A True Story About How Buyers Influence Price

Market trends, statistics, and data are all important, but the truth is that homes are actually worth whatever a buyer is willing to pay.

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If you’re a seller, I’d like you to know and understand that a home is worth whatever a buyer is willing to pay for it. Yes the market statistics, data, and trends are important, but at the end of the day, the buyer’s willingness to pay is key.

To help illustrate this point, I’ve got a short story to share with you.

Recently I was looking at a condo in the Irvine area with a client. This property was priced at $630,000. As soon as my client saw this property, they absolutely fell in love with it.

As it happens, their daughter actually lived in the same neighborhood. Since they were older and had retired, being near family was as important to them as how much they loved the property.

To my clients, the money wasn’t as important as the home itself.

To them, money wasn’t as important as both of these factors. When we ran the numbers, we learned that homes in this neighborhood were selling between $620,000 and $630,000. Even so, the client told me they wanted to offer $640,000.

I knew this number was higher than what would likely be justified by an appraiser, but they didn’t really care. They had the additional funds to cover the difference and didn’t want to take any chances.

The property actually did see a number of other offers, but the sellers didn’t disclose how much they were for. For all we know, our offer might have been the highest. Because of the level of interest in the property, my clients wanted to do everything they possibly could to make sure they won out against the other buyers.

When the sellers sent back their counteroffer, my clients revised their original offer and said they would be willing to pay $642,000. Thankfully, they did get the property.

But as I expected, the property did appraise for slightly less. Still, my clients didn’t have an issue paying the difference. To my clients, the money wasn’t as important as the home itself.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

What You Should Know About the Orange County Market Shift

You’ve probably heard me talk about the market shifting. Find out what that means in this market update.

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Today we’re going to talk about the conditions of our current market. More specifically, I want to consider the question, “How is the price?”

I’ve talked in the past about the market shifting, but I want to bring that subject up again today.

Since I started talking about shifting, I’ve been getting a lot of phone calls saying, “Hey Robert, when you say shifting, what do you mean? Are the prices going down? Should I wait six months before I buy? Will I get a better deal?”

I want to clarify that a little bit: When I say shifting, I mean that we’re starting to see the market stabilize.

When I say shifting, what I mean is that we’re starting to see the market stabilize.

In the early part of this year, the market was very aggressive. Homes were selling for more than what they were worth and there were many multiple-offer situations. This was primarily due to the low interest rates and the fact that we had very low inventory.

In early 2017, you could get away with pricing a home above market value and probably still sell it. As the market continued to appreciate, it would continue to catch up to the overpriced listing, and then the home would eventually sell.

From what I can see now, it’s a little bit different.

Inventory is growing—not significantly—but it is growing over time. The market is slowing down a bit, but only because summer is over, and people are geared more towards school and work. The holidays do tend to see a slower market, as many buyers and sellers exit the market.

So what I’m seeing right now is that, if a home is priced right and it shows well, it will sell very quickly and for a great price. You might even see multiple offers on a property like this because, even though inventory is growing, the inventory on homes that are priced correctly is shrinking.

The reason I bring this up is that a lot of people might call and say, “Robert, you’re saying that the market’s shifting, but I’m still seeing multiple offers every time I bid on a property.”

The answer to that question is that you’re putting offers on homes that are priced right and that show well. So when I talk about the shift, I’m really talking more about those optimistic homeowners or agents who price their homes 5%  to 10% above market value. People price this way because they’re so used to what we’ve experienced in the beginning part of the year that they haven’t adapted to our current marketplace.

When a home isn’t priced to sell, it’s going to sit on the market and get stale. In an aggressive seller’s market, homes are selling within one to two weeks, maybe even a couple days. If a home has been sitting on the market for 30, 40, or 50 days because it was overpriced to begin with, many buyers think, “If the market is so aggressive, why has the home not sold yet? What’s wrong with it?”

Those buyers will actually submit offers lower than market value, and sometimes they’re able to get it. In fact, in the last three months,  we’ve helped clients buy two properties below what we felt was market value. The seller just started way too high, and we’re not in the same market as earlier this year.

So if you’re a seller, what should you want to do?

Well, you should interview different agents and come to understand three things that will get a home sold for the maximum amount: price, marketing, and exposure. Your agent, if you choose a great one, is going to handle all of the marketing and all of the exposure.

So when I say interview agents, you want to understand their personality, strategy, track record, and most importantly, what they’re going to do to market your property and maximize exposure.

Next, you want to collaborate with your agent to come up with a price that makes sense, otherwise it’s likely the home will stagnate on the market. Be sure to look at things like current inventory, your competition, the current market in your micro-community, or maybe the overall market in Orange County— you want to understand the different factors and trends, and pick the price that will inspire the most activity around your home.

Now if you’re a buyer, what does all this mean to you? The good news is that you don’t have to rush and be as aggressive as you did earlier in the year, because inventory has grown. But it’s important for you to understand that if you come across a great home that’s priced to sell, you still might come across a lot of competition, and you could possibly be outbid.

That’s why I’m telling you this today. The market is still very strong for sellers. That’s what I mean by shift—you can’t get away with now that which you could have in the beginning of the year.

If you found value in this information, please leave a comment or a question. Also, if you ever want to talk about anything specific, please let me know. Until then, happy selling.

What to Do If Your Listing Failed

If you tried to sell your home in the past but were unsuccessful—don’t give up. Most buyers tend to do one of four things in this situation, and I want to let you in on which option is best.

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If you’ve attempted to sell your home in the past but didn’t find success—what’s your next step?

In this situation, I typically see homeowners do one of four things. Today, I’d like to discuss each one of these routes and what they achieve.

1. Relist their home with the same agent. Every situation is unique. However, by looking at certain statistics and market averages to how a listing performed, you can generally discern how your listing differed from the norm. For example, the average amount of time a home spends on the market in Orange County is just over two months. If your agent was unable to sell your home with a four, five, or even six-month contract—this does not bode well for you. My team and I, for example, typically sell our homes in just under 28 days. If your agent wasn’t able to sell your home the first time, they aren’t likely to be able to do so on their next try.
2. List their home as For Sale By Owner. While although 2% of homes on the market do sell this way, the remaining 98% of homes are sold through a Realtor. Typically when a homeowner chooses to list this way, they do so because they believe it will save them money. However, listing your home without the assistance of an agent actually involves a lot of unexpected work and costs that people often forget to consider. For example, in order to bring buyers to your listing, you may have to pay a buyer’s agent to do so for you. Additionally, the average FSBO listing will sell for 11% to 17% less than if it was listed with an agent. Instead of focusing on what you are paying in the process, it is much more important to consider the money you will walk away with at the end of the transaction.
3. Give up. Life doesn’t always work out in the way we’d like it to. As difficult as it is, the key to getting back on your feet after a failed listing is by not letting your emotions drive your decisions. Instead, think back to why you were selling your home in the first place. No matter the reason, it likely still important to you even after your home failed to sell. Just because you were unsuccessful doesn’t mean your home is impossible to sell.
4. Interview different agents. In my opinion, this is the best option. Speaking to different agents about their strategies, networks, and pricing options can give you a better idea of what is possible for your home. Not all agents are created equal, and selling a home isn’t easy. Finding the agent who will be best-suited to take on your listing will make a massive difference in your success.

If you’d like to know what my team or I can do for you, have any other questions, or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.