Strategies to sell quickly

A lot of discussion has been going on in the media lately about what the best strategy is to get a home sold quickly in today's market place. I would like to take a look at a number of them and offer real-life, real-world feedback based on actual numbers and research of thousands of listings accross several boards.

First of all, there are three overall strategies a home seller can employ, with each of them having a number of different approaches or strategies that can be employed within them. Let's look at those 3 overall strategies and different ways they can be employed:

1. For Sale by Owner
2. Real Estate Auction
3. Listing for sale with a real estate broker

1. For Sale by Owner Strategy

During the red-hot sellers market of 2004 and 2005 a lot of home sellers decided that they would not need a real estate agent when 'homes were selling themselves in a matter of days'. Even during that sellers market home sellers - while being able to successfully sell their home - generally ended up in a disadvantaged situation in terms of final sales price. Because the MLS exposure was missing, FSBO's would rarely see the demand and multiple offer scenarios that often pushed final sales prices above the original asking price. In addition, buyers of FSBO's generally will demand a lower price because they know that the seller is not paying a commission.

While FSBO strategies made sense during the past two years, today - with the exploding supply of homes available for sale - going the FSBO route is in my opinion a costly mistake. Costly, because of lost time to market, and costly because if the market corrects this delay may result in a lower final sales price. Right now MLS exposure is absolutley critical, and without this crucial exposure the odds at success are drastically reduced.

Some key factors to bear in mind - and strategies that should be employed if going the FSBO route:

• Average sales time right now in our market is 5 months. Be prepared for the long haul.
• The buyer is king and you must be prepared to have the home available for showings at very short notice.
• You can get MLS exposure via certain MLS listing services. Be prepared to pay a few hundred dollars for the listing, plus a couple of hundred dollars for virtual tours and professional photography (a must), PLUS payment of a co-broke commission to an agent who brings a buyer - 2.5 to 3% is standard in this market.
• Continuous advertising in magazines, classified ads, website listings, and email broadcasts can add considerable costs to your bottomline, especially when taking the long marketing term into consideration.
• Appropriate pricing is key in today's market. Having an appraisal prepared is highly recommended.

Again, unless you are not in a rush and really don't care whether or not you will sell in 3 months or 12 months, this is not the time to go the FSBO route. If your attitude is 'let me try it for a couple of months and then list with an agent' then don't waste your time. Your house will in all likelyhood not sell in a couple of months - even if listed with an agent - unless the pricing is extremely aggressive.

2. The Auction Strategy

This approach to selling has become more and more popular in recent days. If you must sell quickly then the auction method can yield excellent results. Bear in mind however that while unique, high end signature properties will many times yield top dollars at an auction, the average single family home will not. The primary audience at auctions for the lower to moderately priced homes (sub $1 MM) will be investors looking to get a deal, something they can either use as an income property to turn around and sell for a profit.

If you are looking at this strategy keep the following in mind:

• Reserach a real estate auction firm that has a lot of experience with auctions in your price range. Review their most recent auctions - i.e. do not depend on results they posted last year when the market was hot. How did they preform this year?
• Evaluate how they will promote and market the auction. Unless there is significant exposure and a decent size of bidders present at the auction, you will not see much activity.
• Beware of "absolute auctions". An absolute auction is an auction where the highest bidder wins, no matter how low the highest bid is. A better way is to set a (secret) minimum reserve amount, and if the highest bid is not above that amount then the property does not sell.

If you do need to sell in a hurry then the auction route can be a quick way to sell in a matter of a few weeks. However, you will need to be willing to accept a low price in most cases, and usually if you were to list your home for sale with a broker at a very aggressive price then you may find selling it just as quickly.

3. Listing your home with a real estate broker

In today's market, this is truly the most effective way to go and most home sellers do decide to emply a real estate broker/agent for the sale of their property. Given the extreme overhang of inventory, and the resulting long time frames required to sell, a lot of discussion has centered around what kind of incentives can one offer to make the home more attractive and get it sold faster.

The range of incentives discussed runs from incentives for the buyer such as closing cost contributions, downpayment assistance, seller financing, etc. to incentives for the agent to show the home, such as a higher commission (co-broke) rate, buyer agent bonuses, etc.

In our practive we have investigated and tested a number of these, plus I have researched thousands of MLS records to generate a statistical analysis to determine whether something works or not. Here are some thoughts and what I have found...

• Offering a higher co-broke rate or agent bonus
  
  While a few years ago agents truly were the gate keepers to real estate and buyer only got to see for the most part what agents presented to them, today this is no longer valid. 77% (NAR) of home buyers use the Internet to start their home search, using sites such as realtor.com which offers access to all MLS listings, plus most real estate firm websites provide real time MLS searches, many times with automatic updates of new listings that match search criteria. The buyer is now in the driver's seat. While some agents may still be in a position to steer buyers, the idea that an agent will get a buyer to purchase something that is aguably not the best home for them, and not the best value, because they get an incentive is one that probably only applies to that small percentage of unethcial agents who happen to work with a clueless buyer. In practicality it just does not work.
  
