#1 The top mistake occurs in the pricing of homes offered for sale.
Sellers tend to base current market value on the following:
1. The original price
2. Added improvements
3. Cost of replacement
Pricing should be based, instead, on a total market overview which includes sales price data (when available), location of comparable properties, amount of inventory in the specific market (Puerto Vallarta for example) and the general area (Bay of Banderas). For the specific property, value includes specific location (quality of view is important in Puerto Vallarta), general condition of the property, amenities including parking, price in comparison to other comparable properties.
Basing asking price on the seller needs or emotion rather than market value, is a mistake. Many times sellers base their pricing on how much they paid for or invested in their home. This can be an expensive mistake. If your home is not priced competitively, buyers will reject it in favor of other larger homes for the same price. At the same time, the buyers who should be looking at your house will not see it because it is priced over their heads. The result is increased market time, and even when the price is eventually lowered, the buyers are wary because “nobody wants to buy a house that nobody else wants”. The result is low offers and an unwillingness to negotiate. Every seller wants to gain as much money as possible from the sale, but a listing priced too high often eventually sells for less than market value.
Some thoughts on pricing:
These statements frequently heard from sellers really have nothing to do with the home’s value:
“Another agent said it was worth more.” “People always offer less than asking price.” “The buyers can always make an offer.”
Other factors that do not affect value:
The owner’s need for money (perhaps the fact that they may be moving up to a more expensive price for another home) has nothing to do with the home’s current market value.
The seller’s personal attachment to the property does not affect value.
#2 Failing to “Showcase” the home. A property that is not clean or well-maintained is a red flag for the buyer. It is an indication that there may be hidden defects that will result in increased cost of ownership. Sellers, who fail to make necessary repairs, don’t spruce up the house inside and out, and fail to keep it clean and neat, chase away buyers as fast as agents can bring them. Buyers are poor judges of the cost of repairs, and always build in a larger margin for error when offering on such a property. Sellers are always better off doing the work themselves ahead of time.
#3 Over-improving the home prior to selling. Sellers often unwittingly spend thousands of dollars doing the wrong upgrades to their home prior to attempting to sell in the mistaken belief that they will recoup this cost. If you are upgrading your home for your personal enjoyment – fine. But if you are thinking of selling, you should be aware that only certain upgrades are cost effective. Always consult with your agent BEFORE committing to upgrading your home.
#4 Choosing the wrong Broker or choosing for the wrong reasons. Many homeowners list with the agent who tells them the highest price. You need to choose an experienced agent with the best marketing plan to sell your home. In the real estate business, an agent with many successfully closed transactions usually costs the same as someone who is inexperienced. That experience could mean a higher price at the negotiating table, selling in less time, and with a minimum amount of hassle.
#5 Using the “Hard Sell” during showings. Buying a home is an emotional decision. Buyers like to “try on” a house and see if it is comfortable for them. It is difficult for them to do if you follow them around pointing out every improvement that you made. Good brokers let the buyers discover the homes on their own, pointing out only features they are sure are important to them. Overselling loses many sales. If buyers think they are paying for features that are not particularly important to them personally, they will reject the home in favor of a less expensive home without the features.
#6 Not knowing your rights and obligations. The contract you sign to sell your property is a complex and legally binding document. An improperly written contract can allow the purchaser to void the sale, or cost you thousands of unnecessary dollars. Have an experienced broker who knows the “ins and outs” fully explain the contract you are about to sign to you, and have your lawyer review it before acceptance.
Selecting your listing agency/agent
A fellow realtor wrote recently that in his home state of Washington, 14 real estate agents had had their licenses revoked and 12 more that had theirs suspended for fraud, deceit and violent crimes. One of the agents took the buyer’s earnest money and converted it to his own. One tried to sell property that wasn’t for sale, and another lied to the sellers and convinced them to sell their home way under value (to the agent’s friend). Just think, there are 49 more states with similar problems. Do you really want to go forth and deal with just any agent?
Not all real estate agents are created equal. Typically, 15% of the agents make 85% of the money. What percentage of the agents are you dealing with? How were you planning on selecting an agent to help you buy or sell your next home? Reading the newspaper or using the first agent you come across?
