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Journal

Making a Lower Offer

2016-06-25 07.26.42

It is rare in today’s market that you will find a truly motivated seller that will give it away (discount more than 10%).  Of the NSDCC sales closed over $1,000,000 in the last 30 days, the average sales price has been within 5% of the average list price.

Does it hurt to try?

Lightweight agents will warn you not to ‘offend’ anybody with a lowball offer.  But let’s assume that sellers have a thicker skin.  There is a tactical problem that makes it very difficult to come to terms when a buyer presents a low offer.

My rule-of-thumb is that we have two days or two counter-offers, whichever comes first, to make the deal.  If the initial offer is 15% or more below the list price, there is too much ground to cover.  You’re more likely to run out of time or counters, than to reach an agreement.

The biggest problem is that both sides become attached to their price once they put it on paper, and feel the need to defend it no matter how that price was determined.

Typical Example:

Buyer offers 85% of list price.

Seller thinks it is low, and counters 98% of list to send a message to the buyer that this house isn’t going to be stolen.

But the buyer becomes attached to his 85% offer, and he’s not going to be pushed around! The fight is on – and the buyer counters at 88% of list.

Seller thinks we’re going nowhere fast, and drops the negotiations.

Example that has a Better Chance:

The buyer offers 85% with low expectations, knowing the seller won’t be pleased.  The seller counters at his 98% number.

The buyer’s response to the seller’s counter needs to be at least 90% of list, for  two reasons: A) to impress the seller that a deal could be made here, and B) beat the clock.

Typically, the seller will then counter at 95% of list, and hope the buyer just signs it.  But the buyer splits the difference instead at 92.5%, and hopes the difference is small enough that the seller shrugs it off and signs.

The key is the buyer’s counter to the seller’s first counter – it has to be high enough that the seller stays in the fight.  If the buyer doesn’t come up much, it’s too easy for the seller to give up.

Tips:

  •  If you want to buy at 85% of list, then have the agents discuss it on the phone.  You have to convince both the seller and the listing agent, so you might as well start with the agent first – if they blow you off, just wait and see if they lower the price later.
  •  Determine a price strategy in advance, and respond promptly.  The egos on both sides will run out of gas within two days.
  •  Make a clean, crisp offer – include a solid prequal letter and proof of funds.
  •  Provide convincing data why your price is right, especially if there have been new comps since the listing began.
  •  Don’t justify your price by dogging the house, and all the repairs needed.
  •  Include other sweeteners like free rent after closing.
  •  Keep in mind that you are only fighting for the last 2% or 3%.

Having a strategy is important.  Too often a buyer will just throw a price out there, without having a path to follow – and the path is predictable!

The prevailing market theory employed by nearly every realtor is to wait until someone comes along to pay their price.  Your negotiations have to go perfectly to disrupt that belief!

Get Good Help!

Posted by on Jun 25, 2016 in Jim's Take on the Market, Listing Agent Practices, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments

Preparing Your House For Sale

scotts

When it comes to getting the best price for your house, there might be no higher-profile experts than Drew and Jonathan Scott, the personable hosts of several HGTV series including the long-running “Property Brothers.”

The 38-year-old twins started their real-estate ways while still in college, first leasing out a building to fellow students and then flipping a house for a $50,000 profit a short time later. They’ve put the lessons they’ve gleaned from nearly 20 years of buying, renovating and selling homes into their first book, “Dream Home: The Property Brothers’ Ultimate Guide to Finding & Fixing Your Perfect House.”

“Everybody always thinks that their house is nicer than the one that just sold for more money,” said Drew, a licensed Realtor. (Jonathan is a licensed contractor.) “But the fact of the matter is, most homeowners are blind about the flaws in their home. Which is why you have to value using professionals who will step back and give you an honest opinion.”

Here are the Scotts’ five top tips for getting your home ready to sell:

Read full article here:

http://www.latimes.com/home/la-hm-property-brothers-20160613-snap-story.html

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Posted by on Jun 24, 2016 in Jim's Take on the Market, Thinking of Selling?, Tips, Advice & Links | 0 comments

San Diego’s Pending Index Rises

pending index

Work with an agent who is well-versed in handling multiple offers!

http://www.car.org/newsstand/newsreleases/2016releases/may2016pending

Pending home sales in Southern California as a whole rose 5.6 percent from May 2015 and 2.4 percent from April, thanks to year-over-year gains of 6.9 percent in Los Angeles County and 6.2 percent in San Diego County. Orange County experienced a 1.8 percent decrease from the previous year.

