have gotten IF they had listed at the right price from the start.
You'd think in this real estate climate, when looking at a CMA, sellers would lose the the mindset of " well yes THAT house sold for X, and THAT house sold for X too, but MY house is worth SOOOO much more"..., .BUYERS are so savvy about pricing today. Buyers do, and have always, controlled what fair market value is, even in the boom times a few years back when everything was selling for more than list.
I relisted with FSBO at the same price as the realtors have it listed for, and am presently negotiating with 3 potential buyers now, a feat that the realtors with their wonderful open houses and empty promises have been unable to do.
I totally agree with Jim Turano, but will take it a step further. There are relatively few "professional" sales brokers out there! Whereas every broker has a dozen or so "licenced" agents, with practically no experience. When I was a car salesman, I had a weekly quota to reach, as well as a monthly goal. I always met both, because I didn't sit back and wait for the right person to walk in and buy a car. Real estate goals are really no different, it's a product, and as such needs to be taken to the customer as such. Every office has a customer list, and as such the sales people should be cold calling, making contact, keeping up with changing client needs. The people that need a 2 bedroom today, may just want that extra capability of a 3rd or 4th bedroom in the near future. YOU HAVE TO GET AGRESSIVE!! If not you cheat yourself and the client.
Dan Feigenbaum
Steve
Dropping our price twice at $3,000 each time has done nothing to sell it. Now looking for a new realtor..a female! We live 20 minutes from Charlotte airport in low tax South Carolina..any suggestions?
3 bed 2 bath, 1680 sq ft ranch, 9 years old updated granite in kitchen and wood flooring....what do people want
If its a new home, stop looking at ours and start from scratch........
If you sign a listing agreement with a real estate agent with the low listing price and you get an offer for that price then the agent has fulfilled the terms of the contract and you owe them the full commission whether you accept the offer or not!! For example, an unscrupulous agent could get you to sign a listing agreement at a low listing pricing promising you that this will get you multiple offers over list price to where you and all the other agents feel the home is worth. Then if you get an offer somewhat close to the list or at list, but below market value, they can then force you to either accept it or threaten you with legal action especially if you signed the mediation and arbitration clauses. This sounds implausible but it happened to me and all the lawyers told me that I was well within my rights to excise the cancellation clause in the contract and that since I had not gotten any written offers at list price that I owed the realtor nothing but then they also told me that since I signed the mediation/arbitration clause and the realtor claimed I owed them a commission that I was forced to go through the mediation/arbitration process and it would cost me much, much more to defend myself through mediation and arbitration and even if I won it would cost me a lot to try and get the agent to pay court ordered lawyer fees and thus it would be simpler and less costly to pay "extortion" than to fight for what was right. I am not saying that most realtors are like this. I am saying that you cannot tell just by talking to the realtor. I learned the hard way that you must do a lot of research on real estate agents, search bankruptcy records and local court cases for lawsuits and small claims actions by and against them and if at all possible deal only with those who are recommended by people of upstanding character. In my opinion you should be careful of any realtor who wants you to sign a listing agreement for less than the consensus is of what the house is worth. this approach may get you multiple offers and may get you an offer above list but it can also put you in the situation where you have to accept less than what you want for the house. Also, it is my feel, and I have been told this by multiple realtors, that most buyers in the market now know what has happened in the past 10 years and thus are unlikely to be caught up in a "bidders auction" going significantly over list -- as happened when the market was hot and out of control in the early/mid 2000's. As always, every market is local and unique so you have to determine what is the best approach for your market. Just be aware that when you sign a listing agreement with a realtor and for a lower than market price for your house you potentially open yourself up to unpleasant outcomes. Best wishes.
Tara's advice applies only to highly liquid markets. That is, markets in which a lot of transactions are occuring. That describes few areas of the country at this moment. If you are selling a home in an area in which there is little demand for housing, it is unlikely that any strategy will generate multiple offers.
So, what happens if your strategy backfires, and you get only one offer at the artificially low price you strategically set? Generally speaking, a seller is not required to accept an offer, no matter how good the price and terms. (Many agents mistakenly believe otherwise.)
The greater risk, as Ron noted, is that the listing broker may demand a fee for producing an offer at the list price. The circumstances under which the broker is entitled to be paid will depend upon the written agreement you signed with the broker, so read it carefully before employing this type of strategy.
(Standard disclaimer applies: I am a real estate broker and not a lawyer, so my advice is not legal advice. You'll have to consult a lawyer for that.)
