Dennis and Scott

Why being environmentally conscious is usually the “road less travelled”..

If we went to a cocktail party and asked everyone what it means to be green, we’d get so many different answers. Some would say it means reducing waste. Others would want to adopt conservation-minded technology, like solar panels. Some would say it means eating less meat.

In home construction, green can mean a bunch of different things: sustainable materials, the latest in energy efficient mechanicals, tighter envelopes, reduced consumption of precious resources. And no matter which tactic a builder takes, the effort to be responsible is important and noble.

So then what gives? There’s no doubt that being green, if we have the option, is the better choice to make. So why does it seem so hard to make substantial progress on this? Well, we can tell you why. Because way too often it’s easier, even more valuable, to be irresponsible than it is to be responsible.

Here’s what we mean…

Instant hot water heaters are more efficient and will lower utility bills, but they’re more expensive to install than the old tank-based hot water heaters.

Flooring a home with sustainable wood or using similar framing materials is going to drive up your costs. Same goes for low VOC paints. And you’re going to pay extra for extra insulation or HVAC units with higher SEER ratings.

A builder might do all of this in service of earning green certification from one of the agencies that does that kind of thing (such as EarthCraft of VA). And it’s likely going to tack on an additional 3-5% more to the final construction tab. If you’re looking at a $400,000 home, that’s about $12,000-20,000. That is real money. Are people going to pay for that? Increasingly so, yes. But they’re not necessarily the ones getting in the way of progress.

What is then? It’s that little thing called the appraisal. When a home is purchased using borrowed money, banks are going to require an appraisal. And if the appraiser doesn’t give premium value for whatever green components are included in the construction, then the value is artificially depressed. It’s possible the deal gets more complicated. It’s possible the borrower has to pay a higher interest rate. It’s possible the borrower might need to bring more cash to the table. None of these scenarios is good. All could possibly stunt the expansion of green building.

And we need to do exactly the opposite. We need to encourage builders to build—and buyers to buy—new green homes. We can’t let mortgage lending be the tail that wags the dog, not on something this important. This is a time for policy makers and the markets to lead.

What it means when the market just doesn’t bite on your home…

As salespeople, we are trained in (or at least in tune to) non-verbal communication like body language and tone. We sense it, interpret it, and try to communicate it to our clients each and every day.

But what about the communication you never get — how do you value that? In other words, how do you value silence?

Even tougher, how do you interpret a silent market?

When an agent has to convey the reasons for the lack of activity around a home or project, what are the lessons to be drawn? What do you do when silence is the only sound you hear?

Exposure

While sellers invariably equate silence with a lack of exposure, it is rarely the case.

Measuring a property’s (or project’s) exposure is far easier than it used to be. Most MLS databases can show the number of times a property appears in searches and how many times buyers have tagged it as a favorite or removed it from their searches. Trulia and Zillow also provide similar measurements and can show not only the number of times it has been viewed, but how many times it has been favorited and/or shared.

And when projects implement web and video promotion, it’s even easier to track engagement through page or video stats. When you have historical data on other projects, comparative analysis becomes far easier.

But regardless of any metric, in this day and age, exposure is rarely the issue. Between the community of agents, e-mail campaigns, MLS, syndication of MLS data to Zillow and Trulia, as well as the constant (ab)use of social platforms by Realtors, almost every property receives the necessary promotion to reach anyone who is even remotely considering a purchase.

No Market

Market caps are prices above which no one is willing to pay in a given area, regardless of the home size or features. (We’ve written about market caps here.)

You can spot market caps when you look at a specific area and see at what price point marketing times rise sharply, seller discounts increase, or the expired listing count spikes.

Sometimes, especially when the home’s price is above an area maximum or the price per foot is higher than average (or even worse, when both exceed market norms) the market simply refuses to engage the property.

This is especially common in urban redevelopment zones, properties that are overbuilt for an area, or properties that might have a great deal of unfinished square feet that artificially drive up the price per foot metric to an intolerable level.

So the easiest way to correct the marketing of the home is to look for market caps, in both aggregate price and price per foot, and see if your property is too far above the norm. If so, the only real solution is to adjust the price.

Seasonality (or other Temporal Factors)

I am always amazed by the predictability of the sales season. I am also always amazed by how little the market understands the power of seasonality.

Take a look at the following charts:

As you can see, several market inputs have not reset to pre-recession levels and are causing market conditions to become hyper-seasonal. Inventory is still less than half of what it was pre-2008 and seasonality has never been stronger.

So selling your home in October but using sales in March as your guide will not yield the result you are looking for. If the market is silent on your home, it could be that you used a pricing model that was based in a season that has no bearing on the one you are in currently.

In most cases, the only solution is to adjust the price to what the market will currently allow or to wait until the higher velocity market of spring. As the leaves change colors and the temperatures begin their decline, pricing does as well. Waiting and hoping is not the correct strategy.

