On-Line Pricing Is Not Accurate

Second opinions usually have the negative result of bringing confusion to an issue. For example, you know exactly what treatment to follow if you visit with doctor "A", but if you visit doctor "B" who has a different treatment program, well, now you don't know what to do.

That's the problem now being faced by people who have relied upon the website www.zillow.com to get their pricing guidelines for real estate because now there's a second and even a third entry into the on-line property valuation process.

Zillow, famous for its "zestimates" is now being challenged by insurance giant Fidelity National Information Services and their new on-line entry, www.cyberhomes.com, and by a nationally advertised service called www.HouseValues.com.

The problem with this is that now buyers, sellers and real estate agents are faced with as many as three pricing opinions -- and often these opinions differ widely.

How widely?

The Palm Beach Post did a comparative study of how the Zillow and Cyber sites valued the same properties. The paper reported that the numbers were all over the place, that the prices from Cyber were "very optimistic" and that Cyber was above the asking price for the four houses they looked at. The paper concluded that people should not take these tools too seriously.

I've been advising readers the same thing for months about Zillow. I am of the opinion that neither Zillow nor Cyber is going to give accurate pricing guidelines. I've never checked out HouseValues, but I doubt it is any more accurate than the other two.

If accurate pricing is required, I advise you to pay for a professional appraisal or have the property evaluated by a skilled real estate agent.

For more information about real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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Oh My Gosh! You've Got An Offer!!!

Imagine how excited and pleased you will be when your real estate agent calls and says "We've got an offer on your house to discuss. I'll be right over."

Wow! An offer! You've been waiting for weeks, maybe months, to hear those words.

So, the agent comes over and reads you the offer.

Okay, so it's not your asking price. And so the buyer wants you to fix a bunch of things. And so the terms are not quite what you were hoping for. And so the closing is not as soon as you want.

So what. It's an offer! A rare thing these days.

The questions is, now what do you do?

I suggest there are six criteria you want to use when evaluating an offer ... and here they are.

1. Carefully evaluate the merits of the offer versus your motivation in selling. Ask yourself why you wanted to sell in the first place and if the offer will allow you to reach the goals you set when you decided to sell. If so, take it.

2. Carefully review with your agent your list price and the local market conditions. If the market is hot, you may be safe in rejecting the offer or negotiating for better price and terms. If the market is cool, you may want to accept the offer as written. Your agent should be able to guide you in this decision making process by keeping his finger on the pulse of the local market.

3. Evaluate how many homes similar to yours are currently for sale. If there are many homes similar to yours for sale, your best bet might be to accept the offer because a buyer can easily substitute your house for another. But if you have a unique house for which substitution is not an option for the buyer, then you may be safe in holding out for a better offer.

4. Determine the market condition. If homes are not selling well, you might want to accept the offer rather than continue to wait for the market to improve. I'd look at sales over the last month or two before making a decision on market condition.

5. Is the offer competitive? Determine how the offer compares to the selling price for similar homes in your neighborhood. If it is about the same, then accept it; you may not do any better by waiting.

6. Is this the only buyer? Ask your real estate agent if there are any other parties that have expressed an interest in buying your house. If not, you need to give the offer very serious consideration. But if other buyers may still be waiting in the wings, request that your agent contact them to determine if they want to make an offer soon.

The answers to these six questions will help you determine if an offer is worthy of acceptance, countering or outright rejection. Ultimately, it's your decision as the seller but getting the facts before making the decision is where a real estate agent can be worth his weight in gold -- your gold.

For more information about the Tampa Bay real estate market, visit my website at www.TheStPeteRealEstateSite.com.

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Some Really Bad Advice In The Times

On Sunday, November 19, 2006, the St. Petersburg Times ran an article on the front page entitled "Bay's home boom suddenly belly-up". This feature article showed how home prices throughout most of the Tampa Bay area are falling, and essentially it blamed the reason for the price declines on an oversupply of property. Okay, basic economics 101 combined with journalistic sensationalism. Makes for nice reading, but not really very timely.

