Selling A Home?  Learn and Save Money, Stress and Headache! Part 2

In Selling a Home, knowledge equals less Stress.

Photo Credit by PlusLexia.com

The Lannister's were very excited about learning what they need to do when selling a home - their home.

I arrived 10 minutes early for our meeting.  They greeted me warmly and I was very excited to meet them.  They were a very nice couple and very welcoming.

After our greetings, I asked if I could put my paperwork at the kitchen table while they give me a tour of the property.  The said, “Of course.”

Jaime was very excited to give me a tour.  He showed me what they’ve done to the property since they’ve moved in.  I asked Jaime if he could write down approximately when they did the improvements, what they did and give me a copy. He said yes.  I told him that this list would be a good marketing material for us.

I told him that transparency is going to be our theme when we market their home.  The more the buyer knows about their home, the more comfortable they will be when making an offer.

Selling a home should be more transparent.  It would make the entire process more enjoyable and less stressful for all parties.

We sat down at the kitchen table after the tour.  They offered me a glass of water, which I happily accepted.


LEARN HOME PRICING STRATEGIES THAT GET YOU THE HIGHEST OFFER!


“Cersei and Jaime - Thank you so much for having me over tonight.”  I started our interview.  I then asked them, “Did you get a chance to read the package I emailed you?”

“We did.”  Jaime answered.

“Do you have any questions regarding what’s in that package or about me?  I asked.

“No.  It was very thorough." they both answered.  They said, they would really like to get to pricing as soon as possible.

“Good and we'll get to that very soon”  I said.  “Let’s quickly go over my questionnaire just to review your situation and so we’re all on the same page, okay?”

They agreed and we went over the questionnaire.  Then moved on to going over the Comparative Market Analysis (CMA) to determine the value of their home and what would be the best price to set on their home when marketing it.

When selling a home or when buying a home, the CMA is a tool used (to both buyers and sellers) to determine the value of the home, based on FACTS - meaning the price of comparable homes around the property that have CLOSED and the title of the home has been recorded under a new owner.  Click here on how to do a proper CMA.

"Oh, good!  Just what we've been looking forward to."  Cersei said.

I continued... 

...  Let me emphasized how imperative it is that we leave out as much emotion out of pricing your home as possible.  I know that selling a home can be emotional and frustrating.  A lot of times, sellers aren't as prepared as they think they are, but we need to make a decision on the price based on the facts and other important information that the market is giving us.

Selling a home is only half of the process.  There is also the buyer's side and what we're about to do is what any decent buyer's agent would do for their buyer before making an offer.

I understand how easy it is to be emotional about your home - especially if you’ve done many of the upgrades yourselves, ...  Watch their children grow up in the home, etc..   There are a lot of memories here.  I understand all of that...

 ... Unfortunately, the potential buyers and the buyer’s lender will only care to not overpay on the home.  What the buyers and their lender will do is do what we’re about to go into in detail.  

I repeated that sentence again…  What the buyers and their lender will be doing BEFORE CLOSING ON THE LOAN, is review, in detail, what we’re about to review and there will be NO EMOTIONS involved…

I continued and asked them to play a little game with me.  I asked the to... 

When Selling a Home - Pretend You're the Buyer!

Imagine you are a buyer and I’m your agent.  We’ve looked at homes and you finally find a couple of homes that you absolute love.  You choose one that you want to make an offer on.

The first thing we’ll do is pull comparables on the home and do a CMA.

Unless you’re paying all cash for your purchase,  your lender will only give you a loan based on the value of the property you’re buying.  The home is the collateral for the loan.  Therefore, they want to make sure the home will appraise for the same amount (or higher) than what they’re giving you.

We have to make an offer that makes sense and stands a good chance of closing without a lot of headache and knowing the value of the home helps us with that.

It's never good to have valuation issue in the middle of the transaction when you've spent your hard-earned money for inspections and for the appraisal (total of over $1,000).  Therefore knowing the value of the home by doing a really good CMA will give us a much better chance of a smooth transaction.  However ...

If we get our offer accepted and the agreed upon purchase price is higher than the appraised value, then, as the buyer you can then decide to:

  • Come up with the difference between the offer price and the appraised value
  • Ask the seller to lower the agreed purchase price to the appraised value
  • Negotiate with the seller to come up a certain amount above the appraised value, but less then the original agreed upon purchase price.
  • Or terminate the transaction and get their initial deposit back

So, it is imperative that our offer is at value or a bit over, if you have the cash to come up with the difference.

Make sense?

GOING OVER THE CMA

So, we went over, in detail, the following:

  1. The map of where the comparable homes are located and the distance from their property
  2. The size of the home and lot
  3. The number of bedrooms and baths
  4. How long those comparable homes were on the market before they accepted an offer
  5. The condition of those homes
  6. What price did they close and if...
  7. Whether those homes closed giving credit towards closing costs to the buyer or not
  8. And many other items…

They gave me a couple arguments why their home should be priced higher.  I told them I understood why they felt that way, but in order for me to do my best for them and look out for their best interest, I had to stick to my guns.  I went back to the facts on paper, which AGAIN, will be the same facts the buyers and their lender will be looking.

