Rod Moser

I imagine this is happening in a lot of areas out there but I thought you might be interested to see the sharp contrast in the Cache Valley real estate market on homes below $180,000 and those $180,000 and up.

Cache County real estate market under $180,000

• 274 Homes currently on the market
• 71 Homes under contract
• 241 Homes sold in the past 6 months

Cache County real estate market over $180,000

• 434 Homes currently on the market
• 40 Homes under contract
• 176 Homes sold in the past 6 months

So, looking at the numbers you will see that under $180,000 we have about a 6 month inventory while the market over $180,000 has about a 15 month inventory. In the under market, approximately 1 in 5 homes is currently under contract while the over market has approximately 1 in 12 homes under contract.

What do I learn from the numbers? In the real estate world, time is valuable. Where I spend that time can help me be successful or can lead to my demise. What I learn from these numbers is that I need to focus my efforts on building an inventory of homes priced under $180,000. I will spend less on the marketing because they will sell faster and I will have more frequent paychecks from closings. I know these numbers may not apply directly to your market but I would bet that your market has a benchmark number. It might just help you survive the market shift knowing where to prospect.

Thanks for reading.....

The next area to consider after the target market that I discussed in my last post is the brokerage fee. Why in the world do agents charge so much to market my home? Sheesh! I know I can cover the marketing for less. How in the world could I lose money here?

To understand how 'by owners' end up at a net loss we need to break down the brokerage fee into smaller bites. Every real estate transaction has 2 sides. There is the selling side and the buying side. Now, understanding that your target market consists primarily of the investors and the experienced owners (see part 1) the party making the offer will understand how the fee works. None of the people negotiating on your home are going to allow you to take all of the savings for yourself. The reason they don't have representation is so that they can have the benefit of their side of the transaction for themselves.

Let's look at this in real numbers. Say you are selling your home for $150,000. The average brokerage fee is about 6% (obviously this number is negotiable, keep in mind that there is a reason that some agents offer 'discounted' commissions. It's because they aren't very good at their job and they have to give incentives like 'discounts' to win your business) Now if the negotiated fee was 6% the total fee would come to $9,000. Evenly split for each side, the fees would be $4500 for the buyer's side and $4500 for the seller's side. Because anyone negotiating on the transaction is going to expect the buyer's side benefit, your true cost to list with an agent is $4500 or 1/2 of the total fee. Make sense?

Now let's measure the $4500 (the cost of listing with an agent) against the benefits

Scenario 1: (Benefit - you get to enjoy dinner)

You are at dinner with your spouse. It's Valentine's Day and you ordered the 'surf and turf'. You have had your home on the market for a few weeks and the activity has been pretty sparse. Your cell phone rings, it's a potential buyer wanting to see your home, they are parked out front, "How soon can you get here?" You rush through dinner (your spouse understands because they want to sell the home too), you race home, greet the family, open up your home to them. They walk through, tell you how much they love it, thank you, and leave saying they will get back with you soon.......you never hear from them again. Why? They said they loved it......well, this is a common problem. Buyers don't want to say how they really feel about the home because they want to be polite. You never get true feedback when you are present during the showing. With an agent, you could have enjoyed your dinner and dessert, while the agent helped open your home. The feedback would have been more honest because the buyer's don't worry about hurting anagents feelings :) If the buyers truly liked your home, it is a proven fact that the 30 minutes after a showing are the most critical. Buyer's will talk themselves out of buying a home unless they are with a true professional who helps them understand and see the benefits of owning your particular home.

Scenario 2: (Benefit - your home shows even when you are at work or play and people working with an agent are pre-qualified)

You and your spouse both work but you figure most people look at homes on the weekend or evenings. You spend every weekend 'babysitting' your home, hoping to get a call. You have been to dinner a few times (see scenario 1) and you decide it is easier to eat at home. You just get started cooking a wonderful dinner and you get a phone call........They are out front (if you are wondering why the people are always out front when they call, it's because you spent $120/weekend for 4 straight weeks in the newspaper ads and didn't get many calls so you are resorting to the sign in the yard) and would like to see your home. You bring them in and apologize for the smells. These guys are super polite and you talk for a while (meanwhile, dinner is burning....but you are smart enough to exchange contact info this time). They leave saying, "We will contact the bank and get approved and call you back, we LOVE your home!" A week later after not getting a call, you call the family back and find out that they didn't qualify for enough to buy your home so they are looking at homes just a little less expensive. They are sorry because they LOVED your home.