In a separate study, California REALTORS® responding to C.A.R.’s May Market Pulse Survey reported slower growth in floor calls, listing appointments, and open house traffic, reflecting slowing market activity. Despite the lagging indicators, the percentage of properties selling above asking price reached an all-time high and the number of offers per property rose.

• The share of homes selling above asking price in May increased to 38 percent, the highest level since the survey began, rising from 32 percent in April. Conversely, the share of properties selling below asking price dropped to 34 percent. The remainder (27 percent) sold at asking price.

• For the homes that sold above asking price, the premium paid over asking price declined for the third straight month to an average of 9.4 percent, down from April’s 9.6 percent and up from 8 percent in May 2015.

• The 34 percent of homes that sold below asking price sold for an average of 10 percent below asking price in May, down from 12 percent in April and up from 7 percent a year ago.

• Nearly seven of 10 properties for sale received multiple offers in May, indicating the market remains competitive. Sixty-five percent of properties received multiple offers in May 2015.

• The average number of offers per property increased to 3.1 in May, up from 2.9 in April and 2.8 in May 2015. The increase in the number of offers was driven by a greater share of transactions that received three or more offers. Moreover, homes priced between $200,000- $399,000 and $750,000-$999,000 saw the greatest increases in three or more offers compared to a year ago.

• About one in four (23 percent) properties had price reductions in May, indicating sellers are pricing their homes more realistically. One-fourth of properties had price reductions in May 2015.

Posted by on Jun 24, 2016 in Jim's Take on the Market, Market Buzz, Market Conditions, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 0 comments

Existing Home Sales, May 2016

existing home sales

The national cheerleaders get excited about every nugget of data, and are happy to jump to conclusions.  Yunnie is finally tip-toeing around the downsizing trend that we see everywhere around here, but he can’t assume that those sellers are buying too:

“The May gain over April signals that the real estate market has maintained strong momentum all spring,” says realtor.com chief economist Jonathan Smoke. “We are now in this year’s peak home buying months, and this pace of sales should produce the gains we have been forecasting that will make 2016 the best year of home sales in a decade.

The biggest challenge to prospective buyers right now is tight supply, which we have seen for 45 consecutive months. In these conditions, home values have strong support, but potential buyers will continue to face challenges finding a home for sale that meets their needs. That is why we’re seeing the age of inventory drop dramatically while prices have gone up 5 percent over the last year and are now at record nominal levels.”

Lawrence Yun, NAR chief economist, says existing sales continue to hum along, rising in May for the third consecutive month. “This spring’s sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” he says. “With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now.”

Adds Yun, “Barring further deceleration in job growth that could ultimately temper demand from these repeat buyers, sales have the potential to mostly maintain their current pace through the summer.”

The local NSDCC sales in May built on the momentum from April, and the 2016 three-month total looks very similar to last year (865 vs. 859):

Monthly Detached-Home Sales, Carlsbad to La Jolla

Year
March Sales
April Sales
May Sales
Median SP
Avg $/sf
Median $/sf
2012
238
272
289
$821,000
$380/sf
$311/sf
2013
299
303
362
$943,500
$416/sf
$366/sf
2014
219
258
269
$950,000
$465/sf
$375/sf
2015
294
278
287
$1,125,000
$497/sf
$410/sf
2016
246
299
320
$1,216,250
$500/sf
$419/sf

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Posted by on Jun 23, 2016 in Jim's Take on the Market, North County Coastal, Sales and Price Check, Spring Kick | 0 comments

Real Estate Goes Hollywood

This was the best of the 40+ house videos on this guy’s YouTube channel – and the only one from San Diego (the others were corny).  This condo sold for $2,330,000 in 2014, after selling for $3,000,000 when new in 2007:

http://nypost.com/2016/06/21/wanna-sell-your-home-hire-a-hollywood-director/

Splurging on glossy renderings is so early aughts; now, the hottest sales tool for a luxe NYC crash-pad is a custom-made mini movie. And the Scorsese of selling homes is Curt Hahn, the Tennessee-based owner of Film House. This seasoned film vet turned his movie-producing skills to moving houses four years ago, at the suggestion of a real estate-agent friend.

It’s given Hahn’s four-decade career in movies, commercials and concert films (where he’s worked with Candice Bergen, Garth Brooks, Reba McEntire and Isaac Hayes) a new twist. He now shoots and edits at least one such “home video” somewhere in the country each month; budgets run around $20,000 per shoot, and each is painstakingly scripted and cast.

For a museumlike home more suitable for a family without young kids, Hahn’s mini movie featured a childless gay couple, which helped seal the deal with their real-life counterparts. When tasked with selling an eight-figure ski lodge in Telluride — “the kind that one-tenth of the 1 percent could afford” — Hahn imagined a CEO keen on creating a family hideaway.