If you don't accept an offer ,even if it is full price, I have always been told that you are under no obligation to an agent or buyer. IF the offer is cash, no contingencies THEN you have an obligation.
That said, I had an experience, while listing my home for sale that disproves the "sweet spot theory". Here's my brief story:
I was informed by my realtor, that my home should be listed at $300k (the bank appraisal value from a recent re-fi). The local realtor said that this was a good price and wanted to list at that appraisal price. She said that this was my sweet spot.
I disagreed. I felt that it was worth $850k (obviously, a huge discrpency). I wasn't willing to take that loss just so she could have a sweet sale in a slow market. While looking for another agent, I listed my home FSBO (for slae by owner) at the higher price. I had constant lookers. But I had moved out of town and the comute to show the property was wearing me down.
I finally found another realtor and we listed the home at a "price range" of $775- 800k.
I sold it quickly at $780k (cash offer). A much better deal for both the realtor and myself, as well as bringing up the value for the entire area AND raising more tax revenue for the city/state!... A win, win, win all around.
Why aren't agents more willng to raise the bar for themselves so they benefit themselves, the seller and ultimately, the entire RE market?
When the market is illiquid, all bets are off.
It's unfortunate, but Investorcindy simply hired a realtor who was either incompetent, unethical, or both. When she replaced that realtor with a better one, things improved markedly.
As with any profession, a certain percentage of real estate agents just aren't good at their jobs. Trulia has some tools to help buyers and sellers make more informed choices. Perhaps Tara will supplement them by writing an artcle on how to recognize the ethical, competent, and professional agents.
I was so sickened by the lack of professionalism I rec'd via the agent that next house will sell FSBO!
@amyc423 - take a look at the previous post for tips for buyers wanting to compete with multiple offers, here: http://www.trulia.com/blog/taranelson/2012/06/buyers_4_secret_ways_to_beat_other_offers
@Michael Kupritz and @S (Steve) - here’s a post I did recently on how to select an agent you’ll be happy with over the long haul: http://www.trulia.com/blog/taranelson/2012/03/how_to_find_an_agent_you_love
@Bobbie Becker - several people answered you, and the precise answer depends on your state and your listing agreement, but you are never obligated to sell your home at a price you don't want to. In fact, if you only get one offer at a given price, the reality is that that may truly be the fair market value of your home - even if you think it might be higher. It is true, though, that under some listing agreements, a full price, cash offer with no contingencies may obligate you to pay a commission, though you can negotiate to change the default terms so that you are only obligated to pay a commission on a transaction that actually closes.
Consider getting some legal advice if you don’t feel you completely understand the terms and implications of your listing agreement – before you sign it and/or before you set the list price of your home.
That said, please read on to my next answer in this comment.
@All – Allow me to clarify the “low listing” issue. I'm not talking about listing your property hundreds of thousands of dollars below what you think its fair market value is, or even about making it the very lowest priced home on your market. I'm talking about listing it at what seems like the low end of the range of comparable supported prices or a slight discount from that – and by that I’m talking about a 2-5% discount - not 40 or 50 or 70%.
Many sellers, @inquiringmind, @Ron, @dennisfan and @bobbiebecker, are okay with taking the risk that their home might sell at 2% below the comparables as a tradeoff for the opportunity to generate multiple offers and the possibility of receiving a premium sale price. And if you are a seller considering listing low, you should be uber-aware of the potential tradeoffs, and should only make that decision with some market data to support the fact that this strategy makes sense in your local market.
***To be crystal clear, my opinion and advice is that, as a seller, you should not list your home at a price you would be upset about receiving or unwilling to accept.***
And remember – these are strategies that have proven to be successful for people specifically aiming to generate multiple offers in the many markets that currently support multiple offers (reference: the intro of the original blog post). If your objective is simply to sell your home – period – in a down market, for example, then this may not be the route for you to take.
Every market is different, and every home and seller are different. If your market is still very soft or you don’t see any multiple offers happening in your town, you may not be able to generate loads of offers no matter what you price your home at. As always, work with your agent and take a long hard look at your local market dynamics before deciding on a pricing strategy.
And @ALL – Please make sure you understand your listing agreement, and any other contract, before you sign it. Talk with an attorney if you need help deciphering it or understanding what additional protections you might want to build into it, beyond the boilerplate.
David | http://kanowitzlaw.com/#!services