List Smart: Pricing, Prep & Pitfalls—What Sellers Miss | Ep. 4

Hello everyone, this is again Brokers Uncensored. We're really enjoying this podcast. We're going to talk about real estate reality, and this is going to be raw and real. I have Shadd Boucher and Becky Dewey with me, and we all are managing brokers with RE/MAX Alliance Group and realtors. We've been in the business for a while, so you're getting a bunch of information. We are going to just talk about a topic today, and we hope that you get lots of points from it that will be helpful, whether you're a consumer or, or you're in the business. It doesn't matter. But the topic is, how do you price your house in the current market that you're in? So we're going to talk about that, and you might learn something, and maybe you're looking at this wrong. And we hope we can steer you in the right direction. And of course, if you have questions, you can contact us. Our contact information will be at the end of this podcast. So let's just open this up and let's start with Becky. Becky, what do you think is the biggest problem with a consumer trying to price their property for the current market? And it could be any market at that time.

I think they need to be aware of what their competition is at that particular time, whether it's resales. Just using today's market as an example, obviously there's a lot of inventory on the market, and probably one of our biggest competitions for a resale of a home is new construction and the incentives that builders are offering to Yes.

And of course, they got to realize that those incentives are built into the price of the property.

Of course.

Shadd, you want to add anything to that?

Yeah, I think I'm going to go ahead and I'm going to get a little nasty. Here's the thing that most sellers don't understand is you need a certain price and the buyer and the appraiser don't care what you need. So keep that in mind that you have to be realistic with where you're going on the market. And if the market's not necessarily there for you right now, maybe it's not a time to sell. You know, by saying, well, I need to get this out of the house. Well, if the market doesn't support that, it's probably not your time or you need to readjust your aspirations because that's the problem with most people is they try to price their house for what they need, not understanding that the buyer doesn't care and neither does the appraiser.

And they think that they set the price. They don't set the price. It's the consumer who sets the price. And if a seller is in some some form of, for lack of better terms, financial bondage, and they need a certain price. The buyers don't care about what you need. They care about what they're willing to spend for that house. And if I can segue into the fact that a realtor is your best friend when you're trying to price a property, we see— we call them FSBOs, or for sale by owners. When we see a FSBO, some of them are priced too low and they go fast, and some are priced too high and they just sit there. Well, you need a realtor to help you through that process. Uh, Shad, what can you say about that?

Well, okay, so let's, let's back up one second. I completely agree with you, but I tell people all the time and they think I'm crazy. A house is a lot like comic books and baseball cards. It's not worth one red cent over what someone else is willing to give you for it.

That's right.

Okay. You know, I joke all the time with people. When I was a kid, we were chasing Ken Griffey Jr. rookie cards because they were worth $1,500. Now I can get 15 of them for a dollar. So, you know, a house is a commodity, and so you really do need a realtor, and you need one that you can trust that's going to tell you the truth.

Excuse me.

Because if the realtor that you're working with all of a sudden is like, sure, sure, we can get you that, without giving you any data, then you've got a massive problem. They're just trying to please you and get a listing because that's advertisement for them, not necessarily They're going to actually sell your property.

They're telling you what you want to hear, not what you need to hear.

Correct.

Yes, absolutely. And, you know, I hear a lot where people start talking about price per square foot. And, you know, it's kind of funny because that's the last thing you need to be focused on. You need to look at the market conditions, the market area, the condition of the property, the features that the property offers. You know, where is it located in relation to noise levels, highway? There's so many things that come into play. Give you an example. There's a place by not far from my house, and somebody who works with my wife, they have a house in that development. Real nice development. We take our dog on a golf cart there all the time, drive by. Well, they put a road in, 2 lanes each way, and literally probably 100 foot from their house is this big wall with the highway going up over the bridge which goes over I-75. Well, when they bought that house, they weren't thinking of it. Now If they're going to sell that house, whoever buys it has got to be willing to be about 100 foot from an elevated 2-lane each-way road.