So he scripted the story of a father soothing his mirror-image, workaholic daughter with a trip to the grand lodge, during which the entire clan surrendered their cellphones. The lodge quickly sold to a wealthy family, as planned. “It so resonated that we’ve now done several versions of that storyline for other homes,” Hahn notes.

He explains that several factors have driven the domestic-movie boom. Staging, of course, effectively transforms ordinary homes into movie sets. The prevalence of social media has made video an ideal (and shareable) selling tool. And the globalization of high-end buyers has been crucial.

Indeed, one couple spent $1.4 million on an apartment without ever visiting in person. Recalls Hahn: “They told me, ‘We watched that movie at least 25 times, we know where every stick of furniture we own is going to go.’”

Posted by on Jun 23, 2016 in Jim's Take on the Market, Listing Agent Practices | 0 comments

How to Become a Real Estate Agent

rw

Last month there were 3,419 houses and condos sold in San Diego County. There are more than 10,000 agents!

http://www.realtor.com/advice/buy/become-a-real-estate-agent/

Every month, over 14,000 people Google “how to become a real estate agent,” and consider joining the 2 million real estate licensees in the U.S. And for good reason: Helping people buy the perfect home or make tons of money selling their house is exciting! Not to mention the rather enticing fact that real estate can be a lucrative field.

According to the Bureau of Labor Statistics, real estate agents make an average of $45,610 per year—and the top 10% tier of agents earned a whopping $166,940 in 2015.

“We can make as much money as doctors and lawyers, and they spend tens of thousands of dollars on their degrees,” says Rae Wayne, a Realtor® with the Bizzy Blondes team in Los Angeles.

Still, buying and selling real estate isn’t as easy as it might look. And it’s a notoriously tough industry for newbies; some real estate experts like industry vet Tom Ferry estimate that 87% of all new agents fail within the first five years.

All of which means you should carefully weigh the risks and rewards of joining this profession. Just so you know what you’ll need to invest in terms of time and money upfront, here’s how to become a real estate agent.

Read full article here:

http://www.realtor.com/advice/buy/become-a-real-estate-agent/

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Posted by on Jun 22, 2016 in Jim's Take on the Market, Realtor, Realtor Training | 2 comments

French Castle

It’s hard to fathom how magnificent castles were built centuries ago. One group set out to understand just that by building their own masterpiece two hours outside of Paris. Tucked away in a forest, a team of master builders and archeologists are attempting to construct Guédelon, a castle from the 13th century, using only medieval techniques.

Posted by on Jun 22, 2016 in Interesting Houses, Jim's Take on the Market | 2 comments

Spence on ZG

We just cut our Zillow advertising back to the minimum.

At the beginning of the year, we made the plunge and took on about 18% of the Encinitas territory. We definitely got more calls!

Here are the incoming calls and emails per month – total is 157:

zillow 2016 stats

The best realtor-teams nationwide are achieving a 3% to 5% lead conversion, and ours has been less than 1%. Why? Because the consumers who inquired either have an agent and thought they were calling the listing agent for general info, or they were calling on the hottest new mobile-home listing.

Yes, if this was Glengarry Glen Ross, there would be no coffee for me.

But the 1% conversion rate means I talk with 100 people to find one who will buy or sell a house.  My conversion rate is close to 100% with people who call from the blog – I am here to help you, and together we get it done! But that is a personalized, dedicated service, not an order-taking real estate factory.

At the last Zillow conference, there was an agent team from Florida that swore by the Z-advertising. They had several junior agents manning the phone banks, and shuffling buyers into houses for $100,000 to $300,000 up and down Florida.

But that’s not Encinitas, and it’s not me.

I’m still a believer in the Zillow platform, because they have the eyeballs – somewhere between 60% and 70% of the real estate traffic.

But they do funky things – for example, they tell the Premier agents that we have the exclusive ability to include 2-minute video tours of our listings only, and they will put those at the top of the search lists.  But within 1-2 months, they are letting everyone do a video tour – including for-sale-by-owners. The tours are rinky-dink, so I don’t expect much, but the integrity of the switch-a-roo was terrible. You can’t help but feeling you got hustled…again.

The future of the real estate selling business is whether the consumer will stick with their realtor for life, or be persuaded enough by promises of insider deals and coming soons to switch to a phone-bank agent.

Here is how Spence sees it today – the usual banter:

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Posted by on Jun 21, 2016 in Jim's Take on the Market, The Future, Zillow | 1 comment