More Bad News For FSBO's!

Information reported in the April, 2006 issue of Florida Realtor magazine states that unrepresented sellers, popularly known as FSBO's, are taking it on their financial chins when selling property.

The article states: "A clear downtrend in for-sale-by-owner (FSBO) homes has been seen since the market share experienced a cyclical peak of 18 percent in 1997. Only 13 percent of sellers conducted transactions without the assistance of a real estate professional in 2005, and 39 percent of those FSBO transactions were "closely held" between parties who knew each other in advance. " According to the National Association of Realtors (NAR), who began traking sales of homes by unrepresented sellers in 1981, the record for FSBO sales was 20 percent in 1987.

According to NAR data, the median home price received by sellers who use a real estate agent is now 16 percent higher than a home sold directly by the owner; $230,000 versus $198,200 with no significant differences between the type of homes sold.

"While many unrepresented sellers are motivated to save on paying a commission, we think the price difference speaks for itself," said Thomas M. Stevens, President of the National Association of Realtors.

If you would like more information on the latest trends in buying and selling real estate, you can order a copy of NAR's 2005 Profile of Home Buyers And Sellers survey by calling 800-874-6500. The cost for the survey is $50 for NAR members and $125 for non-members.

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Home Sellers Often Ask The Wrong Questions

I've been a real estate agent for many years. I've talked to countless families about selling their property. Before I walk through the front door, I know the first two questions the seller is going to ask.

And I know they are asking the wrong questions.

First, before I have had a chance to look around the property, I'm going to be asked: "What's it worth?" or "How much can we get for this house?"

Candidly, I don't know. Beyond its square footage and the color of the living room walls, I don't know what's there to be sold. So, how can I know its value? Although I've probably already researched the sales prices of similar homes in the neighborhood, I'm not sure of the condition of this house versus others. And make no mistake, property condition has a lot to do with value.

The second question is: "How much do you charge to sell a house?"

Ah, the old commission question. Sometimes I think that no matter how low an agent puts the sales commission, it's going to be too high. "Six percent! I know ten real estate agents who will gladly sell this house for four percent. Six percent is too high." "Four percent! I know ten real estate agents who will gladly sell this house for two percent. Four percent is too high."

The simple fact is that when a seller first meets a real estate agent, the question of commission is irrelevant. As a seller, you don't even know if you want to be represented by that agent; and the agent does not know if he or she wants to represent you and your property. Before you start to negotiate a real estate commission, you ought to find out if you like the agent, have confidence in them, want them to represent you in the transaction, and what they are going to do to earn any amount of commission. Look at it this way, you are about to enter into one of the largest financial transactions of your life. Do you want to entrust that sale to somebody who's primary professional credential is that they will do it cheaper than somebody else?

I think both of these questions are irrelevant in the early stages of your talks with a real estate professional. One requires the agent to have a crystal ball revealing property value, the other is based on grocery store arithmetic which often results in voodoo economies for the seller.

How much is a property worth? It is worth its current market value, not one penny more or one penny less.

How much should the real estate commission be? The commission must be enough to provide the agent with access to sales and marketing tools, and to provide adequate incentives to attract the best buyer who will pay the highest price for the property.

The Right Question

The only really important question to ask a real estate agent in your first meeting is this: "How are you going to sell my property for the highest possible price?"

Now you've gotten down to the heart of the matter.

When you sell property, you want to sell it for the most money. In the entire marketplace, there is only one buyer willing to pay the highest price for the property. That buyer, by definition, is the best buyer. Selling to the best buyer is how you will net the most money as a seller.

The next important question then becomes: "What are you going to do to attract the best buyer?"

The answer to this question can be summarized in one word: Marketing.

The real estate agent should be able to present to you a comprehensive marketing plan desinged to find the best buyer and sell your property for the most money, in the shortest period of time, and with the least inconvenience to you. If he can't show you a written, detailed marketing plan designed to do that to your satisfaction, look for another agent.

If that marketing plans consists primarily of the 4-P's, find another agent. The 4-P's? Put a sign in the yard. Put it in the MLS. Place an ad in the newspaper. Pray that somebody buys it. Folks, that ain't marketing. That's what agents do who discount their commissions, and it's next to nothing.

When an agent discounts a commission, his profit disappears and he can't afford to do an in-depth marketing plan designed to find the best buyer. So, the house sits unsold for month after month until the seller complains about a lack of activity. Responding to the seller's concerns, the agent suggests that the price is too high and should be lowered. When the price is dropped, any savings that the seller thought he was going to receive because of the lower commission have vanished. In other words, the discounted commission created a voodoo economy for the seller. Actually, the discounted commission forced a reduction in marketing activities. A reduction in marketing activities equates to lost opportunites to find the best buyer and that means a loss of net profit to the seller. Or, as my friend and broker, Bill Tourtelot of Tourtelot Brothers Real Estate observed recently, "Discounted commissions mean that sellers don't get what they don't pay for." The seller didn't pay for a marketing plan, so he didn't get a marketing plan and the property did not sell for its fair market value since the agent did not find the best buyer. Bill is 100-percent correct in this observation.