Well, that's, that's that old joke of location, location, location.

Exactly.

To your point, Steve, like, like Becky, what's the average house go in your marketplace?

Uh, they're between $350,000 and $400,000 depending on Punta Gorda, North Port areas.

Okay, what about Marco Island?

I think our average sales price down there is about $900,000.

Exactly. For— and to Steve's point, is the square footage any bigger or massively bigger parcels than what Steve's looking at, you know, on another property? Yeah, it's all location. So understanding what you've got in the market you're in is a huge big deal for sure.

Yep. The tool that I love to use, we call on our system a quick CMA. You have a section for active, a section for pending. and then a section for sold. And of course, as a former appraiser, the sold section is the most important. But I start to analyze that with a consumer to show them their competition. Of course, the pending— we don't know what the sale price is until they close, but to see what's pending in the area. And then looking at the sold, and I generally go for, what, maybe 6 months on the sold properties. Sometimes you have to go farther back depending on the uniqueness of the area and the property, but for most part, In Florida here, we can go with 6 months. But that tool gives us so much information, and it does wake them up. If they're open-minded to see what the market is calling for, you know, whatever price that might be, then you've got somebody you can work with. If they're adamant about a price that's not going to work, it just doesn't make sense. The property's just going to sit there if it's overpriced way too much out of the market. Right.

Well, I think, I think there's a lot of people that call that aspirational pricing.

Yes.

You can't price based on your aspiration. You have to price based on data. And I agree with you, the 6-month stuff is good, but like the market we're in right now is so crazy, 90 days is probably the max that I'd go back.

Yeah. And what we're talking about is, what we're talking about is comparable sales, which in our terms we call them comps. And that's very, very important because we want to go to a consumer's house and say, look, here are the comps that compare to your house. I'll tell you a funny story. I have somebody who I have her house listed, and some people knocked on the door and said, oh, we got a 2 o'clock appointment. Well, they don't have a 2 o'clock appointment. However, there's a house 3 doors from her that is the exact same model, and that's on the market for $35,000 more. So they knocked on my seller's house. By accident, went inside. They love the house. Now they're talking to a lender, you know, fingers crossed. I hope it works out. However, it was the wrong house. We're happy.

That fell into place real nicely.

Yes.

Well, I think that's what sellers don't understand, that if the house isn't positioned correctly on the market, all you're doing is advertising for other agents.

That's right.

And that's it. I mean, You know, the agent's job is to help you sell your home, and I understand that. You know, I think one of the toughest things, and I think you and Becky will agree with me, is we have to give bad news to people all the time.

Yes.

And you know, yeah, I'm sorry. You know, especially a lot of our houses that are going on the market right now were bought in 2020, 2021, where people were radically overpaying.

Yes.

Now the world's come back around. So you know, I think that's part of the problem is just understanding. That no one cares what you need, and this is the market you're currently in, and that too will change, right?

Yeah, absolutely.

How out of both of you, your house in 2008 when the market crashed, what did your next tax bill look like? Because I know what mine looked like.

Went down.

It went from $220,000 to $89,000.

Yep.

Now what changed about my house? Nothing. Nothing.

Nothing.

And so I think that's what most people don't understand, is it's literally the market that dictates what the house will sell for. And you have to have someone who can help you read the tea leaves of the market.

Well, and then if I could add to what you're saying, you have certain market trends, such as, is it a buyer's market? Is it a seller's market? And then when you hire a professional, a realtor, And they come over and they talk to you about different ways you can market your property and different things you can offer. For an example, if you have a lender you can speak to and you can do what we call a buydown, you can offer a lower rate for those potential buyers. The builders do it all the time. Why can't the average person do it? Well, they can.

Mm-hmm.

They just need to have somebody come over and explain, hey, you can do this, this, this, or this, and, and what do you feel more comfortable with? It's not always price that's a problem.

