That Keller Williams Kool-Aid
May 13, 2008
I recently completed a transaction as the buyer’s agent with an agent for Keller Williams. It was a short sale, and yes, it dragged on for months - we got into contract in January, and closed in late April. After all was said and done, the seller’s agent and I agreed to meet for coffee and to exchange some final documents and so I could get the key to pass on to my buyers.
You may not be aware of this, but Keller Williams agents are kind of messianic about their company. They love it over there. A few months back during the Watsonville REO tour that we had, I had met another KW agent, and she spoke in glowing terms of her company, and in particular about this training that they had, which was open to agents from any brokerage, not just Keller Williams.
So when I was sitting down for coffee with the seller’s agent, I started talking to her about Keller Williams and the training that they provide. Not surprisingly, she was very enthusiastic and encouraged me to come on down for the next training session they were putting on. I agreed to do so, and so yesterday I sat through 2.5 hours of training on getting listings, put on by a very able and passionate trainer.
As promised, the training was excellent. Honestly, probably better than any real estate training I have been to. There’s one thing in particular I took away from that training, which I want to share with you. If you are a seller, please sit down, pour yourself a nice tall glass of kool-aid, and listen to this.
Keller Williams has a pretty good pricing strategy. It’s simple, and it goes like this: price your home below “market price.” A good bit below. Like, 10% below. Then, market the heck out of it and wait 21 days before taking offers. The buyers will beat a path to your door so quick it will make the neighbors upset because obviously, you’re having one heck of a party and they didn’t get invited.
A home which is priced clearly below market value will attract multiple offers. There is good example of this every day, with these REO properties. The banks price these things low. They price them to sell. And they do, quickly, and usually with multiple offers. It is very common for these properties to sell for over asking price, often by 10%.
This pricing strategy is an excellent one, especially in a market like today’s. In an appreciating seller’s market, it’s not such a bad thing to over-price your property by 10% - sooner or later, the market will catch up to you, and you’ll probably end up getting that extra 10% if you wait long enough. However, when you are in a declining market, if you do not sell your home quickly, the market will probably pass you right on by.
In a declining market, people don’t want to buy for fair market price, because the market price is dropping, and next month, it’s going to be worth less than it was the month before. You need to list your property under fair market price, attract multiple offers, and sell it for the most the market is willing to pay for at the moment.
That’s a winning strategy, and it’s working spectacularly for the banks selling their foreclosure properties, and it is also working for sellers who price their homes to sell.
I’m going back to Keller Williams on Wednesday for another training. Not sure what it’s about. And yes, I know, it’s all a trap. They want to seduce you into signing up with them by providing world-class training gratis and showing you that there’s a better way to sell Real Estate. I have no intention of leaving Thunderbird Real Estate at the moment - I’ve long thought that my next step after Thunderbird would be to open my own brokerage (I’m a licensed real estate broker, after all). But if one day you see me sportin’ a mustache and talking feverishly about how great KW is, you’ll know how it all began.
Posted by SantaCruzBroker at 8:28am
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California Median Price down 29% in March, down 20.9% in Santa Cruz
April 30, 2008
This news is a few days old, so maybe you heard about it. Somehow, I missed this one, I’m a few days behind in reading the real estate news. But check out this news from C.A.R., the California Association of Realtors:
[From the California Association of Realtors - median home price fell 29 percent in March ]
Home sales decreased 24.5 percent in March in California compared with the same period a year ago, while the median price of an existing home fell 29 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
It’s a pretty interesting article, with lots of numbers to pick apart. Some areas are actually seeing median price increases - they provide a separate link with March 2008 home prices for various California cities and counties. According to C.A.R., home prices are down in Santa Cruz county by 20.9% And I know what you’re thinking - blame Watsonville. My broker did, at our weekly office meeting. The C.A.R. data says otherwise - the only city it breaks out in Santa Cruz county is the City of Santa Cruz, where it reports that median home prices have dropped 17.9% since March 2007.
I prefer to look at this as a good-news, bad-news kind of thing. The bad news is that if you need or want to sell your house, C.A.R. has just provided ample proof (again) of what you might have maybe thought: now is not the time to sell your home. Also, you might want to make sure your home equity line is still available, because your lender may get wise to the fact that you probably have a lot less home equity than you thought you did.
The good news, of course, is that lower prices creates a lot of buying opportunity that simply hasn’t been around for years and years. Many people who have been shut out of the market or who have been sitting on the sidelines are now seeing that their day may come. The Center for the Continuing Study of the California Economy put out a report in February 2008 about rising affordability of California homes. According to that report, we are still far away from being an “affordable” place to live, but that’s the price of Paradise.