Search Patterns

So the sign is in the front yard, you are professionally staged, your pictures are great, and you are priced off of the correct season’s most recent sales — and nothing happens. Zip. Zilch. Zero. Nada. Crickets.

Almost every local MLS has lines that break an entire market into smaller zones. A line in MLS is typically either a border (city to county or county to county,) a major road, or some other feature in the land (a body of water is the most common.) Most times, the lines that exist in MLS are based on a decades old interpretation of the market.

So when lines are old and search patterns established, a new or emerging redevelopment area may not be searched naturally. For Richmond, condominium projects that exist outside of the borders of Zone 10 receive stunningly few organic searches when compared to properties inside of Zone 10.

Marketing any property that is atypical for a zone is harder and requires a ton of work by the agents to raise awareness. Direct mail, a relentless e-mail campaign, and even direct calls to targeted agents is the best way to combat the issue of being in an atypical zone.

Summary

Don’t assume that the cure for a lack of activity is always more exposure. Expensive advertising, time consuming open houses, or other alternative but pricey forms of promotion may make a seller feel good but actually do little to move the needle and prevent the agent from far more productive activities.

Seek to understand the reasons for the silence and adjust the program accordingly.

“You’re home is worth…[click here]”

“Do you want to know what your home is worth?”

“Your neighbors sold their home—guess how much!”

We all see these solicitations all the time—via email, in our mailbox, on billboards. You’re surrounded by companies and services who can give your home its value to the penny. But how valuable are their estimates?

The Rise of the AVM

There’s no doubt that the proliferation of real estate information and, with it, the rise of the Automated Valuation Models (AVMs) have been transformative for everyone involved in real estate. Values are no longer safeguarded by agents or appraisers. Anyone who can navigate the internet can find free valuations as long as they have an accurate address. But there are some big questions you need to ask.

Are they accurate? They can be.. 

Are they easy to use? Most are.

Are they valuable? Well, to use an old adage, you get what you pay for…

The Technological Achievement

There’s no question that these services’ capacity to aggregate real estate information and give you anything close to a real value without even seeing the property is kind of amazing.

But Zillow has created a myth that its valuations are absolutely correct, regardless of what you might know (especially if you’re a Realtor). It’s too bad because Zillow is a pretty darn good tool if you know how to use it properly.

Where Zillow Missed

For a while, Zillow was it. It was the first big name in the game. It even branded its valuations – Zestimates.

They operated in a vacuum for nearly a decade, with no competition. And for a while, no other service could match their accuracy.

As more people learned about Zillow, we Realtors had to deal with it becoming more of a factor in our client services. More specifically, we heard a lot of clients telling us that “Zillow says the house is worth…” Or they just come to you with a number, which happens to match to the dollar the number you find when you go for a Zestimate. I have seen buyers and sellers rely on the Zillow valuation without questioning how Zillow arrived at the number. As if the only thing needed to validate a number is for it to appear on a nicely designed web page.

This can be pretty frustrating. The public doesn’t necessarily understand all of Zillow’s ingredients. And Zillow, while certainly possessing some amazing information, is pretty rigid in its valuation — especially in light of the unknowns. And of course they don’t want anyone to doubt the value of the their valuations. But this is ultimately a weakness that harms the site’s users.

Instead of saying ‘Our Zestimate = $276,400,” Zillow could use something like ‘Our Zestimate is between $271,000 and $278,000 and our data indicates we are 80% sure of our estimate.’

What this does is rightly recognize that there are a lot of factors in a real estate valuation that can push it up or down.

Zillow’s Competition is Better

Well, things have changed. There’s more competition in the market. And some of those new services are doing exactly as they should: creating ranges and encouraging users to think in slightly more elastic terms. And the result is that the valuations we’re seeing have quite a bit of variability.

See below:

Here is a sample of AVM’s for the following home – 157 S Colonial Avenue, Richmond, VA 23221 :

• HomeFacts – $395,000
• Zillow – $532,790
• EApprasial – $422,292
• HomeSnap – $377,100

Those values represent a roughly 30% range. So which one is correct? Well, there’s not a simple answer to that.

How it Should Be Done

The CoreLogic platform that we subscribe to as a part of our MLS states values differently.

We really like that they offer more than just a suggested value. You get an entire range of values along with a confidence interval that gives you a sense of how close you might actually be. It just feels like a smarter way to offer valuations to the public. It’s good to know that someone put some thought into this.

The Market Reacts

The availability of this more sensible valuation information is already having an impact.

We’re seeing more people ask smart questions, such as why Zillow’s valuation might different from Realtor.com’s, which is also different from Movoto. Skepticism is a good thing, especially when someone is telling you that your most valuable asset is absolutely worth $x.