No, no, no, it's payment. It's affordability. It's payment. And I think that's what a lot of people just don't understand. So, so it's just, it's tough when you don't have an expert and that's what you need. So if you have, you know, and here's where I'm going to, I'm going to start slaughtering some sacred cows. But if you have an agent that's sitting at your table Who's talking longer about their marketing than they are about where to position your house? You've got a problem. Yeah. You know, I joke with agents all the time when I'm talking to them about this, that if McDonald's all of a sudden tomorrow priced their cheeseburger at a million dollars, but then threw a billion dollars into the marketing plan, wouldn't make any difference. A billion dollars in marketing is not going to sell a million-dollar cheeseburger. No, because it's price. It's price and exposure. So, yeah, I think that's the biggest problem. And, you know, honestly, I think sellers just need to understand and agents need to understand, you know, stop taking aspirational listings. Yeah. You know, stop putting them on the market like that. So, Becky, what are your thoughts?

Well, I mean, when you're selling your home, you want to make sure that you have— I mean, you don't want a sugarcoated you know, real estate agent. You want them to tell you the facts and then you— where you can make an educated decision. Of course, every seller thinks their house is the best house on the block.

Mm-hmm.

What's going to make your home stand out? You know, I mean, your competition. I mean, I'm hearing sellers are doing some, you know, slight upgrades to make their house stand out from the competition in the neighborhood. And I've had agents put their seller in their car and say, let's go take a ride around your neighborhood and see what else is available so you can compare apples to apples and see, you know, what other homes and what your competition actually is. You know, because the reality is, is, you know, I mean, we've all heard it, you know, the seller thinks they have, like I said, they have the best house on the block in the neighborhood, and, and it's worth $1 million more than the guy down the street. And that's not necessarily the truth. And a lot of agents, we call them, you know, list them and leave them. You know, I don't think agents right now need any more listings that aren't going to sit on the market and sell.

Yeah.

And, you know, sometimes having that discussion with a seller and, and unfortunately delivering them some bad news going, you know what, Your home is not going to sell for what you need or want for it at this point in time in the market. So either, you know, I walk away from you now, or in 6 months you're going to be really mad at me because your house hasn't sold, and now buyers are questioning possibly what is wrong with your home because it has been sitting on the market for so long. That's right.

And then unique features, like what unique features does that house have? I'll give you an example. I had a buddy who put a $50,000 outdoor kitchen In his lanai by the pool because he likes to do, you know, have a lot of gatherings, cook a lot of food, drink some wine. Beautiful. He did a great job, put a lot of money into it, and he did most of the work himself. And I explained to him, I said, look, this is an over-improvement for your neighborhood.

Yep.

This is not going to help you get more than $50,000 more than the average house. As a matter of fact, you're going to take a loss on the money that you invested in your house. And they get upset. It's like, look, I'm sorry, but, you know, if you put a $50,000 outdoor kitchen in a house that's in a million-dollar price range, that's one thing. But we were in a $200-something thousand price range, close to $300,000. $50,000 kitchen.

You just spent a quarter of the value of your home on an outdoor kitchen.

Exactly. Great. But they were adamant about it.

Great if you're going to live there.

Yeah. Yeah. Now, if they lived there another 10, 15 years, then good for them. But that wasn't the case. Wow.

And the improvements that you're doing, you need to make sure that— I guess these ways they're neutral, they may not appeal to everybody just because they appeal to you. You know, you need to always think of the resale part of it too, is, you know, is someone gonna like that, you know, turquoise, you know, what is the flooring that they're doing now? The— it's like Painted concrete, kind of. It's like, you know, and it's like a royal—

Oh, you're talking about terrazzo?

No, it's not the terrazzo.

I know you're talking about— I've seen it with the little lights in it.

Yes, yes. And I'm like, well, that's, you know, that blue might not be everybody's color, you know, kind of thing. So, um, so those kinds of things you need to be conscious of when you're doing upgrades to your homes too. I mean, that flooring sometimes can be an easy fix, you know, depending On the, you know, the material.

Another factor which we haven't mentioned yet is the timing and motivation of a seller.