So, when you invite real estate agents to your house to discuss selling, you should first be concerned with finding an agent who can bring you the best buyer and sell your house for the highest price. The place to start is with a full-service, full-commission broker because they will spend their own money to market your house and find the buyer who will pay you the highest price. Agents who work for cut rate and discount brokers don't offer the marketing needed to get the highest price because they gave most of their marketing budget away when they cut their commission. If you don't get the highest price you probably won't net the most money from your sale no matter where the agent sets the commission.

Don't ask the wrong questions. Ask questions about marketing. Leave the matter of property value and commission to a subsequent discussion if you must. The simple fact is that the agent who brings the best marketing plan to the transaction is the agent you should hire if you want to net the most money for your property.

12 Reasons Good Houses Don't Sell

When a great house sits unsold for months, it is likely that the seller or the real estate agent, or both, are guilty of making one or more of 12 key errors. Here are the most common home-selling mistakes you should avoid at all costs.

1. Improper Pricing -- Set the price too high, and the house sits unsold. Too low, and you leave money on the closing room table. Proper pricing is imperative to a smooth and fast sale. If you're having trouble determining a property's true market value, call in a certified appraiser.

2. Poor Marketing -- There is only one buyer in the marketplace willing to pay the highest price for your property. The only way to reach that buyer is through an effective advertising program. A simple "For Sale" sign in the front yard and an occassional ad in the newspaper won't cut it. Wide reaching advertising is essential. Without it, the house may sit and become what real estate agents call a "stale listing".

3. Bad Housekeeping -- You would not believe the number of real estate sales that are lost to cluttered rooms, bad stains, dirty kitchens and bathrooms, unpleasant odors, mildew and the like. Keep your house sparkling clean while it's on the market. Here's one hint: don't light up those scented candles. Buyers often feel that scented candles and similar devices are being used to mask odors that could spell a problem -- especially mildew.

4. Failure To Make Repairs -- Buyers buy what they see. Small fix-up jobs can make the difference between selling your home at top dollar and having it languish on the market for months.

5. Poor Showing Techniques -- Show your home, not your vacation photos. Show each room and make positive comments about your home's best features. Don't hover. Give the buyers space out of ear-shot to discuss your home among themselves. Answer questions honestly and directly.

6. Failure To Innovate -- Don't rely solely on traditional sales methods. Today's marketing demands 24/7 advertising exposure. Failure to think outside the box can leave your house on the market for a long time.

7. Emotional Attachment -- Selling your home is a dollars and cents business transaction. Don't let your emotional ties affect your good judgement about selling it. Remember, buyers aren't buying your home, their buying their home.

8. React To Market Conditions -- Many sellers fail to react to market dynamics. Just like the stock market, there are current market conditons that affect the value of houses. These conditions are dictated by supply and demand, availability of mortgage funding, insurance costs and taxation policies toward real estate. No single person has any control over the market. Continuing to ask more than a home's current market value is like swimming upstream -- you'll get nowhere fast.

9. Unqualified Prospects -- People selling their homes without the aid of a real estate agent (FSBO's) often fall prey to this selling error because they do not have a readily available way to financially qualify prospective buyers. The simple fact is that you should not waste your time even showing your house to people who can not qualify to buy it. Buyers should always be pre-approved for a loan before you begin negotiating with them, and they should prove that they are able to buy by presenting you with a letter of pre-approval from a mortgage company. If it is to be a cash transation, request proof of funds.

10. Poor Curb Appeal -- Within about 10 seconds of driving up to your house, a buyer will determine if they like the place or not. First impressions are vital. If your house does not look good from the street -- really good -- buyers will be turned off no matter how nice it looks inside.

11. Pet Odors -- Few things turn buyers off faster than a house filled with odors from pets. Also, pets have a tendency to be in the wrong place at the wrong time, and sometimes they react badly to strangers. Put your pet in an out-of-the-way place during showings.

12. Negotiating Skills -- Everybody likes to feel like they won a little something when negotiating a real estate transaction. Constantly refusing the buyer's requests during the negotiation will result in buyer frustration. Frustrated buyers buy other people's houses. Better to give a little and get a lot.

There they are! The twelve biggest reasons good houses don't get sold. If your house has been on the market longer than you think it should, I suggest that you review your activities against these key errors. If you've been making these mistakes, correct what you've been doing. After that, your prospects should improve.

Happy Selling!

Time For The Parade!

If a new home is in your plans, you'll want to go to the parade ... the 2006 Parade of Homes.

The 36th annual Tampa Bay Parade of Homes will run from March 25th through April 9th. About 156 tastefully furnished model homes will be open to the public. These homes are a showcase of modern design combined with the absolute latest technology for modern living. The homes will be found in Manatee, Hillsborough, Pinellas, Pasco and Highlands Counties and models will be open Monday through Saturday from 10 a.m. to 6 p.m., and on Sunday from noon to 6 p.m.

In Saturday's St. Petersburg Times you can obtain a guidebook that will tell you all about the homes and their builders. The guidebook also shows the floorplans and contains a map giving the locations of all the models.