People are recognizing that no estimate, no algorithm is perfect or magical. They’re understanding that the data and the factors underlying that valuation don’t tell a black and white story. There is variability and different ways to interpret the data.

Another good thing…clients are recognizing that there’s really too much information out there, and they’re asking for help in trying to sort through all the digital noise. This is good because agents—good agents—really do offer a set of tools and skills that help their clients understand the market and make sound decisions. That’s a good thing for everyone.

So definitely use AVMs, but don’t use them blindly. Ask lots and lots of questions, and don’t be afraid to ask for help.

(To read about the heat Zillow has faced recently for this exact issue, click here.)

You see it all the time:

‘We will sell your house fast!’

‘Sold in one day!’

‘Call us and start packing!’

Somewhere we have convinced ourselves that selling a home quickly is the only way to go. And the selling public has bought into the same myth. The only type of sale is the fast sale and anything else represents failure.

So what do Realtors do? They tend to focus on speed, pushing a marketing message that promises a speedy sale to please clients who feel that a home sold quickly means a job well done.

And it can. Sometimes speed can be the best strategy, particularly in cases where a bidding war can be created, if the market is falling quickly, or if a particularly great opportunity presents itself on the buy side.

But a quick sale shouldn’t be the goal as a client — the best price and the best terms should be the goal and if it takes a little time to achieve those goals, so be it. Focusing solely on speed can mean losing some value in the long run.

The value of your home isn’t as stable as you might think.

Sure, there are some homes that may never (in their current physical state) be less than a certain value or more than a certain value (these are called market caps), but there’s a large gray area in which a home could realistically be valued anywhere within. Aside from the material value of the brick and mortar building itself, people often think of factors like proximity to retail, what school district the home falls in, or easy access to major highway systems as factors that additionally determine a home’s value (location, location, location, right?). But what about other factors – factors that change temporally and thus draw the connection between a home’s value and timing rather than just surroundings.

Think about comparable sales (comps) for example. It’s the classic supply and demand equation from our freshman year econ class that clients so often forget. Higher supply of goods means prices are driven down, right? If you try to sell your home while 10 other similar homes in your neighborhood are up for sale, it might not only be harder to find a buyer, but the value of your home automatically both impacts and is impacted by the value of those other homes. Wait until there’s only a few up for sale nearby and you might be able to increase that value – people have less to choose from. But, there might be fewer buyers during that time.

Other reasons that waiting might make more sense include:

• allowing time for an up and coming market to blossom further
• a home undergoing a significant upgrade
• in the case of a particularly interesting or unique home, to allow the time for a buyer with that specific need to find you

It’s complicated. We know. It takes experience and a large amount of market knowledge to be able to understand and interpret these factors appropriately, which is why not anyone can just jump into the real estate market on a dime and expect to be a successful Realtor, but that’s another argument for another time.

Ultimately, timing (or seasonality) is something to be taken seriously. Very seriously. And ignoring the timing of a sale is one of the biggest mistakes we see people in this industry make. But that’s the thing – it’s about timing not speed. Speed implies that quickness is the only focus, while timing implies an element of strategy. For most of our clients, value is the goal, and speed is just an added plus, if the transaction happens to work out that way.

Learning the nuances of this sort of timing can be tricky, but the savviest and most experienced Realtors tend to have it down. Those are the ones who aren’t afraid to let you know when waiting the market out is the best plan in the long run (even if they still brag about speedy sales because, let’s face it, it’s what people want to hear). A Realtor who promises speed regardless of market factors that may dictate a more slow or cautious approach is likely more concerned about his or her own personal gain, rather than the client’s.

If you’ve been in the business long enough, you know how to spot it. A client enters a possible home target and immediately disengages. There are any number of ways to see it, but especially through body language: What are they looking at? Walking slow or fast? Checking their phone? You immediately know the long of it—they’re not buying this house. No matter what you say, you won’t be able to get them to consider it.

Why is this? There was something in that house, or about the way it looked, that just wasn’t going to sit well with your client.

What is a Deal Killer?

When I talk about a deal killer, I’m saying there’s something that the seller could’ve done to fix a situation but didn’t, and now they’ve got a discounted asset on their hands. And if the person who would’ve bought the house in the right condition walks through that front door and then back out, well, you’ve cost yourself some money. And that’s not funny.

We’re not talking about calculus here. If you can fix a “situation” and then get more money for your home than the fix required, you do it. If not, it’s like you’re purposefully trying to kill that deal.

Here’s the thing. Buyers—like everyone in this world—prefer the easy route. If they not only have to imagine a “situation” not being present anymore but actually go through the process of fixing that situation, you are putting an obstacle in their way. If you’re counting on potential buyers to see past the “situation” and recognize what the value could be, you’re going to get less money than you should—and it’s going to take longer to get it.

Here are some of the most common errors that sellers make:

Smells

This one feels like it should be so easy.

