Real Estate's Three Rules Have Changed
Do you remember the three rules of real estate?
Sure you do.
Location. Location. Location.
Right?
Well, those three rules have changed.
Recently, I heard a real estate agent say that the three rules are "Price, Price and Condition". I think those are two rules. But the comment got me thinking about what today's three rules might actually have become.
As far as I can tell, I think the three rules of real estate today are Price, Condition and Marketing.
Rule #1: Price
In this part of Florida and in many other markets across the United States, buyers are hesitating to purchase real estate because they believe prices will continue to fall. As far as I can tell, many real estate markets have not bottomed-out yet and may continue to fall for the rest of 2009. That's why price is such a key rule in real estate today.
Property that is priced at or above market value is simply not selling. Moreover, buyers are reluctant to make offers on overpriced property fearing that their offer will not be low enough and they will find themselves upside down as the market continues to fall. Overpricing is the fastest way to assure that a property will not sell.
To sell property today, you must price it at a very competitive level. This means you must not be over the market value presented in your agent's CMA or your appraiser's valuation report. As a general rule, you need to be below that number. I think you need to look at nearby competition as well. If you are competing against short-sales or foreclosures, you need to at least be competitive with those properties -- after all, if a buyer can purchase a property similar to yours at a short-sale price, why would they pay market value for your place?
In addition, you must make sure your property stays at a competitive price. Your real estate agent needs to re-price your house about every sixty days just to make sure you are still in the ball game with other properties in your area. If not, you are going to be overpriced in a short time and then you will find yourself chasing the market by constantly lowering your price in knee-jerk reactions.
Proper pricing has to be the first rule of the new real estate laws.
Rule #2: Condition
Today's buyer has changed. When prices were rising rapidly, the market was filled with buyers who thought of themselves as real estate investors. They were oftentimes real estate novices with tools and an SUV who would buy property in ill-repair, invest a few thousand dollars and some labor, and then sell the house to somebody else for a substantial profit. Some people actually made considerable money in this line of work.
Those days are gone and most of those kinds of investors are gone with them.
Today, buyers don't seem to want to do much "remodeling". They want that to have been done by the current owner. If it isn't, they just go on to the next property in this inventory-heavy real estate market.
If the property you are trying to sell is not in top condition, you cannot ask a top price. Simple as that. If it is in less than tip-top condition, you must offer it at a reduced price. If you aren't willing to evaluate the property and price it accordingly, the market will do it for you. Problem is, you may not like where the market puts the number.
When a real estate agent pulls up in front of a house, they can tell within the first ten seconds if a buyer has any interest in the property. The buyer gets an immediate idea about the entire property based on its curb appeal. If it looks good from the curb, buyer's show positive signs because they think the rest of the house will look as nice. If it does not have curb appeal, well, I've had some buyers just turn to me and say they don't even want to go inside and ask if we can just move on to the next property.
The interior of the property must look clean, neat and show pride of ownership. If you don't have the "latest and greatest" in appliances, flooring, bathroom decor and the like, don't even think about asking a top price. Buyers are very quick to say this-or-that needs to be replaced or remodeled, discounting their offer so they can afford to get that done, and then living with the un-remodeled interior for years. Nevertheless, if you want the sale, you have to accept the offer.
So, should you remodel your house before you put it on the market. NO! It's probably too late now and you'll never recoup the remodeling investment. Better, I think, to make sure what is there is in good condition, clean, working well, and then lower the price to get a quick sale without investing any more money into the property. One thing I think every seller should do, however, is to put a fresh coat of paint on the property -- inside and out. Make it a neutral color. We like to call it "real estate agent beige".
So, the second rule is that the property must be in tip-top condition.
Rule #3: Marketing
It does a seller no good whatsoever to have a property that is priced perfectly for the market and in absolutely A-1 condition if nobody knows it is available. Making the sale known to the public is the job of your real estate agent's marketing plan. If you are more comfortable with it, instead of calling it marketing you can just as easily call it advertising. For the sake of this article, it's the same thing.
Either you, if selling as an unrepresented seller or FSBO, or your real estate agent needs to prepare a comprehensive marketing plan designed to promote your property to those buyers who are most likely going to be ready, willing and able buyers of your property, and to real estate agents who represent the most likely buyers.
If you can't prepare and implement such a plan, you need to hire a real estate agent who can.
If you have a real estate agent who cannot or will not prepare such a plan, you need to find an agent who can.
We live in a world of marketing. Your plan must include components for internet marketing (MLS system, various internet sites, e-mail), print advertising (newspaper and magazine advertising, direct mail, brochures), realtor contact (caravans, broker opens), and buyers events (open houses, neighborhood opens). This is the minimum marketing you must do today. It is absolutely imperative that these kinds of things be done to get your property sold. If it is a commercial property, your marketing plan must be even more expansive and more tightly targeted.
The third rule has to be marketing. It just has to be.
Well, there you have the new rules for today's market. By the way, I still think "location" counts an awful lot. But I think it is now rule three-and-a-half. Today's buyer will almost instantly evaluate the location of your property and give it a value in their purchase decision.