If you need more information about the Parade of Homes, you can contact the Tampa Bay Builders Association (TBBA) at 813-873-1000.

Gulfport Home Tour Saturday, March 25, 2006

The Gulfport Chamber of Commerce and the Historical Society are sponsoring a tour of 18 historic homes in Gulfport on Saturday, March 25th. The tour will begin at 10 a.m. at the Gulfport Historical Museum, 5301 28th Ave. S. and will continue until 5 p.m.

During the tour, you can explore each of 18 homes dating back to 1913. The theme of this year's tour is "Views of a Vintage Fishing Village". Each participating home will be marked with a colorful pink flamingo in the lawn, and local business and restaurants will also participate in the fun by marking their establishments with a pink flamingo. Establishments so marked will offer various discounts and freebies.

Tickets for the event are $10, available on the tour day. You will be given a wristband and a guide book which will be needed when using the Gulfport trolley and getting pink flamingo discounts at restaurants and shops around town.

Hey, this is a fun event and you really ought to go. Gulfport is an interesting little village. In addition to being home to many artists and galleries in this area, did you know that Alvah C. Roebuck, the co-founder of Sears & Roebuck department stores, once owned a house Gulfport? It's a two-story Dutch colonial and it will be on the tour. In fact, Mr. Roebuck is responsible for the construction of many of the properties in Gulfport. You see, many of the homes in Gulfport were originally Sears & Roebuck kit houses. You could go to the Sears & Roebuck catalog, select a house from the many floor plans offered for sale in the catalog, and purchase the house you wanted. It would be shipped to you (probably on a train) and you would then erect it on your lot.

These historic homes prove that it is often better to renew a housing resource than to tear it down. Plan on attending, at least for a couple of hours. You may get some great remodeling and landscaping ideas you can use at your house, and you're sure to have a nice time.

What's The Value Of A Home Improvement?

This year's "Cost versus Value" report has recently been published by Remodeling Magazine in association with the National Association of Realtors. I thought you might like to read the results for the Tampa Bay area. Essentially, the report seeks to answer the question: "If I spend money on a home improvement, will I recoup my investment if I sell the house?"

With so many area homeowners spending money on various kinds of home improvements, obtaining this kind of data may be quite useful. So, here are the highlights of this year's survey using average costs for the Tampa Bay area.

Project Job Cost Reseal Value % of Cost Recouped

Bathroom Remodel $10,013 $11,168 111.5%
Minor Kitchen Remodel $14,473 $16,367 113.1%
Siding Replacement $6,900 $6,952 100.7%
Attic Bedroom $36,589 $47,946 131.0%
Deck Addition $10,906 $10,950 100.4%
Replacing 10 Windows $9,108 $8,609 94.5%
Roof Replacement $9,469 $9,096 96.1%
Family Room Addition $51,316 $50,581 98.6%
Home Office Remodel $12,174 $10,833 89.0%

This report is something that comes out once a year. I'll give you another report in 2007. In the meantime, happy remodeling.

What A Real Estate Slowdown Really Means

On November 12, 2005, the St. Petersburg Times ran a front page story headlined "Frenzied housing market slows" by Helen Huntley, the Times' personal finance editor. Good story. She reported that figures obtained from the Pinellas Realtor Organization (PRO) showed that from June through October, 2005, residential sales in Pinellas County had dropped from 2,172 properties sold in June to only 1,737 in October. During that same time, listed properties rose from 3,795 in June to 6,679 in October.

PRO reported that in November, listings rose to 7,726 but sales dropped to 1,433. By the end of December, listings had risen to 8,199 while sales remained sluggish with only 1,555 properties sold.

This slowdown in the market is continuing. In February, 2006, sales of single family homes were down to 801, down from 1,081 in February of the previous year. Listings have skyrocketed! In February of 2006, there were 11,399 properties listed on the local Multiple Listing Service (MLS) as compared to only 4,733 in February 2005.

So, what does this mean to buyers and sellers?

If you are a seller, it means the days of fast sales and multiple offers may be over. Increasing listings means you have a lot more competition. High prices, rising mortgage rates, outrageous property taxes, and expensive flood and homeowner's insurance premiums are forcing many buyers out of the market or making them buy less expensive property. This means sellers need to be ready for longer periods on the market and much tougher negotiating positions from buyers. To get top dollar for a property, sellers need to have a very thorough marketing plan at their disposal designed to find that one buyer who is willing to pay the highest price for the property. This kind of marketing is only available from full service real estate firms. Discount brokers and dot-com services simply don't offer much marketing because once they cut their commissions, neither the broker nor the agent has enough profit left to invest in advertising your property.

If you are a buyer, you can now be more selective because there's more inventory from which to select your "dream house". You can demand more concessions from sellers and probably get them. It does not mean prices are coming down. Most real estate gurus predict prices to increase at from 4 to 7 percent in 2006 -- so don't wait to buy or you may pay more. Hire an experienced real estate agent to function as your exclusive representative, negotiate hard and be realistic about your offer.

So, does all this mean the real estate bubble is bursting? No, probably not. But it does appear to be leaking a little air.