Email ElizabethRaising the Sales Price When a Home is Overpriced is a Bad Idea
Raising the sales price when your home doesn’t sell because it’s priced too high for the market is a screwball strategy that some sellers employ for various unknown reasons. Well, if you ask the seller he might say that a home down the street, for example, was just listed at a higher price, which in his mind would justify the price increase, even though it’s the wrong way to look at it. If anything, an overpriced home down the street will make a reasonably priced home sell faster.
Homes that are for sale in Sacramento are not necessarily homes that are for sale. The list prices of those homes are pretty much meaningless and carries little weight if there are no offers. A sales price is an enticement, like bait on a fishing hook, but there is no guarantee a fish will bite it. Not only that, but it might be a plastic lure disguised as a tasty treat. Not every home that has a for sale sign in the yard is a home that is for sale. That’s where home buyers’ and home sellers’ perceptions can slide sideways.
What matters are the pending sales and the sold comparable sales because those are the homes that real home buyers have purchased. Those prices are indicative of the marketplace. They show what another home is worth.
Then, you’ve got condition. A home in poor condition will not be attractive to many first-time home buyers. Investors in today’s Sacramento real estate market want a good deal, and to the investors I talk with and receive offers from a “good deal” means paying less than market value.
Bottom line is in today’s fall Sacramento real estate market, when you’ve hauled in a big fish and it’s flopping about in the boat, the thing to do is knock it over the head. You don’t throw it back in the water when you plan to eat it. You don’t say you need to catch a bigger fish if it meets minimum catch guidelines. And you don’t raise the sales price because you don’t have any offers.
Give home sellers enough time, and they’ll come to that conclusion on their own. The thing is they generally end up paying for those decisions.
Telling Sacramento Sellers What They Don’t Want to Hear
You can’t really be an effective Sacramento real estate agent if you’re not willing to tell sellers what they don’t want to hear. That means you have to figure out how to share bad news in such a way that people don’t immediately take off their shoes and start beating on your head. There is a way to frame bad news. Not necessarily like the cat on a roof story.
I don’t know how one can expect a seller, for example, to make a decision without all of the information necessary to weigh the facts and come up with a response. I suspect that some real estate agents are too worried that they will hurt another’s feelings or worse, that maybe the seller won’t list with them if the seller gets upset by the news. But you can’t tiptoe around on little cat feet. That’s not helpful for anybody.
Not everybody appreciates a person who is straight forward and direct. There is a way to be straight forward by tempering the news a little bit because if you just blurt it out, in our present society, people will accuse you of being rude. Oh, my god, my ears. What did you say? I’m ugly and people don’t like me? Of course if you don’t care what they think — and sometimes, let’s face it, we don’t — then it doesn’t matter.
A guy called me this morning to talk about his listing. He was unhappy because his agent doesn’t communicate with him and makes him feel like he is not a priority. He gave me several examples, so I have to kinda agree with him, even though I realize there is always another side to every story. He said he knew his listing was priced too high but he needed that amount in order to pay off his loans.
What?
Why didn’t anybody say anything to this poor guy? Why are they letting him rot in MLS, hopeful yet frustrated? This makes no sense to me whatsoever. He talked to several agents. Even if they explained the truth and he didn’t listen, it still doesn’t explain why his home is in MLS the way that it is.
Fun Facts About Sacramento SUPRA iBox Exchange for Lockboxes
If it’s not bad enough that people knock Sacramento for being a good place to live because it’s within driving distance of better places to go, we also seem to get the short end of the stick when it comes to our SUPRA iBox exchange for lockboxes we purchased through MetroList. I wouldn’t be surprised if Randy Newman writes a song about it.
For starters, for being the 5th largest city in California, we seem to be last on the list for getting the iBox BT LE upgrade. This is a new Bluetooth-enabled lockbox that reads both infrared, apparently, and bluetooth signals. I feel like I’ve been waiting forever to get it. The real estate agents who belong to the Bareis MLS in Marin got their iBox upgrades in January. They also received a 1-for-1 exchange, and their MLS allowed an agent’s representative, with written authorization, to do the exchange.