Yep.

You know, and, you know, there's times that folks need to move fast. And there's times that they can move, they can let the house sit there vacant, they can cover the holding costs. It's no big deal. Maybe their company transferred them and they're going to take care of it for them, whatever the case might be. But we got to look at the motivation of the seller. You know, what is their motivation? Is this going to appear as though it's a distressed sale or, hey, you know, they're in a hurry, so let's take advantage of it? At least a buyer might think that. And, you know, but Shadd, talk about that for a moment.

So I think one of the things that sellers don't understand when they come to us and say, well, I just want to test the market.

Okay.

You know, I think all of us here get, you know, They when somebody says they want to test the market because what they don't understand is that time on market has downward pressure on price. The longer you're on the market, especially if you're on there a long time compared to what the average is, it's gonna have a downward pressure on price because people start to make stuff up. And this is what's really funny: it's not even real. But I had a house that was sitting. For a long time, and I heard everything from the agents. Well, my buyer said that there was a murder here. Like, there's no murder here, but that's all of a sudden what they thought was wrong with the house.

Somebody tried to chew them down in price.

Exactly, exactly. So it's just, I think that you need to understand that your job is to price that house so that it's on and off the market within 30 days, because if not What you're trying to do by saving your, your, your value, other houses are going on and off the market, and those are now becoming comps that the appraiser is going to use. So you're losing that money anyway.

Yes.

Right.

You know, the, the first one out makes the most. That's just the case.

And usually the first offer is the best offer. And I always tell sellers, uh, my goal in a normal market is for the property to go into contract within 30 to 60 days. That shows me that we didn't give it away. It also shows me we weren't overpriced and we had steady activity, and then we got the right offer.

Well, let's— and let's chat about that, because you as an appraiser, Steve, you know that at the end of the day, if the house doesn't appraise, it doesn't happen, right?

Exactly.

So you're not going to give it away necessarily. You know, if you go in there and get a good price for the house and then the house doesn't necessarily appraise, you just got all the money you can get That day for this house.

Yeah.

Now, a month from now, 2 months from now, none of us can read those tea leaves. But I think that most people think that they're going to get that. Let's say you do get somebody crazy, like their mother lives 3 doors down. They must be in this neighborhood and yours is the only house on the market. So I'm going to go ahead and pay you your half million dollars for your $400,000 house unless they're paying cash.

Yeah.

It's not happening.

Yeah. And a good realtor is going to make sure when they make an offer, the appraisal addendum is attached. Yep.

Yep. So I think, you know, I think the biggest thing right now is especially— I mean, we can all, I guess, agree 2020 to 2021, you know, you could have lit your house on fire and sold it.

Yeah.

I mean, it is what it is.

But now sellers are still in that mindset, though.

Yes, I think that's what I was talking about when I say aspirational pricing. I think they are in that mindset that, you know, well, there's a lot of demand. No, there's not.

Right?

No, there's not. So you need to think about kind of to Steve's point, if you need to be in Colorado in 30 days, then you need to price your house like you need to be in Colorado in 30 days.

Yes.

Right.

And that means you're not going to get every penny out of it.

Yes.

So, you know, you need to understand what your end goal is. But the good news, and I think one of the things we haven't talked about and maybe we can now, is if your house doesn't sell for the maximum amount of value, the house you're going to buy isn't going to sell for the maximum amount of value either.

It's all relative.

Yes. So you're going to make it up, right?

Yes. All right, let's talk about, uh, one of the things a seller should do is, of course, seek a professional realtor to give them some information. And part of that information would be— and I always go with the whole package— part of the information, what we— is what we call a CMA, which is current market analysis. Uh, sometimes, you know, there's an appraisal, even though both are only good for a certain period of time, very little time if you want to be quite honest. But a CMA does a bunch of things. It shows the— again, as I mentioned earlier, the active properties, the pending properties, and the sold properties. And that is very important. However, some folks get a CMA and they ignore it. Look, you can't ignore market data, raw data. You cannot ignore it. If you choose to ignore it, then look, your house is going to sit there or you're going to undersell it.