Make your home smell good. Or just not bad.

Just take a little time working on your house’s odor. You don’t need it to smell like fresh-baked Krispy Kremes, but…

Some of the things I run into all the time: dog, wet dog, cat, cat litter, old shoes, moldy basement, cigarette smoke, other kinds of smoke. These are deal killers, people.

We’re talking instant reaction which colors a buyer’s opinion so immediately and forcefully that they’re just not going to get over it. Now you’ve reduced your target buyers to cat-loving, cigarette-smoking hoarders. Good luck with that.

If you’re not sure if you have a smell problem, call someone honest who isn’t afraid to tell you the truth. Make them drink in the air.

Another thing: don’t cook any cabbage or other odorous food in the run-up to your open house. That’s not smart.

Pets

One of my coworkers once showed a home where the owners kept a crow in a birdcage. The bird was furious and let us know in no uncertain terms.

Whatever it takes, find another place for you pets to hang out, no matter how small.

Snoopy II might be the biggest package of love and affection a human can imagine, but he has no place in a showing. And it’s not enough to put him in the backyard or a crate in the basement. For starters, he might not dig that and bark incessantly to let everyone, including your buyers, know. Second, your buyers are going to want to go out in the backyard, they’re going to want to inspect the basement. At their speed. This becomes an obstacle for your buyers.

People have come to your home to see it unencumbered by distractions. And pets don’t always act the way you’re absolutely certain they’re going to—especially amidst a parade of strangers. Take care of this.

You know who else doesn’t want pets: real estate agents. They’ve got enough to worry about without making sure a cat doesn’t dart out the front door.

The Dirty ‘____’

Remember our little conversation about smell. Same thing goes for dirty stuff. Dirty anything. It’s not enough to have it spotless by closing. You need it spotless for the potential buyers.

Look, houses get dirty. There’s so much that can get dirty: caulking and grout, garages and closets, windows and counters. And everything paints a picture for the buyers about the maintenance, especially if it doesn’t look that good.

A couple of items of note:

• Carpet—if it’s really old and stained, replace it. Shampoo is not going to get the job done.
• If you’re a pack rat, hire a guy with a van to clean it out and take the crap away.
• Air filters—when you change them, dust around the grates.
• Baseboards—first dust, then look for areas that could use a little touch-up of paint.
• Hand railings—they receive a lot of grime thanks to your hands. Murphy’s Oil Soap will work miracles.
• Attic—if you can’t cross safely, point that guy with the van up there too.

Then, once you’ve gotten everything to the point that you’re impressed with cleanliness, HIRE SOMEBODY. They’ll clean it even better, and it’s a small cost for a possibly big payoff.

Seller Present

This one seems like a no brainer. It’s one of the cardinal rules.

Sellers, get out. Get out well before anyone gets there because someone is going to come early. Don’t wait for them to get there. Don’t be anywhere on the property, on the block, in the vicinity. You are not needed and you will only cause problems. You can actually become a deal breaker.

I don’t care who you are, how helpful you are, what powers of persuasion you might possess. If you’re there, you’re going to screw it up.

Don’t make a potential buyer uncomfortable.

People aren’t buying a house, they are buying a home. They want to envision it as their home. This is all about feeling. And that feeling will be very hard to come buy if someone else is crowding out the dream.

Which leads to… Personal Items

There is a fine balance between a home that is too personal and one that feels so sterile it belongs in a hospital. Try to find that balance.

It’s time to store photos and special art, political statements, even books can be removed. You never know who’s going to be coming into your house. Once again, you don’t want to erect an obstacle that makes it hard for buyers to imagine themselves in your home, thinking of it as their home. Depersonalize as much as you can.

Hard to Show

If you’re going to sell, be ready to do anything necessary to sell. Don’t make it hard for an agent to see the property. Be flexible. Be prepared to not get enough notice. That less than considerate buyer might just fall in love with your house.

And be responsive. When you see a phone call or text from your agent, hop into action. Don’t take a few hours to respond. Make this easy for buyers, and buyers just might make your day. You have to keep in mind that a buyer’s agent trying to see your home might also want to see 3-4 other homes around that same time. If you’re not flexible, they might just decide to pass on your home altogether.

It’s not always easy to be perfectly flexible. Life happens, kids get sick, whatever. But if there isn’t a good reason for you to bend over backwards to show your home, then do your best to make it happen.

Summary

Believe me, I know. Real estate transactions, for all their excitement and anticipation, wreak havoc with your life. So do the best you can to make it happen quickly by making sure your house, in every respect, is ready to sell.

It’s not easy to do. So if you’re going to do it, then do it right and don’t make mistakes that really only cost one person: YOU. Everything I’ve outlined above is designed to help you sell your house with the least amount of pain and the most return. So give all these ideas some serious thought.