What s the best way to sell a home? VIEWPOINT.CA

What s the best way to sell a home? VIEWPOINT.CA

CHAPTER 1 What s the best way to sell a home? by Bill McMullin, CEO, REALTOR ViewPoint.ca & ViewPoint Realty ViewPoint has served more than 2.7 million visitors who have have viewed more than 75 million pages of property and listing information. As a brokerage, we ve helped thousands of buyers and sellers answering questions, advertising listings, showing homes, writing offers and closing transactions.

If you ve ever bought a home, it s unlikely someone sold it to you. Real estate, unlike most products, isn t a commodity or impulse purchase - it s a deliberate, planned purchase where buyers make considered decisions over a period of weeks, months and sometimes years. While there are many factors that influence the home purchase decision, the three P s - property, place and price are paramount. If it s the right property, in the right place at the right price for the buyer; they ll buy it. It really is that simple. But before a buyer can even consider a property, they need to be aware that it s for sale. Prior to the Internet, sellers or their agents had a big challenge to reach all active buyers. In fact, in practical terms, it was impossible. That said, some agents had better marketing and advertising systems than others, but things have changed - dramatically. The Internet has leveled the playing field. Buyers are finding houses on their own by shopping online and driving through their preferred neighborhoods. The traditional real estate lawn sign is still one of the best tools to draw a buyer. Advertising in the newspaper, flyers, TV or open houses are little more than self-promotion tactics for agents. These expensive tactics might make a seller feel better but they have lottery-like odds of drawing the eventual buyer for your property. If you have ever purchased a property, think about how you first became aware that it was for sale. Can one agent sell your home faster or for more money than another? Many agents and real estate companies would like you to believe that they can sell your home faster and get more money for it than other agents by using some special marketing strategy. There isn t a sliver of evidence in the data to support this suggestion. Keep in mind that you are only concerned about how much you net from your sale after fees. Agents do provide valuable guidance and assistance to those selling a home, but a big name agent can t sell your home faster or get more money for it than a less well known agent. Well known agents are well known because they have more listings, so, naturally they have more sales. Listing agents don t have any special power over buyers. In fact, more often than not, the listing agent and buyer never meet, as buyers are usually represented by their own agent. If you re considering selling your home, you re probably wondering: 2

How much can I get for my home? How long will it take to sell my home? Is it a good time to sell? Do I need or want an agent? How do minimize the real estate fees? Let s answer these questions in the following chapters. 3

CHAPTER 2 How much can I get for my home and how long will it take to sell?

Nobody can predict the eventual sale price of a home or how long it will take to sell. Analysis of tens-of-thousands of listing records in the MLS system clearly shows that sellers and their agents aren t very good at setting list prices. For example, in the last two years in Nova Scotia there were more than 40,000 listings, less than 20,000 sales and more than 15,000 price reductions. What that says is that 20,000 listings expired unsold, were cancelled or re-listed with another brokerage (we ll talk about that later). After price reductions and fees, sellers are netting, on average, about 93% of their original list price. These 20,000 failed listings represent a massive cost burden on the real estate industry, and ultimately the consumer. As most sellers opt for a contingency arrangement with their agent (paying a fee only if it sells), the unlucky agents that get these defective listings also carry the costs, albeit temporarily. Ultimately, the commission fees paid by the successful sellers are covering the costs of the listings that don t sell. This is a key reason why real estate fees are so high. Understandably, if you pay nothing up front and only pay if it sells, the agent is going to expect to be paid a premium for carrying the risk, much like lawyers do when they accept cases under a contingency fee arrangement. Contingency fees are substantially higher than hourly rates because they must account for the risk of getting paid nothing. The difference between an agent selling your house and a lawyer arguing your case is that the listing agent, by comparison, has little influence over the outcome, whereas your lawyer pleading to a jury and or judge at trial significantly influences your fate. The overpricing problem starts with sellers who have unrealistic price aspirations and to make matters worse, agents often endorse their expectations in an attempt to get the listing (which normally works) only to discover that buyers don t share their view. As a listing agreement is legally binding for the listing period, agents will accept overpriced listings. Even though these listings sit on the market, they can be used by agents as a self-promotion vehicle to generate leads, so all is not lost, even if the listing eventually expires unsold. For sellers who are determined to sell and believe that the price isn t the problem, they will switch agents in frustration, believing that their agent wasn t doing enough to sell or market the property. Often, sellers will relist the property with a big name agent on the belief that a well-known agent is better able to sell the property. Usually, after some additional time on the market, the big name agent will advise the seller to reduce the price, the house sells, the big name agent gets the windfall and the original agent gets nothing other than the expense of their futile effort to sell an overpriced property. As for how long a property will take 5