Right.

And, and, and there's a lot of things that go along with, you know, trying to sell your property, between paperwork, getting the pricing done, who's the closing agent going to be, uh, the inspections. There's a lot of things that come into play. So when you're pricing your house and you don't want to pay a realtor, you're hurting yourself. You really are.

Ultimately, you need an expert. You need an expert. I mean, at the very, at the very bare bones, not that I'm trying to talk anybody out of using an agent, Okay, but at the bare bones, if you're gonna go on the market yourself, like for sale by owner without an agent, pay an appraiser.

Yeah, yeah, I was just gonna say, what do you— how do you guys feel? I mean, we've had sellers that are just totally unrealistic and their agent is like, you know what, you don't want to take my word for it, let's bring in an appraiser because we're in an area that more than likely this buyer is going to be getting a mortgage. I'm going to spend the $300, $400 for an appraisal to come in to show you the price about what, you know, this house is going to go for.

There's a problem with that. Because, because I've done that.

Okay.

And appraisals are only good for a short period of time. One more sale in the neighborhood, that throws your figure off.

Yeah.

It does not necessarily mean that's what a buyer is willing to pay for it. And every time I've done that, the house has sold for less than what the appraisals—

Oh, interesting.

Okay. —valued the house at. So it's— it— that's a tough one. I, I think the concept is sound, but—

Well, I think the other part of that concept too is, and, and Steve, you know, I've always been told this too, is when you do get that appraisal, you have to tell the appraiser to appraise it as if it was going for a loan, not a refi. Yes. Because the refi can go much further out looking for comps and much later back. Yes. So I think there's— I think you have to have expert data at some point. Yes. And sometimes if he— if they're not going to listen to the agent but they will listen to an appraiser, That's right.

Yeah. And again, it comes that— it comes back to pricing. Like you said earlier, Shad, pricing is important.

It's getting your home sold is price and exposure, and it's not a 50/50. It's 2/3, 1/3. 2/3 is based on price, 1/3 is based on exposure. Yes. Last year, 87% of all homes, residential homes in, in the country Sold through an MLS. So that would go to say that 87% of the exposure is getting your home in the MLS.

Right. Well, and let's also talk about our buyers are a lot more savvy and more educated now because of the internet and, and the research that they're able to do on their own now. So, I mean, you have that up against you. You know, sometimes they're not always getting the correct information Either, you know, they have their own, you know, they're going to, you know, that Z website and having their own information, which isn't always accurate. So, you know, we're running into those situations too where buyers think sometimes they're a little bit more savvier than they are as well.

Absolutely. And that's the other thing too, like Steve was talking about, it's not necessarily just price. I mean, there's a lot of things that can derail a home sale that you need to take into account. You know, four-point inspections, age of roof. I mean, here in Florida, I'm pretty sure it's standard. You don't have five to seven years of life left in your roof. You're not selling your house. Yep. So because you can't get it, you can't get insurance on it. So there's so many hurdles to people, and and all of that goes into pricing and understanding what you need to fix and don't need to fix, and. You know, all of those things to get your house on the market and what makes your house more valuable versus more marketable.

Yes. And sometimes a seller may have to chew on a little bit of dirt. You know, they got to, they got to offer something to make a deal go.

Well, okay. So I talked about it in our, in one of our previous episodes. I've seen deals close in the last couple of months where the seller brought a check.

Yeah.

Yes.

And now it didn't need to be a short sale because the seller only brought like $7,500 and they had the money. But they had to bring $7,500, so they walked away from that closing with nothing. Yeah. You know, and and I think part of that when I looked back at that one property, I don't think we've talked about this, but I looked back at that property. It had been on the market 45 days longer than the average, and they had basically just been going down price drops like little tiny. So they were chasing the market.

So in reality, they probably lost more than $7,500 because they had the carrying cost, the holding cost.