Agents: you might not like them, but you most certainly can’t live without them. Honest hardworking agents exist. They are hard to find, but finding one is easy once you know what to look for. Good agents can save you thousands of dollars and make the rest of your life easier, so it’s important that you locate the best.
Let you Real Estate Advisor give you some insider’s knowledge abut the industry and the people who work in it. With knowledge comes power and with this power you can save money.
When you are interviewing an agent to list your property, you want to make the distinction between Performance and Personality. You will want decide what balance you need of these two benchmarks, in order to select the best agent for you, personally.
Some of the questions can be:
1. What’s your percentage of listings closed to listings taken during the last 12 months? 24 months? Term of career in real estate?
It doesn’t help if your agent just gathers listings and does nothing else for you. You want someone with a track record of actually selling properties and who has been able to sell in the current market climate.
2. May I have the names and phone numbers of three clients whose homes you have sold in the past year?
If the agent refuses, or claims it’s “confidential information,” you may be dealing with an agent who has no satisfied clients. A good agent will be happy to give you references. Try to contact a few clients and see if their experiences match your situation.
3. Will you give me the name and phone number of at least one client whose home you failed to sell in the last year?
Few agents have a 100% success rate. Whether or not you actually follow up and call this client, you can use this question to judge your agent’s honesty, and use it as a springboard to discuss his or her strengths and weaknesses.
4. What will you do to market my home beyond the MLS (Multiple Listing Service) and local advertisements in print?
It is important to find an agent who will use a marketing strategy to sell your home, which may be different from a strategy to seller your neighbor’s home. There are many marketing tools available, and your agent should be familiar with all of them.
5. If I don’t like your performance, may I cancel our listing agreement at any time, no strings attached?
The best agents allow you to cancel a listing if you are not happy with their service. However, be prepared to explain the reason for your displeasure, and give the agent an opportunity to make it right. Remember, the agent does a lot of “behind the scenes” which you never see.
6. What’s your guarantee? In the market in Vallarta, there is not a guarantee of the agent to buy the home (through a mortgage most often) if it doesn’t sell within a certain number of days. But, it is a good question to ask and find out what can be negotiated with the agent. The purpose of this question is to get to some level of deep seriousness about the marketing plan being discussed.
7. Is your office fully automated with a mobile phone or pages, voice mail, email and fax so we can stay in constant touch?
Are you committed to being available? It is crucial for your agent to be available, especially during the offer-counter offer process and the week before closing. Nothing is more frustrating than having a vital question you need answered NOW and not being able to reach your agent. Your agent should respond quickly to your calls and keep you informed on a regular basis through the selling process. Agents with full-time teams that are dedicated to seller needs are capable of maintaining constant lines of communication.
8. How much time will you spend prospecting for buyers for my home? How will you do it? You want an agent who will be proactive and really work to earn the commission. Just placing ads isn’t enough. In addition, you want to make sure that your agent pre-qualifies buyers before showing your property, so you don’t waste time dealing with offers that can’t be met.
9. Can you give me three good reasons why I should choose you over anyone else? See which strengths the agent discusses, and how he or she compares to what others say. Ultimately, you want an agent who is right for your situation and who can sell your property.
In our Mexican market, agents do not have to be licensed by the state or government to demonstrate their knowledge of the business of real estate. Members of AMPI have taken an extra step to abide by a set of voluntary rules pertaining to ethics, business procedures, treatment of the client and the public, as well as fellow agents. There are few rules in the mercantile law of Mexico regarding the function of the real estate agent in a transaction. The individual real estate offices and agents, therefore; create their own business practices. It is wise to find out what these business practice and policies are.
Harriet Cochran Murray, Director of Cochran Real Estate, is a seasoned Real Estate professional both here in Puerto Vallarta, Mexico and in the United States. Harriet has served in many capacities as a board member for the local Real Estate Association AMPI (AMPI is the national association of real estate professionals). She is also a member of FIABCI, NAR in the United States and a proud member of CIPS (Certified International Property Specialist), a designation of NAR. Harriet’s expertise and experience in the Real Estate and especially in the Mexican market makes her Viewpoint blog articles both informational and intriguing. Harriet is a Buyer’s Agent who specializes in getting the best deal on the right property for her clients. Click HERE to view Cochran Real Estate Listings.