Not so in Sacramento. Here it is almost Halloween, and our iBox Exchange was just announced for November. The dates are November 17th through November 20, 2014, and it’s by appointment scheduled by your last name, so you know where that puts yours truly, at the bottom on the last day just above the Wisemans. Plus, MetroList is not offering a 1-for-1 exchange. I don’t know why MetroList could not negotiate the same deal with SUPRA that others did around the country. Nope, it’s a 2-for-1 exchange, which means for every two lockboxes we turn in, we get a new iBox BT LE. That’s probably not a big deal for many agents who might own only two lockboxes, but by my estimation, I own roughly 70 lockboxes, and at $108.75 a pop, that’s over $7,600 invested in these lockboxes.
I hand them 70 boxes and I get 35. Thanks for the highway robbery, MetroList.
Look-it, besides Bareis MLS in January, St. Louis MLS got their iBox Exchange in March 2014. Charlotte, North Carolina, finished their exchange a while back, too. But Sacramento, the capitol of California, will be lucky to get it done by the end of next month.
From what I can find, other MLS systems have fully allowed their agents (subscribers) to own the lockboxes upgrades received through the exchange, but our Sacramento MetroList will only “lease” them to us if we exchange them. They’re not yet telling us how much the lease payment will be, as that apparently will be disclosed to us after we stand in line to exchange our lockboxes. We have to pay off the lease in full to own the lockbox. (They do say if we buy and not exchange the new iBox, it’s $115 plus tax and we own it outright.)
MetroList won’t let us send a representative in our place to exchange the lockboxes, either. To participate, I would have to borrow a larger vehicle that can transport my Red Radio Flyer wagon, which I would then use to cart all of my lockboxes into Cal Expo. Or, make 17 trips on foot in four-inch heels.
These guys at MetroList are tough. No 1-for-1 exchange, we’ve gotta go there in person, and when they’re finished beating on us, we don’t even own the lockboxes.
But with the downside of everything, there is always an upside. Sometimes, you’ve gotta squint through rose-colored glasses to find it, but it’s there. The upside is the new containers are much bigger. They are large enough to hold 5 sets of keys and 2 security cards. Can’t quite stuff a remote control in there yet, but a larger capacity is a great benefit. I will no longer be required to slam the lockbox onto concrete to jangle the key loose.
Also, SUPRA says the lithium batteries never need replacement. That’s probably because the batteries are inaccessible and by the time they’re about to expire they’ll come out with a newer iBox and offer a 5-1 trade. From what I could find, the iBoxes in St. Louis are warranted for 6 years but here in lovely Sacramento, we supposedly get a 7-year warranty, with no explanation why we get that extra year over St. Louis. The battery life is extended because it shuts off when not in use. This is good because some of my old 280-series boxes have no juice left at all, and the 530’s and 535’s are getting low.
Another benefit is A Sacramento real estate agent can also use her new iPhone 6 without a key fob to open the iBoxes, but if she uses an ActiveKey that particular device will continue to work. The problem with the eKey systems seems to be that it takes two hands to open the lockbox. One hand is required to push up on the container before engaging with a cellphone held in the other hand. I’ll probably stick with the ActiveKey because it’s been completely reliable for me. They say the eKey will work even if there is no cellphone tower as long as the app has been activated that day, and I can’t remember to do that. I’m lucky enough if I remember to turn on my phone, which I no longer have to do because the iPhone 6 automatically turns on when unplugged.
A pro and con is the fact the lockbox shackle is now completely removable from the lockbox. This means I don’t have to try to wiggle into a small area with the entire box to try to latch it over a pipe, I can just slip in the hook portion to determine if it will fit. The downside is I imagine once it has been released from, say, the gas meter, the lockbox itself will fall on your foot. And then I will stub my toe. Again.
Plus, I have the added benefit of being one of the very last agents in Sacramento to get her lockboxes on the very last day offered, which is also, according to MetroList, the last day all of the old lockboxes will work. It sounds like they expect me to immediately turn around at 5:00 in the evening and somehow drive to all of my dozens of listings to exchange out the lockboxes or the old lockboxes will no longer open. The old lockboxes won’t work when the exchange is finished, says MetroList. I wonder if they thought this through? Other than how to turn our pockets inside out and shake us upside down, I mean.
For an update on this situation, please see my followup piece: How Sacramento MetroList iBox Exchange Affects Home Sellers.
What is Wrong with the Elk Grove Housing Market?
It’s not just sellers of homes in Elk Grove who are asking what the hell is going on in the Elk Grove housing market. Sacramento real estate professionals are also baffled because they tell me so. But whenever I am perplexed, I search for answers, and I think I’ve figured out what part of the problem is with our Elk Grove home buyers this fall, and also part of what’s wrong with the Elk Grove housing market.
