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I work on a regular basis with a large volume of “expired listings.” As a matter of fact, these clients account for 25% of the Larkin Group’s total sales volume. These are Sellers who spent 3, 6, perhaps even 12 months on the market and their listing term finally “expired” without the home selling.

 

We’ve had tremendous success helping these individuals the next go-around in getting their home sold, which means that I also spend a fair amount of time communicating with potential clients from this group.

 

There are many characteristics that the expired listing sellers share, the main two being that #1 – they still own their home, and #2 – they are NOT HAPPY about still owning their home. They make lots of frustrated accusations about ‘why’ the home didn’t sell….the agent, the market, the brokerage, the weather, the neighbors, even their ex-spouse.

 

However, can I share with you the absolute #1 thing I hear from that group, bar-none? “We are just going to wait for the market to come back...and besides nothing is selling anyway!”

 

Why do they think the market will magically bounce back say, next year? Two reasons:1. Because it would financially benefit them if there were a quick recovery and… 2. because the market has never done this in Washington County before, therefore most people are in denial about the reality of the situation.

 

Homes ARE Selling

First of all, things ARE selling and the world hasn’t come to an end.  225 listings sold last month alone. Add to the fact that there are actually TWO sides to every transaction, (buyer and seller), and you are looking at 450 individuals who bought or sold on a monthly basis!  

 

But I digress…..Many Sellers are frustrated with the disparity between what they thought their home was going to be worth and what is actually is. They are concerned about a “paper” loss, if that makes sense. They want to ‘wait it out’, yet they may be waiting a LONG time. Am I saying that it is a bad time to buy? Well not necessarily at all. I’m just pointing out that statistically, Sellers may be looking for a pot of gold in terms of a short turn-around to real estate values.  Allow me to statistically prove my point.

 

If you look back over the past 10-20 years, US home appreciation has never been above around 6% on a year over year average.

                  US Home Appreciation over past 10 years

Along comes the recent housing boom and we start seeing 30%, 50% or even higher appreciation! As a matter of fact, it was 73% in Washington County over the past 5 years to be exact. The problem is that at the same time, wages were NOT increasing at those rates, and many buyers were getting into loans they could not eventually afford.

 

Fast forward to 2007/2008. Those same buyers now have their loans “resetting” to much higher interest rates, the respective profession they work in is suffering due to the housing market so their personal income is down, and the their home is now worse significantly less than what they paid for it.

 

Add that to the fact that many of the very buyers they need can’t purchase their home because they are waiting to sell their own homes, or can’t qualify for a loan in the current mortgage climate. It’s a vicious cycle, quite frankly, and one that most civilians (a.k.a “Sellers”) haven’t fully considered. Hence their (misguided) optimism.

 

And why should they have considered it? They are, of course, civilians, not real estate professionals. It’s not their job to consider it. It’s mine, and that of other real estate people who take themselves seriously.

 

Segway back to the comments about historical home appreciation. Can anyone really believe that we will EVER see that kind of appreciation again? And if so, is it really going to happen immediately following a real estate crash? No, it’s not.

 

So as Sellers consider their options and look forward to a future market recovery, they should consider the following:

  1. Home values will have to stop falling before they can rise.
  2. When they do stop falling they most likely will remain static for a period of time….could be months, could be years!
  3. Then they will start creeping back up at a conservative pace, say 3-6% annually.

That all summarized, you can clearly see that hoping for your home to be worth more, or even as much as today in the next 12 months is wishful thinking at best.

 

Prognosis:

At the end of the day Sellers may do as they see fit. They are adults and can make their own decisions. For those who don’t need to sell, please leave your home off the market! You're just clogging up the pipes so-to-speak. But my advice to those who want to “wait” for a shorter-term, miraculous turn-around to a currently frigid real estate climate would be this: pack your long-johns, it’s gonna be a cold winter.

You may remember that phenomenon as a child....the ball begins rolling down the hill, driveway, whatever....away from you. You make repeated attempts to "lunge" with your foot and catch it, but to no avail. Finally, you realize that the only way to catch that thing is to get in FRONT OF IT.