I told them that if the lender sees the facts and determines the buyer’s offer price is way too high, then they will deny the loan or only offer a loan amount UP TO that appraised value, because the home is THEIR collateral.

Jaime said jokingly, "I don't like what the market was saying."  However, he understood why I was so adamant with sticking to my guns.  He knew I was showing them the actual facts and I did not make up the value out of nowhere.

They did try one more time to get me to change my mind, then came down to earth once I went over the facts again.  Deep down, they knew the market was correct.

THE "NET" SHEET

Don't get caught by surprised.  Know the numbers.

Picture provided by Ashleigh Nushawg

Selling a home involves numbers and you want to know the bottom line.  Therefore, while they were discussing the facts, I pulled out the net sheets so we can go over how much they'll walk away with after all is said and done.

The Net Sheet is a document that shows the seller how much they’re going to NET after all expenses, like closing costs and other fees, are deducted for the sale of their home.

I gave them their copy to review along with me.  I showed them that based on their timeline, we can price their home accordingly.

  1. If they don’t have to sell quickly, then we can price the home slightly higher and see what the market says.
  2. If they need to sell quickly, then we need to price the home slightly lower than the market value and market ti accordingly
  3. If they’d like to sell soon, but have some time to wait, then we can and should price it at the market value.

Then I told them...  My recommendation is to go ahead and price it slightly lower (1% lower than market value), no matter your timeline, and create an auction effect so we can receive multiple offers, which increases our chance of netting a higher amount.

I mentioned again that there is no better marketing of their home than pricing it right.  We can spend a million dollars on marketing and drive buyers to look at their home.  However, that is all they would do - they'll look, but make no offers.

If someone does make an offer, more often than not, it will be a low-ball offer.

They were in deep thought and I did not want to disturb, so I stayed silent until they said something.

A minute seemed like 10 when everyone is silent, then Jaime asked me if I could lower my commission.

I said, “Sure, if you lower the price.” 

They didn’t like my answer.  I told them I wasn’t being a smart aleck.  I was simply telling them no. 

I explained to them how the commission they pay me does not all go to me.  My company gets a huge cut, my transaction coordinator gets a cut and other 3rd parties that I use to help me sell their home gets a cut as well.

Then I asked, “Jaime.  If your employer asks you to take a pay cut for doing your job, would you take it?”

He shook his head and indicated, “NO.”  They both understood where I was coming from.

I said, "I know you want to net as much as possible.  By pricing your home properly from the beginning we will can create an auction effect and have buyers fight over your home.  This is the best way to make more money from the sale of your home. 

They were deep in thought once again and once again I stayed silent and let them discuss and think.

I can see the wheels were turning, then I asked...

DO YOU KNOW WHAT HAPPENS WITH OVERPRICED LISTINGS? 

Wondering why no one is looking at your home?  It's Overpriced, that's why!

Picture provide by Kay Kim

When selling a home, pricing it correctly in the beginning is a must!  Overpricing a home is never a good idea.  Here's what happens when it's overpriced:

  • Stay on the market longer and possibly expire - not good!
  • I’ll have to keep chasing you down to lower the price - do you want that?
  • Chasing the market down - meaning, unless you have one large price drop, the market will always think you're still overpriced.  The one large price reduction gets their attention.
  • All our marketing won’t help it.
  • Buyers will come, but won’t make an offer.  If they do, it’s at a much lower price.

I asked them, "Do you know what agents think when a home has been on the market for a long time?"

After 14 days, your house starts to sour in the buyer’s eyes and the agents will start to wonder as well.  Showings will drop considerably.  The first thing we think of is the property ie ether overpriced or their is an issue with the property's condition. 

After 21 days of selling a home and the price has not been dropped, the buyers and agents start to think that the seller will be hard to work with and thus they are hesitant to make an offer.

"You don't want that, do you?"  I asked and they both empathically said, "NO."

"Great!" I said. "I'm glad you feel that way."  Then I gave them a big heads up.

"Keep in mind once you lower the price, it’s not guaranteed that you’ll get an offer right away.  If we have to drop the price, let's not nickel an dime it.  Let's have one large price drop and get the buyer’s attention and get excited about the property. 

Cersei spoke and said, “Okay, let’s do it!  What’s next?”

Go Back to Part 1          Continue to Part 3

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About the author: All of the articles in this site were written and provided by Rico Castillo (DRE# 01234643) with Coldwell Banker.  If any information is provided by another source, such as the local MLS or by Metrolist, then a disclaimer will be on that page.

Rico can be reached by cell at (916) 934-3146 or email at rico.castillo@cbnorcal.com.   Visit his YouTube Channel at https://bit.ly/3bAaZJs

My aim is always 100% client satisfaction by helping you accomplish your real estate goals and finding you the home you've Dreamed about in the area you and your family can feel proud and safe to live in!