The article ended with some advice from a Century 21 broker named Craig Beggins. The Times wrote that "there's only one cure for the home price blues: smaller supply and greater demand." It then allowed Beggins to chime in with this timely quote to home sellers: "Don't enter the market before you absolutely have to sell."

Folks, I've read some bad real estate advice in the Times in the last few years, but this is just about the worst.

To be candid, if you have property you want to sell or need to sell, why on earth would you wait to put it on the market? The longer you wait, the longer it will take you to sell it. Also, if you continue to wait when the prices are falling, it likely means that when you do put it on the market you will probably have to accept a lower price.

My advice is to put property on the market now, but list it with a real estate agent who knows what's-what in today's marketplace and has a marketing plan that will present your property to ready, willing and able buyers. Then, take each offer seriously and negotiate in good faith. It may take some time to sell. You may have to be patient. But waiting to list your property does not make good sense to me.

As for the advice that the only cure for today's housing blues is smaller supply and greater demand, that's a little like recommending band-aids for treating cancer.

Of course that's a part of the cure! The problem is, that's not really the disease -- it's just a symptom.

The disease has to do with the fact that for about three years investors and speculators treated real estate like a commodity. They bought and sold property for profit. Period. That caused prices to skyrocket. Then, along came a bunch of hurricanes.

Now, those same investors want to cash out. But there are no buyers. Why? Because the disease has set in. That disease is high property taxes combined with high insurance premiums. The taxes are high because of the assessed value of the property brought about by three years of ruthless speculation. The insurance is high because of the high costs associated with hurricane damage. In fact, these two pieces of the disease are deadly and have caused many buyers to simply get out of the market.

Simply put, buyers today can still obtain affordable mortgage rates and can usually find a home within a price range that is affordable for the repayment of principal and interest. What keeps buyers from the marketplace is the high cost of taxes and insurance. Nobody wants to be house poor, so rather than pay the high mortgage+insurance+taxes, buyers are simply not buying.

If you want to increase demand for housing, you must fix the insurance and tax problems that are currently broken in Florida. Only when those two problems have been solved will buyers once again enter the market and purchase the outstanding home inventory that is currently available. Holding property off the market is not going to fix either of those problems, and will not create greater demand which will result in less inventory. C'mon! Don't you guys at the Times get it? It's only a problem of supply and demand because it's really a problem of insurance and taxes.

If the Times really wanted to be of help in this matter, it would use its pages to pound and pound and pound the greedy insurance companies who make billions -- including those at the State level known as Citizens. After the Times has pounded on them, they should turn the power of the press loose on our local, county, and state legislators who never saw a tax increase they didn't like.

Lower taxes and lower insurance premiums will help to reduce inventories and bring the real estate markets back. Holding property off the market won't do anything.

For more information on Tampa Bay's real estate market, visit my website at www.TheStPeteRealEstateSite.com.

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Clarification Regarding Incentives

I need to write a clarification regarding my views on incentives and bonuses as a means of attracting buyers and sweetening the deal when selling real estate.

I guess that in the past I have written some things that would lead readers -- especially real estate agents and property sellers -- to believe that I think incentives and bonuses are a good idea in today's slow market. Having just re-read some of those past comments I can understand how such a conclusion might be reached. The reason is because I started writing comments about incentives and bonuses without laying out a proper foundation for my views.

Let me be perfectly clear on this matter ... I do not believe in bonuses and incentives as a part of the marketing plan for the sale of real estate. Period.

I do not urge anyone to use incentives to sell property. I don't believe you should offer the car in the garage, the boat on the davits, the plasma TV in the living room to get the buyer to make a purchase offer. I don't believe the seller should offer to pay homeowners insurance premiums for a year, the property taxes, the flood insurance or any of that stuff. I am opposed to sellers offering bonus cash to real estate sales people for bringing them an acceptable offer.

To me, incentives and bonuses are not marketing. They are a desperation tactic. They are an admittance on the part of the seller that they are desparate and need to sell the property at all costs. What's more, they are proof positive that the agent's marketing program was insufficient to attract a qualified buyer.