For more information on real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
Sure you do.
Location. Location. Location.
Right?
Well, those three rules have changed.
Recently, I heard a real estate agent say that the three rules are "Price, Price and Condition". I think those are two rules. But the comment got me thinking about what today's three rules might actually have become.
As far as I can tell, I think the three rules of real estate today are Price, Condition and Marketing.
Rule #1: Price
In this part of Florida and in many other markets across the United States, buyers are hesitating to purchase real estate because they believe prices will continue to fall. As far as I can tell, many real estate markets have not bottomed-out yet and may continue to fall for the rest of 2009. That's why price is such a key rule in real estate today.
Property that is priced at or above market value is simply not selling. Moreover, buyers are reluctant to make offers on overpriced property fearing that their offer will not be low enough and they will find themselves upside down as the market continues to fall. Overpricing is the fastest way to assure that a property will not sell.
To sell property today, you must price it at a very competitive level. This means you must not be over the market value presented in your agent's CMA or your appraiser's valuation report. As a general rule, you need to be below that number. I think you need to look at nearby competition as well. If you are competing against short-sales or foreclosures, you need to at least be competitive with those properties -- after all, if a buyer can purchase a property similar to yours at a short-sale price, why would they pay market value for your place?
In addition, you must make sure your property stays at a competitive price. Your real estate agent needs to re-price your house about every sixty days just to make sure you are still in the ball game with other properties in your area. If not, you are going to be overpriced in a short time and then you will find yourself chasing the market by constantly lowering your price in knee-jerk reactions.
Proper pricing has to be the first rule of the new real estate laws.
Rule #2: Condition
Today's buyer has changed. When prices were rising rapidly, the market was filled with buyers who thought of themselves as real estate investors. They were oftentimes real estate novices with tools and an SUV who would buy property in ill-repair, invest a few thousand dollars and some labor, and then sell the house to somebody else for a substantial profit. Some people actually made considerable money in this line of work.
Those days are gone and most of those kinds of investors are gone with them.
Today, buyers don't seem to want to do much "remodeling". They want that to have been done by the current owner. If it isn't, they just go on to the next property in this inventory-heavy real estate market.
If the property you are trying to sell is not in top condition, you cannot ask a top price. Simple as that. If it is in less than tip-top condition, you must offer it at a reduced price. If you aren't willing to evaluate the property and price it accordingly, the market will do it for you. Problem is, you may not like where the market puts the number.
When a real estate agent pulls up in front of a house, they can tell within the first ten seconds if a buyer has any interest in the property. The buyer gets an immediate idea about the entire property based on its curb appeal. If it looks good from the curb, buyer's show positive signs because they think the rest of the house will look as nice. If it does not have curb appeal, well, I've had some buyers just turn to me and say they don't even want to go inside and ask if we can just move on to the next property.
The interior of the property must look clean, neat and show pride of ownership. If you don't have the "latest and greatest" in appliances, flooring, bathroom decor and the like, don't even think about asking a top price. Buyers are very quick to say this-or-that needs to be replaced or remodeled, discounting their offer so they can afford to get that done, and then living with the un-remodeled interior for years. Nevertheless, if you want the sale, you have to accept the offer.
So, should you remodel your house before you put it on the market. NO! It's probably too late now and you'll never recoup the remodeling investment. Better, I think, to make sure what is there is in good condition, clean, working well, and then lower the price to get a quick sale without investing any more money into the property. One thing I think every seller should do, however, is to put a fresh coat of paint on the property -- inside and out. Make it a neutral color. We like to call it "real estate agent beige".
So, the second rule is that the property must be in tip-top condition.
Rule #3: Marketing
It does a seller no good whatsoever to have a property that is priced perfectly for the market and in absolutely A-1 condition if nobody knows it is available. Making the sale known to the public is the job of your real estate agent's marketing plan. If you are more comfortable with it, instead of calling it marketing you can just as easily call it advertising. For the sake of this article, it's the same thing.
Either you, if selling as an unrepresented seller or FSBO, or your real estate agent needs to prepare a comprehensive marketing plan designed to promote your property to those buyers who are most likely going to be ready, willing and able buyers of your property, and to real estate agents who represent the most likely buyers.
If you can't prepare and implement such a plan, you need to hire a real estate agent who can.
If you have a real estate agent who cannot or will not prepare such a plan, you need to find an agent who can.
We live in a world of marketing. Your plan must include components for internet marketing (MLS system, various internet sites, e-mail), print advertising (newspaper and magazine advertising, direct mail, brochures), realtor contact (caravans, broker opens), and buyers events (open houses, neighborhood opens). This is the minimum marketing you must do today. It is absolutely imperative that these kinds of things be done to get your property sold. If it is a commercial property, your marketing plan must be even more expansive and more tightly targeted.
The third rule has to be marketing. It just has to be.
Well, there you have the new rules for today's market. By the way, I still think "location" counts an awful lot. But I think it is now rule three-and-a-half. Today's buyer will almost instantly evaluate the location of your property and give it a value in their purchase decision.
For more information on real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 3:23 AM
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