to sell, you ll hear lots of averages for days-on-market for a particular area, price range and property type. Caution. Your home, nor any home, is average. Your property, circumstances and timing combine to make your listing truly unique. Only the numbers are average. The reality is that there a very few buyers in the market at any particular time, for a specific type property, at a particular price, in a particular neighborhood. Occasionally, however, listings because of their price, location and market timing will get multiple offers. Again, this is the exception, not the rule. $225,000 and $275,000. The average days on market was 67, so there s only one sale about every 5 days, and that is for all homes in that price range. Of course, buyers are very discriminating in their search, looking for a certain type of property in a particular area that meets their needs, so that means there are very very few active buyers looking for an average property at any moment in time. Even if your property is fairly priced it may take longer than normal or average for a buyer to emerge as there may not be a buyer at your price for your type of property in the market during the period of your listing. Reducing the price may spur a lurking buyer off the sidelines, however, this is by no means guaranteed. Each percentage decrease in the price should (at least theoretically) increase the pool of available buyers by a corresponding amount. To bring speculators/ investors into play, the price would have to be low enough that they see a reasonable expectation of profit were they to buy the property and flip it. To further exemplify the scarcity and actual buyers, let s look at the Dartmouth - Colby - District 16 area in the past 12 months. From April 1, 2011 to March 31, 2012 there were 138 sales of single family homes. Of the 138 sales, the majority, 72, sold for between 6

CHAPTER 3 Is it a good time to sell?

Answering this with accuracy is as difficult as predicting the sale price. Trying to time the market in real estate is pretty much impossible because there are so many factors in play at any point in time. While the market can be defined as a buyers or sellers market using statistics, the fact is that the buyer for your property is operating in their own individual environment. Buyers are not programmed by statistics, rather, driven by emotion which is often irrational and unpredictable, especially when it comes to real estate. 8

CHAPTER 4 Do I want or need an agent?

Selling a home is a very well defined, structured and regulated process. A growing number of people are successfully selling their homes with little or no assistance of agents and saving thousands of dollars. If you are comfortable with the idea of showing your home to buyers you can save yourself a lot of money and time. If you hire an agent under a traditional full service arrangement, you won t have to meet buyers and show your property, but you will have to vacate your property, possibly often, for showings. Nova Scotia s real estate regulator, the Nova Scotia Real Estate Commission, relate to agent practices. Regardless of your disposition toward real estate fees and showing the property yourself, the one thing you want from an agent is the advertising exposure they can bring via listing on MLS and ViewPoint. Full exposure is critical to achieving a successful sale at the optimal price. Beyond advertising exposure, an agent can assist with paperwork, showing your property and assistance with negotiations. Unfortunately, our own real estate association has been running a FUD (fear, uncertainty and doubt) advertising campaign on television, suggesting that representing yourself in a purchase or sale is a very risky proposition. The Canadian Real Estate Association did not present any data that supports their assertion because there is no data. Real estate transactions not involving agents are no more likely to result in litigation than those where real estate agents are involved. Ironically, the majority of complaints received by 10

CHAPTER 5 How do I minimize my real estate fees?

Real estate fees are real money but most sellers continue to opt for traditional pay-on-close arrangements where they give 5% of the value of their property to a real estate agent. For the average home, that small percentage translates to a fee of more $12,000 to sell the property. Since the fee is paid to the agent by the seller s lawyer on closing day, the magnitude and impact of the cost is often ignored. If fees were paid in cash by sellers on closing day, it s likely that sellers would be more diligent about fees the next time they list a property. Remember, buyers will beat a path to your door if it s priced right and advertised broadly. ViewPoint offers sellers a range of listing services including traditional full-service for as little as 3% and our popular Exposure+ advertising-only service for $950. For more information and straight talk call (902) 482-3100. 12

ViewPoint.ca ViewPoint Realty Services Inc. 2012 ViewPoint Realty Services Inc. All rights reserved. This website is owned and operated by ViewPoint Realty. The trademarks MLS, Multiple Listing Service, and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license. *MLS listings refers to listings entered in the Nova Scotia Association of REALTORS and Annapolis Valley Real Estate Board MLS Systems. This product includes data which is the property of the Province of Nova Scotia. Copyright of the data and all intellectual property rights in the data shall at all times remain the property of the Province of Nova Scotia. All rights reserved. xiii