What I am in favor of is sound, solid, effective marketing. I believe that if you put forth the maximm marketing effort and give that marketing program ample time, one of two things will happen: 1. You will find a buyer for the property willing to pay the highest price, or 2. You will rightly conclude that the market has spoken and is not willing to pay the current asking price for the property, so a price adjustment is required.

If you do the proper marketing, the outcome will be number 1 or number 2. Adding an incentive or a bonus will have no bearing on the outcome. In effect, adding a bonus or incentive is nothing more than reducing the price of the property without lowering the asking price. That may be okay if you're a builder or developer who must maintain your future price point, but if you're a residential home seller you don't need to worry about future pricing in your neighborhood -- lower the price to reflect current market values and get the place sold.

Now, in those instances where a maximum marketing effort has been made and the seller absolutely refuses or financially can not lower the price of the property, then perhaps -- and I say perhaps -- a special incentive of some kind may be justifiable. In that case, look to some of the advice I have written in other stories on this blog site about incentives and bonuses.

What I am seeing all too often today from both agents and sellers is a quick jump into the incentive/bonus pool. Why is that? The reason is clear. These agents and sellers have never faced a market correction like we are having today, they want immediate results like we had a year or so ago, and they don't know how to implement an effective marketing program so they start offering incentives. They don't know any better! Frankly, most of them don't have a true marketing plan to sell property, so they start this stuff about bonuses to real estate agents and incentives to buyers thinking that's the way to call attention to the property and get it sold.

Hogwash!

What sells property today is the same thing that sold property in the past. A good property that has been well maintained. A realistic price. A motivated seller willing to consider bona fide offers from motivated buyers. A little patience. A solid marketing plan.

Don't muck it all up with screwball bonuses and goofy incentives.

For more information on the Tampa Bay real estate market, visit my website at www.TheStPeteRealEstateSite.com.

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FSBO: Just Because You Can, Should You?

I have a question that every unrepresented seller (popularly known as a FSBO) should ask before they decide to sell without the aid of a professional real estate agent: It's not that you can't sell your home on your own, but should you?

Should you try your own case in court, or hire a lawyer?

Should you diagnose and treat your own illness, or visit your physician?

Should you try to interpret the Federal income tax laws, or rely on your CPA?

Most people would rely on a professional in all these matters.

If you're like most people, your home is your largest single investment and your most important asset. With so much at stake, doesn't it make good sense to consult with an expert in the sale of this asset? Sure, you can sell it on your own. But should you?

It's just a question. But before you jump into the FSBO waters alone, you might want to give the answer some serious thought.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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October Sales Report: Simply Devastating

For some unknown reason, I thought the sales report for October would be better. I don't know why I thought that way, wishful thinking is so unlike me.

October was devastatingly bad.

As usual, let's start by reviewing the absorption rate which is calculated by dividing the number of units sold during the month by the total number of listings in the Multiple Listing Service (MLS).

For single family homes, the absorption rate for October was 7.2%. A year ago, it was 25.5%, and we were already in a market slowdown then. The October 2006 absorption rate is actually an improvement of .2% over last month. Pretty sorry, eh? In point of fact, October 2006 was the second worst absorption rate since the MLS began keeping such records in January 2003.

I hate to tell you this, but condo sales were even worse.

The condo absorption rate fell to 4.7%. It was 26.9% in October 2005. The October 2006 rate is actually a decrease of .6% over where we were in September condo sales. Simply yuckie.

Let's take a look at each category and see where we stand.

Single Family Home Listings: In October 2006, there were 10,225 single family homes in the Pinellas MLS system. This is the highest number of listings since the MLS started publishing such data in January 2001.

Single Family Home Sales: There were 738 homes sold in October. That's an increase of 32 homes sold over September's sales figure. It proves only one thing: there are still buyers out there.

Single Family Home Median Selling Price: The median selling price was $220,000 in October. By comparison, it was $276,000 a year ago. So the median has dropped by $56,000 in a year.

