Agents Should Be Careful What They Say

There I was in the midst of an all too rare real estate sales story with a positive slant when a quote segment from a local agent took the wind out of the sails.

This business story about the increase in home sales during the month of March along with a dip in housing inventory 'should' be the best possible news for current sellers as well as real estate professionals to come along in quite some time.

As much as I preach to agents that I provide either media coaching or advertising critiques or assistance for that you need to get the name out there and be a local "expert", a big part of this process is most definitely saying the right thing at the right time.

Normally, being the only agent quoted for a San Diego Union Tribune story appearing in the Business section would be a wonderful thing for a local realty agent:

https://www.utsandiego.com/news/2012/apr/17/spring-homebuying-season-heating/

However, the section about agent Clemente Casillas clearly hurts the cause. Saying, in effect, that it's too soon to tell and "could be a fluke" and revealing that Casillas had a listing on which there were "no calls" until the price was reduced were actually damaging things to say.

Bad publicity is not always better than no publicity, especially in this case. Casillas seemed to have overlooked the "message" she sent out to thousands of local home owners by those quotes.

Some of the readers are certain to "believe" that if a an agent prominent enough to be quoted in the major local newspaper is not convinced that the market is improving ("could be a fluke") that there is no reason for them to think so either. And more properties will sit for even longer.

Other readers who might be considering looking for an agent to help with a sale or purchase now are aware the Casillas carries listings which are not priced right, as evidenced by publicly admitting that there were "no calls on it" until the price came down.

In other words, this golden opportunity Casillas had to make the local real estate community AND herself look good to thousands of readers went down the drain because of a couple of quotes.

I also understand that Casillas wanted to be quoted for the story and needed to have an angle to be sure quotes were included. But they should not have been damaging ones, nor did they have to be.

All she needed to say was something like "I hope this trend is here to stay, even if it is too soon to know for sure. I can tell you that I had a listing that has been getting calls lately after a slow start."

Not to make an example out of Casillas, but the point needs to be made to other realty professionals and to current and potential home sellers. An agent is supposed to be positive and show the positive about the current market, rather than telling thousands of people it "could be a fluke". An agent is supposed to walk away from a home in which the seller wants an unrealistic price in today's market, let alone reveal that it "wasn't getting any calls".

Instead, the only positive I got from her quotes is that I'm glad she doesn't have any listings for anyone I know.

It's not what agents "think" about the current state of the housing market. It is what they are doing about it that matters.

Do home improvements benefit buyers OR sellers more?

Home owners willing and/or able to fix up before selling will find it interesting that making improvements on the exterior pays off more within the warm weather states.

Remodeling Magazine has released many of the results of its "Remodeling Cost vs. Value Report" and there is a lot be learned from it. Many home owners think that doing even a small remodeling or home improvement job will automatically increase the resale value. Not always the case.

The study shows only one project, which is exterior, actually brings a higher direct return upon the investment upon sale, and this is primarily within warm weather states. Only a "steel entry door replacement" shows better than a 100% recoup of cost upon sale, showing an estimated 102.1% "return" upon resale.

Exterior improvements made more of a difference in the "return" along the west coast (Washington, Oregon, California) and along the South and Southeast corridor extending north only to Virginia and West Virginia.

As with most statistics, there are a number of ways to look at the impact. Sellers who think that by spending $5,000 on a home improvement they could then raise the asking price by $7,500 or more are going to be in for a disappointment.

Among the next highest exterior remodeling projects were upsacle fiber cement siding replacement recouping approximately 80% of the cost. Upscale vinyl window replacements and a wood deck addition each showed an approximately 72% of costs recouped upon the sale of the home.

A "minor" kitchen remodel finished among interior remodeling or improvements at around 72% of cost.

In other words, this annual study again shows that an improvement or remodeling project does not automatically increase the actual value of the property. Rather, (and generally speaking) its purpose is to accelerate the sale process of the property.

If your house shows with more quality, upgrade, or improvement work done recently when compared with similar houses within your community, the chances are better that the one buyer you need will be more willing to make an offer on your home first.

Since the vast majority of buyers and sellers are not aware of this study, learning about its findings could be a nice benefit for either situation.

A buyer, when told of or noticing an interior or exterior improvement or remodeling now has the means to point out that it does not mean an automatic raise in the value of the property, and maybe shouldn't be (in effect) "charged" $10,000 more in the asking price based on a $5,000 remodeling job.

Meanwhile, a seller can use this to point out that he/she recently spent "$5,000 on this project" while not raising or having the asking price reflect this. Show potential buyers that if they do go ahead and purchase you are providing them with additional value for a feature the buyer obviously likes.

