My Advice on Selling Your House

Last month I told a friend not to do a for sale by owner. In that post I went into detail why you need to court buyers agents more than ever. Someone asked me what I would do if I had to sell my house now. Before I outline my plan, let me first state I’m not in the real estate industry. For almost one year I had my first house up for sale. During that time I learned a lot.

Here in San Diego, inventories are rising and sales are falling. This is not a recipe for getting top dollar. From No Spring in Real-Estate Step:

In 2006, spring has seen record numbers of people lining up to sell their homes, but there’s been no subsequent rise in the rate of sales. Indeed, sales activity in April 2006 was down 30.7 percent from April 2005, despite the existence of almost 20,000 homes for buyers to choose from. That’s the biggest year-on-year decrease in sales rates since April 1995.

In this environment you need to go for the quick sale. This isn’t 2003 when homes would appreciate while they were on the market. Sell before your neighbor drops their price.

  1. 4% Buyers Agent Commission: Yes, you heard me correctly. When there are 20,000 homes on the market you need a big piece of candy to catch the eye of the buyers agent. Many of the new home developments that for years wouldn’t even pay a dime in buyers commissions are now offering 4-6% commissions. These companies recognize the importance of selling their product quickly and preferably before you sell your house. Follow their lead and raise your buyers agent commission to 4%. 2007 UPDATE: Instead of 4% commission, I now advise 3% and taking another 1% off the price of the home.
  2. Price To Sell: You should have your house priced better than at least 90% of the homes in your area. Yeah we know you have upgraded counter-tops and a better view, but many buyers will not have the time to see every property to find that out. Price yourself higher than your neighbors and they won’t even look at your house. Also, you should force your neighbors to lower their house price as a result of your sale, not the other way round.
  3. Seller Agent Rules: Ask your seller agent at what price they can sell your house in 90-100 days. Tell them you will show they house in whatever manner they wish with no hurt feelings. Don’t give them any excuse to fail and ask for an extension. If they fail, fire them and hire another agent. Start the interview process before your contract runs out. Hiring a new agent resets the clock on your days on market. Offer the seller’s agent 2% commission. If they complain, tell them to chase down the buyer and they can get the full 6%. Only hire the top recent performers and never hire a friend.
  4. Demand Professional Print Marketing: It should seem like common sense, but you don’t take a photo of a $700,000 house with a $300 point-and-click digital camera. My house sold as a result of using a professional photographer and excellent printed fliers.
  5. Don’t Debut Until Everything is Ready: Many of the serious buyers are checking for new listings daily. Your listing should be perfect on day 1. The house should be spotless. The yard should be perfect. Photos and flyers finished. The listing verbiage should be agreed upon and without any errors. The layout for the newspaper ad should be completed. All this should be done BEFORE your listing goes live. You do not want to burn off opening week while your agent is still dealing with the printer. Debut perfect and the serious buyers will come.
  6. Work With Your Neighbors: Last summer a group of competing agents in the 92025 zip code got together and created a joint ad for the homes for sale in a gated community. The result was they had a high open house turn out. Meanwhile, the agents in my gated community refused to work together and nobody showed up to our open houses. Only after I took the lead with my RanchoSanPasqual web site did inventory start to drop. Although your primary goal is to sell your house, your secondary goal would be for your neighbors to sell. This reduces the inventory and keeps the days on market lower for your area.
  7. Weekly Meetings: Demand weekly meetings with your agent. They should have an open house and show up with copies of any newspaper ads ran that week. For most people selling a house is an emotional process. The meetings with your agent should be handled business like.

Good luck if you are trying to sell your home this year in San Diego. Go for the quick sale and be tough on your sellers agent.

3377-Holly-Oak-Lane 2002

Legacy Comments

Derek

Mas, have you ever read Freakonomics?

There’s a great chapter in there on the value of the services of a realtor. The bottom line of their study is right in line with my personal experience: that realtors do little to enhance the sale-price of your home. I don’t think they specifically studied the time-to-sell factor of a FSBO vs. a realtor-represented home, though–that would be interesting.

Your list is full of great things you can do to sell your home, however. Almost all of them can be done as a FSBO 😉

MAS

Buyers agents will NOT take their clients to FSBO. They will take their clients to the listings that offer the highest commission to them.

I’m not against FSBO when inventory is low. I’m against it when inventory is high and prices are falling.

My agent earned his commission because I pushed him. Most agents are lazy. Real Estate today is like the dot-com period was for us. Any loser could get a job as an HTML Engineer (ha!). Once the bubble burst those “coders” left the industry. Real Estate will have an equally great shake out in the next few years.