Look, let's call it like it is. If you have a home you want to sell, today you have more competition for fewer buyers than you have ever had before -- and that situation seems to be getting worse every month. Your best hope to sell is to price the home properly based on today's market prices, and require that your real estate agent implement a high level, high impact marketing plan designed to find you a buyer by exposing your home to the maximum number of home shoppers. Forget trying to do this "For Sale By Owner", it won't work because you won't have the marketing firepower to impact enough potential buyers. Forget using one of those cut-rate or discount brokers. They won't give you enough marketing firepower to get your house in front of enough potential buyers. Remember, with discount brokers you get what you pay for. My recommendation is to put it on the market with a real real estate agent who knows what's-what in today's marketplace and has the marketing tools to get your house sold. Then, be prepared to entertain any and all offers that come in. Oh, and be patient.

Now, let's look at condos.

Condo Listings: Condo listings increased in October 2006 to 6,257 units. In September of this year there were at 6,075. So, the number of condos on the market is increasing.

Condo Sales: Condo sales are getting worse. They dropped in October to 296 units sold. In September there were 322 sales. Pretty sorry.

Condo Median Sales Price: More bad news. The median price in October was $159,900. It was $214,900 in October of 2005. So, condo median prices have dropped $55,000 in a year's time.

If you want to sell a condo, please re-read the paragraph about selling single family homes (above). The exact same recommendation applies to you.

Now, if you're a buyer all this is great news! Consider these facts:

• Selection is huge because inventories are up. So you can choose from a wide range of homes and condos across all price ranges.
• Sellers are anxious, if not desparate. So, they'll probably consider almost any kind of fairly decent offer. Now's the time to negotiate.
• Interest rates are low! Historically speaking, mortgage rates are really very attractive -- and some people believe that a weakening U.S. economy will force interest rates to go even lower after the first of the year, so you might want to consider one of those new adjustable rate mortgages.
• Prices may have bottomed-out! Re-read the info on median prices in this article. The median prices are way down over where they were a year ago. If you've been waiting for the market to "bottom out", this may be it. For all anybody knows, the market has bottomed-out and if you don't buy now you may miss it and find yourself once again trying to buy on a rising market.

C'mon! This is the time to be a buyer. This is what you've been waiting for. If you wait, you might lose this golden opportunity to own the home of your dreams. I'd act now if I was in your shoes. Really!

So, good time for buyers. Tough time for sellers. It's the new normal. Act accordingly.

For more information about real estate in Pinellas County, visit my website at www.TheStPeteRealEstateSite.com.

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Some Selling Psychology

I like this title. It all begins with an "S" sound.

Anyway, this article is about the psychological impact of selling real estate.

Years ago I was in the advertising agency business. We represented many, many developers of condominiums and single family homes -- which is, I think, how I became interested in real estate in the first place.

I was sitting in a meeting one afternoon with a very knowledgeable real estate marketing expert from Miami and he started talking to all of us about the pyschology of selling real estate. He said that he discovered a few years ago in focus groups that when buying real estate, people mentally picture themselves in the house. If they like what they see, they will buy. If they don't like what they see, they won't buy. All the other factors having to do with the purchase -- location, floor plan, construction quality, neighborhood amenities, mortgage rate, etc. -- all those things simply help to justify the purchase decision. The sale was made when the buyer pictured himself in the house and liked what he saw. So, the purchase decision was made on the emotional level.

My friend and broker, Bill Tourtelot of Tourtelot Brothers Real Estate in St. Petersburg, Florida, has a theory that he often discusses. Bill likes to point out that there are two great motivating factors in the purchase and sale of real estate -- hope of gain and fear of loss. Of the two, Bill believes that fear of loss is the stronger motivating factor most of the time.

The reason I bring these old theories up is that both seem to indicate that in buying and selling, our emotions play a major role in the decisions we make.

What salesmen and marketing experts have known for many years has now become the subject of discussion and research at the university level. Writing in the Washington Post on November 4, 2006, Kirstin Downey describes how university professors have begun studying the psychology of finance to reveal that emotions play a major role in the decisions people make about money and the sale of property.