Yeah, correct. That's what I looked at. If they had priced it from the beginning where they are, where they ended up, you know, even probably 10% higher, they probably wouldn't have walked away with much. They'd walked away with a little, and they surely wouldn't have brought a check. Yeah. So yeah, I think that's what I mean. Right now, you going to sell your house without a trusted advisor? Yeah, it's, it's danger. Yeah, as far as I'm concerned.

I agree. And to come full circle about, you know, how to price your house in the current market, let's have some closing comments. And Becky, let's start with you.

I think it all boils back down to is the education of the agent and their knowledge of the area and what's on the market and what's been selling and all the moving parts that go along with selling a home in that particular area, you know, whether it's flood insurance, whether, you know, whatever the case may be. And, you know, Shad mentioned 4-point inspections. Now I feel like the agent's job is to be the educator and to be the informant even more so than they were years ago, and informing the seller of all of the things that they need to be looking at and know the competition that's out there for them. Again, whether it's resales, whether it's, you know, new home construction, the incentives that they're offering so they can offer creative advice to the seller and what's going to help them get their home sold for the most amount of money in the least amount of time?

Chad, find yourself an agent that prides themselves on saving the seller's equity, that they're going to walk in, they're going to try to cover, you know, like Becky was saying, they're going to try to dot all the i's, cross all the t's, and they're going to understand exactly what it is to sell your home in this market again. If you throw out a number and it's crazy that I want X, and that listing agent goes, sure, sure, great, let me show you my marketing. Okay.

Yeah. All the marketing is not going to— it's not going to help.

All the marketing in the world will not sell a wrongly valued asset. You can throw as much money at the marketing as you want. And not that it's not going to get you showings, it will. Because the buyers are so exacerbated right now with what's on the market. They don't like it all. So they're going to come look at it, but then when they hear the price—

Yes.

No.

You need to concentrate on creative marketing. What's going to make your house stand out more than the neighbors down the street? What incentives are you offering? Those kind of things. Maybe instead of doing a price reduction, you offer, you know, they're offering homeowners association credit for the year or they're offering lawn service. I mean, I'm hearing it. I'm hearing all things across the board. You just got to really find out what's going to appease that buyer.

What makes you different? Yep. Yep. Yeah. And like Shadd said, 2/3 is based on price. Yep. And I agree. Yep. All right, well, let me do my closing comments here. First of all, this is great discussion. I hope that you folks have learned something. You know, it comes down to knowing the market data, hiring the right person that's going to tell you what you need to hear, not what you want to hear. Look at the comps, see what's going on in your neighborhood. Look at the condition of your property versus other properties. You know, it's— this is all easy stuff. You've got to accept the data as it is presented. You cannot make it up. If you're going to overprice your house, you're hurting yourself. It's— you're just working against yourself, and we see this all the time. However, you know, just look at the market conditions and You know, consider what your options are. What is your motivation? And, you know, just look, sometimes it's hard to say, well, look, if I drop it $10,000, the house is going to sell. But if I leave it where it's at, I've made $10,000 more. Well, if it doesn't sell, you didn't make the more— the $10,000 more. You know, so you got to look at what's going on in the market. And if there's a lot of properties in your area for sale and they keep dropping the price, you're all in the same scenario. Everybody's competing against each other. And it doesn't necessarily mean you need to drop your prices. What else can you offer that they're not offering?

Right.

You know, so, you know, take a look at that. And again, consult a professional. You know, you've got 3 managing brokers here. We've been around the block. I'm sure there's plenty of experienced realtors that can help you in your area. And, you know, again, our contact information will be at the end of this. Shadd and Becky, again, thank you. Our podcasts are getting better and better. This one's shorter than the typical ones, but we wanted to spend some time on this topic so that it would help consumers. And there's so much more we can say, but we kept it short. But I hope you folks have a great day and guide yourselves accordingly. We're here to help, just like many other realtors. And just do the right thing if you're looking to sell your house. Just price it properly. That's the name of the game. Price it properly. Thank you.