Derek

When I say FSBO I should clarify my meaning. With that term I am including the use of a flat-rate discount broker in order to get your home listed in the MLS, etc. You can still offer the buyers agent the usual 3% or 4% that way.

Real estate has always been an easy-entry profession. It just gets “hotter” when prices start to go up and the dogs start drooling at the potential commissions they could earn with little work.

MAS

Agents suck, I agree. Most will lose their job in the next few years. However, great agents are worth every penny.

For a year I closely monitored every sale inside our gated community. I looked at days on market, which agent was selling and any price movement. Not a single FSBO sold. Every one gave up or went with an agent.

In San Diego inventory is rising fast and prices are starting to fall. This decline is happening at a greater clip than the amount of commission the agents will ultimately earn.

This advice most likely would not translate to Columbus, which has one of the most stable housing markets in the country.

Derek

Yeah, the housing market in Columbus is very stable…which also translates into not-very-profitable. But I don’t really look on my house as an investment too much. I know it is in actuality, but it’s not a very good one compared to most other things one could do with the money. At least not here.

I do keep an eye on things in my neighborhood as well, though, and the same things are happening here that you describe in the market in San Diego. The inventories are rising and the pressure is driving prices down this year. I don’t know if this is a real-estate “bubble” or not but it looks to me like the next few years could be very favorable for buyers.

I despise agents but getting a good one could be worth the money. But it’s hard to find a good one. Agents have historically just exploited their informational advantage (or monopoly) to garner their commissions–in lieu of doing any real work. That advantage is diminishing rapidly with all the resources available on the internet.

I’d like to see real-estate agents adopt a fee-for-service strategy where I simply pay them for their time as needed… like a lawyer. That would certainly get rid of all the dead-weight out there just trying for the easy bucks.

Socially Irresponsible Investing

There is this concept in investing called Socially Responsible Investing (SRI). According to Wikipedia:

SRI investors seek to align their personal values and financial goals by choosing to invest in companies and organizations displaying values comparable to their own.

Whatever. The goal of investing is to earn the highest possible return and then spend your gains in line with your own values. In other words, how you spend your gains is more important than how you earn them.

I value eating a healthy diet. Last year I bought and sold McDonalds stock and earned $200 on a quick trade. Now I don’t eat at McDonalds, yet I was able to take the $200 and buy healthy food for myself. The beauty of Socially Irresponsible Investing (SII) is that I’m taking cash, in the form of a dividend, from the consumers of irresponsible products and services.

I’ve mentioned in the past that I love high gas prices. It’s one thing to save money by driving a fuel efficient car, but Socially Irresponsible Investing allows me to profit when other consumers don’t share my values. In other words, drive a Hummer so I can drive for free.

I’m also heavily invested in MO (Altria). This company is better known as Philip Morris. Even though I’ve never smoked a single cigarette, I just love pocketing the 4.4% dividend this company throws at me each quarter. Second-hand smoke used to bother me, not anymore. Smoke up and destroy your health, so I can spend your vice money when I retire.

The SRI crowd could poke at me for investing in McDonalds and Altria as endorsing products that increase health care costs. It’s true that 75% of all health care costs are associated with preventable diseases. So why not make some money there as well? As a non-smoker that eats a healthy diet and exercises, my biggest investment is in UNH (UnitedHealth Group). Even though I hopefully won’t be a big lifetime customer of healthcare products, I’d like UNH to go in there and liberate some of that money and send it in my direction.

I could go on and on with examples. Maybe I should buy into a casino? As someone who has never gambled or even bought a lottery ticket, wouldn’t that be the perfect SII investment?

Summer of George

Today I gave 2 weeks notice to my employer. I have been at the same job since January 2002. It’s time for a change. I don’t have a new job waiting for me. At this time I don’t want or need one.

This will be my Summer of George!

George: Severance package…The Yankees are giving me three months full pay for doing nothing.

Jerry: They did it for three years. What’s another few months.

George: I’m really going to do something with these three months.

Jerry: Like what?

George: I’m gonna read a book. From beginning to end. In that order.

Jerry: I’ve always wanted to do that…

George: I’m gonna play frolf.

Jerry: You mean golf?

George: Frolf, frisbee golf Jerry. Golf with a frisbee. This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!

Legacy Comments

Joe

get OUT!

Chuck

Sounds like fun.

Matt

Good for you!! I applaud you for doing that!

Derek

Aw, man, I’m jealous. I could use a Summer of George…