Kevin McCabe, a professor of economics, law, and neuroscience at George Mason University in Fairfax, Virginia (a man with that many degrees probably needs to get out more often) has stated that "There's a whole emotional processing system that goes on in the brain that's largely beyond our control." McCabe goes on to say, "The general view is that our emotions control us, and not vice versa."

Studies in neuroeconomics have made several recent discoveries which I think can be applied directly to real estate and to the pricing and selling decisions made by many people. These include ...

• Many sellers will pass up sure profits for illusory ones.
• Some sellers will turn down profits if they believe someone else is unfairly profiting more.
• Some sellers will refuse to sell if they believe they may come to regret it, because fear of future regret can be as powerful a motivator as money in the pocket today. (This sure sounds like Bill Tourtelot's hope of gain/fear of loss theory.)

Kirstin Downey's article goes on to describe something called "loss aversion". Loss aversion means that people tend to deny reality when something they own -- like a house -- declines in value. Every real estate agent who has ever listed a property in a market where prices are declining has probably seen this theory in action. Sellers tend to maintain their asking price at a level that makes no sense even when prices for similar properties are falling. That's loss aversion.

Also a psychological drawback to successful selling is a condition that exists when sellers become mentally attached to the prices received by their neighbors when they sold at the top of the market rather than at current prices which may be lower. In this case, sellers become reluctant to sell unless they receive the higher price enjoyed by their neighbors. It's the "I'll-sell-when-I-get-my-price" syndrome. In such cases, houses often sit unsold for many months with no reduction in asking price and no acceptance of realistic offers from buyers using current pricing information.

"There seems to be a psychological resistance to taking losses on the sale of a house," said David Laibson, a professor of psychology and economics at Harvard University.

No kidding, professor. But many times these "losses" are not true hard-dollar losses. They are psychological losses. They are a failure to obtain a mythical dollar figure which simply does not reflect current market conditions. Often times, these asking prices and profits from the sale of real estate are driven by sellers and agents who create unrealistic expectations regarding the market value of property. This creates mental tension because reality does not match the expectation of net profit. Sellers worry about losing money when in actuality they have a nice profit, just not as large a profit as they had originally hoped. So, sellers worry about "losing money" when in fact they are not.

Buyers, for their part, suffer from this psychological imbalance on the part of sellers by paying more for property than they should when their offers are rejected or countered because buyers suffer from fear of loss/hope of gain syndrome just as much as do sellers.

Geez, it's enough to drive anybody to the psychologist's couch.

For more information on real estate in Tampa Bay, visit my website at www.TheStPeteRealEstateSite.com.

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Zillow.com Clarification

On November 1st I received an e-mail from David Gibbons of Zillow.com regarding my recent story about Zillow.com being sued by the NCRC. Mr. Gibbons has pointed out that Zillow.com has not been sued.

Mr. Gibbons correspondence to me states: "I wanted to point out that Zillow has not been sued -- The NCRC has merely sent a letter of complaint to the FTC whose decision it is whether to act on the complaint." The e-mail goes on to state ... "We have subsequently called the NCRC and are scheduled to discuss their concerns sometime soon."

Thank you, Mr. Gibbons. I stand corrected.

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Property Insurers Put Forward Plan

Word has crossed my desk, and probably yours by now, that Allstate and State Farm -- the two "big boys" in the insurance world -- are pushing hard for legislation that would cap insurance claims in the event of a natural disaster. The insurance companies and their Capitol Hill pals are proposing that state and federal support kick-in once the insurance companies have paid out the first $4.5-billion for damages.

Opponents are already lining up to argue their side of the issue. Mostly, they contend that the U.S. Government should not bail out insurance companies for losses incurred as part of the risk of doing insurance-related business. Opponents are also quick to point out that homeowners in the most hurricane-prone areas would benefit from such legislation at the expense of homeowners in other parts of the country.

And so it goes.

For more info on real estate matters, visit my website at www.TheStPeteRealEstateSite.com.

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