Let me also mention that this phenomenon seems to be isolated to Elk Grove / Laguna. I sell homes from Galt to Lincoln, and cover a wide sales territory over many counties in the Sacramento Valley, and the only place where this situation seems to exist is in Elk Grove and Laguna.
This spring, buyers were snatching up homes like crazy. I call these guys our Tier 1 buyers. They were motivated, had the bucks, were pre-approved and wanted to close escrow on a nice home in Elk Grove. Didn’t matter if the ZIP was 95624, 95758 or 95757, all three of those ZIPs experienced similar market movement across the board. Elk Grove or Laguna, homes were moving.
Now, we have what I call our Tier 2 buyers and our Tier 3 buyers, the ones who aren’t necessarily all that motivated, and might, maybe, perhaps, purchase a home if it fits all of their criteria and is priced right in the right location with the right amount of amenities and upgrades. If a home is missing one of those things, a Tier 2 or Tier 3 buyer is likely to pass it over in favor of another. They also don’t have a lot of financial security and many are unable to pay closing costs. They typically buy with leveraged financing above 80%. Not only that, but these buyers are obviously writing multiple offers, which is wrong on so many levels.
I don’t know if they’re doing it through one agent or multiple agents leaving the others clueless, but they write the offer they want on the house that they want the most, knowing that they might not get it because others probably want it, too. So, then they write an offer on their second-choice home. Because that home is second choice, they feel it doesn’t deserve the same consideration as their number one choice, so they sign lowball offers, ask for all sorts of concessions and then wait to see which way the wind blows.
On the other hand, our absorption rate in those 3 ZIPcodes in Elk Grove is 41%. A year ago in July it was 75%. You calculate an absorption rate by dividing the number of closed sales by the number of homes for sale. Our inventory is almost double over the past 15 months and by any stretch would be considered low at roughly 2.4 months. MLS reports we have 454 homes for sale in Elk Grove, with an average square foot price of $175 and 52 days on the market.
I guess I will now need to advise sellers to put into a counter offer that the buyer promises there are no outstanding offers floating about on other homes before we enter into an acceptance. Because when I ask agents if their buyers are serious, the answer I received this morning from a buyer’s agent was, I kid you not: “I don’t know, let me ask.”
Homes are closing in Elk Grove, and I’m living proof that it’s happening, but what a trip. One can’t be an emotional tree-hugging softie in this kind of real estate market, and sellers really need an assertive agent. A new client mentioned a few days ago when I was out at her home that the reason she wants to hire me to represent her is because I’m tough and firm but nice about it. I prefer to think that I am focused with thick skin. I work hard to get the job done.
Farm to Fork in Sacramento Real Estate
Flexibility is the name of the game in today’s Sacramento real estate, the farm to fork capital in California. If you’ve absolutely got to net a bazillion dollars for your home in order to sell it, this might not be the time for a home seller in Sacramento to be on the market. Unless you don’t care how long your home sits on the market and, in that case, the buyers will — they tend to avoid looking at homes with long days on market. Those homes hold appeal like stale bread.
Sellers don’t write the rules anymore because it’s a more balanced real estate market in Sacramento. The faster a seller catches on to market swings, the faster her home will sell. The low hanging fruit easily falls first but the rest must be yanked off the stems. Here’s a tip: don’t study stats on Sacramento real estate market movement from last spring or this summer or even early fall. Look at what the market is doing right now, this very minute, and you’ll find your answers to market movement. Then, put a fork in it.
Every so often, we run across a seller who says he needs to sell his home at list price. We might receive an offer from a buyer who wants to pay a little bit less, which is not unusual in the market today. This same buyer might also demand a big closing cost credit on top of a price reduction from market.
This situation is a bit like oil and water. You can shake it up, but let it rest a few days in escrow and it separates again.
Throw into the mix a seller who declares that the net profit must be X, and that’s a salad going nowhere. Some sellers think a solution is to reduce the agents’ commissions, but that is not a reasonable expectation, either. You don’t ask an agent to provide superior service, to bring a buyer to dinner, and then kick him in the gut when he performs.
Real estate agents are just the waiters. We bring you the food, we pour your wine, we pick up your fork when you drop it on the floor. You should not refuse to tip us because your steak was too well done.
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