Posted by SantaCruzBroker at 8:29am
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Advice for Santa Cruz Home Sellers in 2008
March 29, 2008
You may have noticed I’ve been writing a lot about home buying lately. True that. It is, after all, a buyer’s market like we haven’t had in a good 15 years. Tis the season, you know. But for every buyer out there, there’s a seller. Actually, for every buyer out there, there’s like 10 sellers. That’s kind of the problem.
There’s a large school of thought that says one reason why home prices have not slid more than they have already is because many folks who would like to sell realize that now is not a good time to do so, and are holding off. If you’re of a certain age and know even a modest amount of people, you probably know a number of people like that - or perhaps, you’re one of those people yourself.
Generally speaking, my advice for people who are considering selling this year is: don’t. Now is not a good time to sell your house. Of course, I need to qualify that six ways from Sunday - actually, now is a fine time to sell your house, if you need to, and if you have one of the few houses that are in hot demand at the moment, which is pretty much limited to fine homes with ocean views or near the beach. If that sounds like your house, don’t worry - it should not be too hard to sell your house. I still don’t think that this is the best time to sell your house even so - but at least these types of properties remain perennially popular, or so it seems.
On my web site, I have a whole section with advice for Santa Cruz homeowners who want to sell their house. To be honest, it’s loaded with articles I got from, I think, the California Association of Realtors. It does have a link to my 30 Day Marketing Plan for Santa Cruz Real Estate, and it also points you to a page where you can go and sign up for my special report, “Insider’s Guide to Selling your Home in Santa Cruz.”
My Insider’s Guide is very good - maybe even great, if I do say so myself. It does go beyond those trite articles you can read anywhere like on MSN House and Home or About.com - yes, it’s true, you really should remove the clutter and put it in the garage or in self-storage. Yes, definitely, mow the lawn and generally speaking, maximize curb appeal. At the very least, your home should be clean and tidy and smell nice.
I’d like to point out a couple of other interesting tidbits, though, which you may not have heard about. Like this article in the Seattle Times, from last year:
[From New study shows which words sell, and which don’t - the Seattle Times]
Words matter. Wars have started over them. Civilizations have collapsed because of them. And it appears the speed with which a house sells might be determined by them.
It is actually a fantastic article, and I suggest you read it. I know what you’re thinking - the “listing remarks” are your Realtor’s responsibility, why should you care? You should care - a lot. Many Realtors put little or no care whatsoever into the remarks, but even if they do put a lot of effort into the remarks, this study shows that what they say really could lower the selling price of your home. No matter which Realtor you chose to help you sell your home, make sure you see every bid of advertising copy, and get your Realtor to fix anything that doesn’t represent your home in its best possible light.
Here’s another interesting thing I came across - it’s an NPR Podcast episode, but here are the show notes:
[From Study Shows Precise Pricing More Enticing to Buyers - NPR]
Researchers at Cornell University say they’ve discovered something strange about the way consumers absorb price information. They say when the price of an item is in a round number, people perceive it as higher than an odd number. In other words, people think a $3,000 car is more expensive than one priced at $3,129.50. The finding has implications for people trying to sell their homes.
When you come right down to it, it’s really all about the price. People often say things like, “My house didn’t sell because it doesn’t have a garage.” Let me ask you this - if the house cost $1, would it sell, even though it didn’t have a garage? Probably, it would have sold for $1. How about $100, or $1,000? Yes, and yes. The problem is not that it doesn’t have a garage. The problem is the asking price was too high for a house that doesn’t have a garage.
Really, it’s all about the price, given the condition, amenities, location, and buyer demand. Getting the asking price right the first time is very, very important. It is much better to set a realistic asking price the first time around, rather than set an optimistic price and “see what the market does.” That may be an OK strategy in an appreciating market (the market may catch up to you), but it’s a really bad play in a depreciating market (the market can easily pass you by on its way down).
Here is an interesting article from NJ.com (yes, New Jersey!):
[From Real estate study finds low list prices work - New Jersey Local & Small Business News]
The study by Otteau Valuation Group measured and analyzed more than 15,000 transactions annually over a period of several years. The same pattern emerged in every price range, regardless of whether the properties in question were entry-level or luxury million-dollar homes: Sellers who priced their home below the market from the beginning, often received a higher price and a faster sale.
So there you have it. OK, New Jersey isn’t Santa Cruz (although, really, New Jersey does have some pretty nice places to hang out, have you been?). But I believe that many of the same principals apply when it comes to pricing strategy. In this market, if you need to sell your home, bite the bullet. Price it right the first time, or you may be find yourself chasing the market downwards for months on end. And that’s not a fun race to run.
Posted by SantaCruzBroker at 9:39am
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