Scenario 3: (Benefit - Your family is protected by a security lock box that monitors who was in your home and when)

You are at work (you scraped enough together from the change jar to run the ad again) and your cell phone rings. It's a potential buyer who schedules an appointment to preview your home. He schedules it when you are usually home so you plan dinner around the showing and you don't have to leave work early. Yay! He is a sharp dressed guy, looks like he has money, maybe this our buyer. Anticipation builds! He likes your home but is quiet throughout the showing. He is and doesn't want to show too much excitement. All these are strong buying signals. He leaves and says, "I'll be in touch." He calls back a few days later to schedule a second appointment. You tell him you will be out of town until Monday so he schedules the appointment for Monday.......then your home is broken into over the weekend. Ouch!

You get the point. The scenarios are endless and most of them end badly. Here are just some of the benefits:

• You stop getting calls from annoying agents hoping to list your home. This is really a huge benefit!!
• You get your freedom back! You can go on a weekend trip with the family, or dinner, or a movie.... and not wonder if you are missing a showing.
• You have a professional handling the paperwork so you make sure your rights are protected and necessary disclosures are handled properly
• All of the marketing costs are paid by the agent! Sure you eventually pay for them but instead of paying up front they are paid at closing as part of the brokerage fee
• Your family is protected with a security lock box. You aren't opening your home up to complete strangers unless they are with a professional agent
• You have a professional helping you to set the right price to market your home
• You get full exposure to the market. You are not marketing to the 13% but to everybody. This is really critical. The more exposure you get, the more money you can expect to put in your pocket.
• In the end, you will sell your home faster and will put more money in your pocket. Again, the person that lists with an agent makes on average 16% more than the person who goes it alone.

After all of this (sorry for the long post, I had some extra time tonight), aren't you better playing the averages? Sure, there is an occasional success story with a person who sells 'by owner' but the truth is they are few and far between.

The question that every homeowner asks when they are getting ready to make a move is "Can I do it on my own?" The answer is, of course you can. What you really need to ask is, "Why do I want to sell it on my own?" If the answer is, "I want to save some money." Then you will probably want to hire a good realtor.

At first glance, this sounds absurd, but after years of studies the numbers are in and they are not in your favor. There are actually many factors that play a role in this outcome. We'll look at just a few to try to help you see why homeowners who go it alone, not only don't save money, but in many instances actually lose.

The first thing we need to look at is your target market. Let's try to find out who might be buying your home. There are basically 3 types of buyers. First, there are the first time home buyers. They usually don't know where to start so they begin driving around areas where they would like to live. They start calling on the signs. It doesn't take long before they have contacted a good agent who helps them get pre-qualified, saves them time by limiting their search to homes with amenities they like and prices they can afford, and who can walk them through the ever more complicated paperwork and the steps of buying a home. When they realize that the seller usually pays the buyer's agent, there is no reason for them to do go it alone. They are much better off getting the help of an experienced agent. At this point, an agent is going to exhaust all of the homes on the Multiple Listing Service before searching the 'by owner' market for a home. You have lost exposure (you may be a last resort) and if the agent brings them by your home he will expect a commission. The other problem is the fact that you will be negotiating against an experienced agent without your own representation. The scales are tipped against you and it results in a net loss.

Next is the experienced homeowner. They have usually bought and sold more than one home. Since 87% of homes are sold with an agent, chances are they are using an agent to sell their home and therefore, are working with an agent to buy their next one. You are faced with the same scenario as before. Now, if you are only planning on working with one of the 13% who went it alone, you are working with a very limited market and exposure is once again, an issue. Chances are, the reason they didn't use an agent to sell was because they didn't want to pay the brokerage fee (makes sense, right?). If they went through the grueling process of selling on their own to avoid the fee, don't you think they will want to save the fee on the purchase as well? They will do, to you, exactly what happened to them. They will make you an offer 5%-6% below your asking price and justify it by saying, "Since you aren't using a realtor, you're flexible right?" In the end, you pay 100% of the fee (instead of paying an agent, you pay a buyer) and get 0% of the service. The ones benefitting by you selling 'by owner' is the buyer not you. Chances are it will take you longer to sell and in the end you will again be at a net loss.