Please keep in mind that I have been using some lower than realistic figures for the sake of example. But there is a lot more at stake in upgrading a home for sale. The study shows that a full basement remodeling has an average cost of more than $64,000 and recoups approximately 70% within the sale. Going by that, the seller "loses" $19,200 on the project. Or, if the seller expects to not only have the costs covered and perhaps clear some extra, it really means their asking price could be $20,000 or more higher.

Furthermore, the study shows that improvement projects such as a sunroom addition and installation of a backup power generator recoup less than 50% of the cost at sale.

My take from this is that it shows why so many properties have an asking price above their actual value. I don't know of any seller who goes ahead with a remodel, addition, or interior or exterior improvement who then does not increase the asking price.

If I were a seller, I would point out any such work I had done and its value, and then show how it has not impacted the asking price. In addition, I would become aware of opportunities to upgrade the property to be able to point out to my buyer what he/she could do to increase the long term value of the property.

I might say something like "I learned that for $40,000 we could add another 200 square feet to a finished basement. But it's an option and by not doing that I can keep this home priced at $xxx,000 for you." If my potential buyer does not know about this study, they will probably think that they could spend that $40,000 at their convenience over the coming months and then add at least $60,000 to the resale value. Maybe or maybe not. But I would not have mislead them in any way nor promised anything. Just pointing out future potential "profit centers" they may want to explore.

For those of you currently or looking at trying to sell, this study is worth thinking about before seriously considering spending on an upgrade, addition, or remodel. On one hand, it could mean you can present a more significant value to a potential buyer without spending a penny more. On the other hand, it could be worth comparing improvements you could make and how your home would compare to other similar properties in the area. If your situation allows you to "lose" a few thousand dollars to have the work done, but would help your home to sell faster by offering more benefits, it is also worth considering.

These are the statistics you should be reviewing, instead of the home sales comparisons (which are usually negative) from past years. All you care about is buying or selling the property today.

Keep Looking For Positives !!

Still looking for more positives about the market while others, including those in the industry itself, continue to spread the word about doom and gloom.

Now, an article in the Nashville Tennesseean caught my attention, about how appraisers are coming under fire:

http://www.tennessean.com/apps/pbcs.dll/article?AID=/20080818/BUSINESS01/808180322

An article in the Kane Country Chronicle (suburban Chicago) over the weekend further illustrates my point. First, it shows declining home sales figures again. Released by the local realty association.

Then, it quotes, among others, Linda Ayukawa, who is managing broker at a local Coldwell Banker office as saying “People for whatever reason just haven’t been that motivated to buy,”.
Let me get this straight. Another local realty association continues to make lagging home sales figures available on a regular basis. A managing broker in the same area gets quoted as not knowing why consumers aren't motivated. Thousands of consumers saw that article.

If I was a real estate professional or a lender in the Kane County area, I'd run ads with Linda's quote, identify her CB office, and in big letters, state that "We work with the motivated buyers and sellers in (name of community)." There is a saying among marketing experts that "Sometimes any publicity is good publicity". Someone should tell Linda that this is the furthest from "any time" I have personally seen in years. But she is probably busy bragging about how she was an expert quoted in the local paper.

Perhaps the rise in some of the homebuilder stocks last week will make some investors and potential buyers take notice. D. R. Horton, Pulte, Red Bank, and Centex, all showed increases in share prices at some point last week. A bit of consumer confidence could go a long way.

Nice reporting by HispanicBusiness.com, with a recently completed study showing that lower home prices are "more than offset" by higher mortgage rates, even to the tune of 10 - 20% more. This came out the same week as a report showing state-by-state which areas have the highest closing costs.

I take that as a message for investors to explore joint venture possibilities with other investors to grab some of the good deals out there. It's not easy, but nothing successful ever is. Get together a group of 6 investors with $50,000 each. A barrel filled with $300,000 CASH up front just might get you a property listed in the $500,000 range since the seller receives all cash immediately. No waiting and waiting and waiting for a qualified buyer to come along. The buyer group can then re-list for a $450,000 - $500,000 sale price without having its own mortgage payments to worry about. Some will call it "group flipping", but it is a way to do some power buying.

Finally some positive sales statistics from a big city. The Detroit Free Press reports that home sales in metro Detroit rose 15%. Before I could join you and say "that is because of foreclosures", that same article added that during the month of July foreclosure activity fell by percentage points. While the article contained many more positive and negative statistics, its most important points were positive toward the industry.

An Aspen CO real estate firm came up with a way to keep the local market going. Chaffin Light Real Estsate purchased a $7.65 million office building to house its operation. How does this impact the local market? I'd say with the right advertising campaign. I am not their marketing consultant, and normally don't give valuable free advice, but in this market I need to get industry professionals thinking and acting positively. Chaffin Light should point out that "We invested over $7 million into this community, and we'll get you the best local investment for your money". And show off their newest listings.

No matter what you read, think positive. Create opportunity.