  Statistically there is absolutely no difference in percentage of listings sold whether the co-broke commission is 2.5%, 3% or 3.5%. There is also no difference in whether or not there is a buyer agent bonus.
  
  Instead of offering a $10,000 buyer agent bonus, reduce the price by $10,000.
  
• Incentives to Buyers
  
  Certain incentives make sense, others do not. Two incentives that are very effective are for the seller to pay title insurance, and/or for the seller to pay buyers closing costs up to a certain limit. The reason these incentives are valuable as they reduce the buyer's cash needed to close. A $5,000 reduction in purchase price will not make much difference in terms of downpayment needed to close. However, a $5,000 reduction in closing costs will mean $5,000 less needed to close - a huge difference, especially to first time buyers or buyers of lower priced homes on a budget.
  
  Be aggressive in your incentive. Offer a significant closing cost contribution (say up to 3% towards prepaids and closing costs). If the buyer makes a low offer then this incentive can be up for negotiation. The goal has to be to make the listing so attractive that you will get showings and an offer.

This brings me to what I have found really works in getting your home sold; and like it or not - they can be summed up in a few points. Do them and your chances for a quick sale go up exponentially, violate them and you may find your home linger on the market for a long, long time. (did you know that more listings expire each month than sell?)

1. Setting the right price!
   
   This is truly the most important aspect of successfully listing and selling your home. Demand that your agent performs a reliable and accurate market analysis. One, that is not based on wishful thinking (or hopes to justify a higher price to get your listing), but one that is centered in reality. For starters, forget about what homes sold for last year, focus on what is happening right now, this year.
   
   If there are 20 comparable homes on the market, and only 3 sold in the last 6 months, then common sense will tell you that in order for your home to be one of the ones to sell in the next 6 months, it has to be one of the top 3 values amongst all the competing homes. If your home is #10 - well, it may take you a few years to sell. Put yourself in the buyers shoes, and follow your agents recommendations.
   
   If you need to sell quickly - i.e. 3 months - then make your home the best priced property amonst all the comparables, by a margin!
   
2. Make sure the home is showable and easy to show!
   
   While it is understandable that you as the seller may have a life of your own and you don't want to be inconvenienced by buyers wanting to see your home on 1 hour notice, the buyer does not really care. If someone wants to look at your home now then it better be available, or the agent and buyer move on to something else. Given that there is an incredible amount of inventory to pick from, buyers will rarely come back at your leisure.
   
   Make sure the home presents well. This means both curb appeal, as well as a clutter free, clean and tidy home. Rent a PODS (portable on demand storage unit) to put away all of your miscellaneous stuff, the family photos, trophies, etc. and clear away as much clutter as you can. Your agent will give you some feedback and ideas. Since you are looking to move you have to pack or toss out stuff anyhow, you might as well start now. The first impression is absolutely critical, and either the buyers love the place and can see themselves live in it, or they don't.
   
   Finally, whatever you do, make sure you are not present during the showing. Buyers will not linger and feel at home if you are there, that's a fact and you will drastically reduce your chances of a sale if you hang around.
   
3. Have an agent/broker that continuously promotes your listing.
   
   In today's market, where it will take on average 4-5 months to sell a home (MLS average), you will need a firm or an agent that will expose your listing continously. This means ongoing Internet marketing, print advertising, direct mail, email broadcasts to agents and so forth.
   
   If your home is priced extremely aggressively then you may find a taker during the first 30-60 days, however in most instances you will need ongoing promotion and activities.
   
   Especially Internet based marketing is absolutely critical in this endeavor, since most buyers do use the Internet in their home search. A realtor.com showcase listing is a must, and exposure on other portals such as AOL, MSN, Yahoo, Google and others are all part of a good Internet marketing campaign. Ask to see a written marketing plan and compare.

In the end, the three key points listed above will more than anything else determine how fast your property will sell. Statistically it is really irrelevant which firm you list your home with, provided they offer the services needed to affect a sale.

Over 95% of all sales are sold via a cooperating broker/agent through the MLS. Some firms offer incentives to buyers to increase their in-house sales ratio and that's great. Don't be led down the path of thinking however that a big name firm listing will do more for you than a smaller name firm. Most agents are independent contractors and you will find that there are many agents with big name firms that do an outstanding job and many who do a horrendous one.

When working with a firm just because of name recognition, and you end up dealing with one of hundreds of independent contractors (who by definition are working and providing their services independently) you are simply taking a crap shoot.

Instead, interview agents or firms and make your decision based on the services they provide, and the bottom line cost to you, not based on the brand of their affiliation.