Finally there is the real estate investor. This is the high volume buyer of the 'by owner' market. The reason they are so involved in the 'by owner' purchase is because they are looking for a steal. They are constantly on the lookout for a homeowner who doesn't know the real value of his home. It happens quite often and it happens in every market. A homeowner goes it alone, not realizing that he is listing his home below market. You have heard of the 'by owner' who sells his house in less than a week, he is so proud because he didn't use an agent, it went so smoothly. The buyer even paid cash! Ouch. The reason I know so much about this is because I was that guy. I sold my first home in less than a week as a by owner before I got involved in real estate sales. What a mistake. Researching the transaction, I believe I lost upwards of 12%-15% of the true value of my home at the time.

Amazingly enough, the numbers show that the 'by owner' makes approximately 16% less than those homeowners who use an agent as a national average. Now that we have looked at your target market and the 3 main types of buyers, my next blog will cover some of the other factors that can affect the 'by owner' sale.......... Thanks for reading, stay tuned for more.

So I hinted at a blog about scheduling and I think that scheduling is a great topic.

Tell me if this sounds familiar...."I got into real estate so I could be my own boss, set my own schedule, spend more time with my family, and make great money doing it!" Hmmmm....I don't know where everybody gets these ideas but they don't sound anything like the career I chose.

That's not to say that real estate isn't one of the most rewarding, exciting, and truly entertaining professions out there. It is! However, in order to do your job right, you need to understand that (1) you are not your own boss. In fact, you have probably gone from having one boss to having many bosses, (2) your schedule has to be more flexible than ever if you want to succeed, and (3) you will see your family because they are vitally important but they will have to be patient and understanding with your schedule.

There are 2 basic personalities that I have seen when it comes to scheduling. First is the pleaser agent. They drop everything every time the phone rings. They scramble to take care of every minor concern as if the world will stop rotating if they don't get new flyers in the flyer box. Then there is the agent who is never available. They don't answer the phone after 5pm, before 9am, Sundays.....or any other time that it is inconvenient for them. Neither of these situations is good. In the first case, you will exhaust yourself and your family and will soon be out of the business. If you are of the second personality type you soon won't have clients to call your phone. It is tough to play without an income.

So where is the balance? It's easier than you think. The key is in prioritizing and flexibility.

Last night, I was getting ready to leave the office and head home for some pizza and a good basketball game. The phone rang and it was a family who just flew in from Connecticut and California. Their daughter / sister had passed away and they were only going to be in town for a few days. They were trying to get arrangements made and needed to meet with an agent within the hour.....so much for pizza and basketball.

As an agent committed to serve his clients, when the opportunity to provide service arises, you make sacrifices for them.

How do I prioritize my time? ............ stay tuned :)

Agents, here is the great news. You will never be replaced. No matter who has access to what information, you will always be valuable. Why? Because you know the market place. If you want to be valuable, you need to get inside of more homes. The more homes you can get into, the more you can understand the buyers in your market.

For home owners, all you have to do is find a good agent that you can work with who knows the market well. Even if they are new, as long as they have a good support system at the office and they have put in the time seeing as many homes as possible, they can still be a great choice.

The numbers on the MLS data forms are only valuable if you know the homes that they represent. You will understand why a home sold at $83/sq. ft. and a seemingly identical home sold for $87/sq. ft. (maybe it had something to do with the animal smell or the lime green paint in the 3rd bedroom.) You will begin to understand why the Johnson home expired at $77/sq. ft. and the Jones home sold at $84/sq. ft.

Here are some hints I use in preparing my CMA:

• Understand and know the invisible boundary lines
  • These are changes in values based on locations. A great example of this is 5400 South in Salt Lake City. Homes are worth more on the south side of 5400 South than the north side. You don't want to use 5395 S as a comparable for the property at 5405 S. If you don't know the market you might miss these important invisible lines.
• Use square footage and age and location as the primary factors in your CMA
  • The number of bedrooms, bathrooms, and offices tend to add to the buyer appeal more than the value. In other words, it might help it sell faster but not necessarily for more money.
• Manually adjust things like finished basements and lot sizes
  • When searching for comparables, if you can't find enough homes in the right location with similar ameneties go with square footage, age, and location. You may need to make adjustments for finished basements and lot sizes.

The more time you spend making certain you know the market before you get to the presentation, the better qualified you will be to help your home owners. Cruise the neighborhood before you begin the CMA. Make sure you know all of the FSBO homes as well as the listed homes in the area before you get there. You may not include them because they aren't comparable but you better know about them so when you get asked a question you don't look like a rookie!

I hope this has been worth while reading. I know when I first started, I was the guy making all the mistakes. If I can help give someone a leg up so that they go through a little less of the pain that I had to endure starting out, I'll feel like it was worth it.