So goes the process of pricing property in today's real estate market. I am just seeing the same ugly scenario over and over again right now in the St. George / Utah's Dixie area, and it goes like this. "Help my home won't sell" is the cry of most Sellers in our area these days. Let's look at a scenario that is all too typical with this group:

You decide to list your Washington County property as you will soon be taking a job transfer to another town, (or whatever reason happens to be yours.) You sit down with your Agent who doesn't get started on the right foot by telling you that the home you thought was worth $325,000, is REALLY worth $295,000 max. Can you believe the nerve of that agent? Just trying to steal your hard-earned equity, right?

So you relent and determine that $295,000 is just too low, and besides, your house is WAY nice than those other homes your agent showed you in the comparable. You can get at least another $15k, right? You list at $310,000 against your agent's judgment.  And since your home is better, it probably won't matter that the competing homes are priced from $285 - $300k.

A month into the listing showing activity slows and your agent encourages you to just DO THE RIGHT THING and get that price amended to a competitive level, say $294,900. Sadly, a few competing home sell bringing the new "market" value to around $285k. Still reeling from the news that your home isn't worth $330k, you choose a conservative $300k even price so you don't loose any more money on the sale of your home, money that YOU EARNED, right?

Long story short, 4-5 months pass and the market continues to run away from you down the hill.  In the meantime you, or your spouse, have made the job transfer and the other 1/2 and the kids have been living without you for 3 months already! You finally relent, determine to get IN FRONT OF THE BALL, and price your home at an aggressive $269k where it closes escrow at $259,000 to a really nice family. 

That was most likely a $30k loss, and a TON of time, pain and suffering in the process. Whoops.

The summary points here are very simple, and extremely obvious. We have a TON of buyers just sitting on the fence right now, and 4x that many Sellers getting upset at the "cheeky" buyers and agents who want to "steal" their equity.  

If you don't need to sell, stay put. If you do need to however, then you've got to get in front of the ball to grab it before it runs far, far away. What these buyers need is something that EXCITES them, and that "something" is almost always a well-priced, well-prepared property.

One of the techniques that is working really well for us right now is the process of setting up a series of continual, small price reductions at the time of listing. Say $2500 per week for a $250,000 listing, and maybe 2x that for a higher-end property. It works brilliantly for many reasons.

#1 - This process puts you in constant, proactive 'motion" to stay in front of the market, rather than waiting for the neighbors to out price you months down the road. #2 - Your home is continually hitting the Washington County Board of Realtors "hot sheet", the daily list of new listings, or price reductions. This same list ends up in hundreds of inboxes of actual Buyers who have logged in to the MLS through public portals and signed up for daily email updates of the hottest listings.

Don't chase that proverbial market "ball." Get in front of it.....now.

 

BOY!....has this market taken a turn from the "good old days....."  I say that a bit tongue and cheek since those days were actually just 2 1/2 years ago.  "That long ago?" you ask....yes, it's been that long.

The real estate world is certainly not ending. It is more accurately "adjusting" for better long-term health. Yet I find that I am facing an increasing challenge with helping our Sellers see the truth on the pricing of their properties. I know how easy it can be for an agent to tell a Seller what they want to hear, but can you tell me how that actually helps them?

 OF COURSE you can trust me.......

CASE STUDY - Joe (name changed to protect the overly optimistic seller) Joe IS a real person whom I just spoke with today. He recently finished a spec home in the Hurricane Valley worth I'd guess $250k. He is trying to sell it on his own because there is just no equity there. So I can tell him 1 of 2 things.

WHAT HE MIGHT WANT TO HEAR: "Joe, we might be able to get you that $270k you want so let's put it on the market and give it a go." I tell him this because I don't want to hurt his feelings.

THE RESULT: I spend enormous amounts of time and energy trying to market the home for 6 mos,after which it doesn't sell. He spends $1200/month in interest only payments and utilities (which he doesn't really have to give anyway). 4 months into the listing he is faced with converting the construction loan to long-term with costs him a few grand, PLUS the payment now goes to $2400/month. In the meantime the home loses another 5% in value.

TOTAL LOSS TO JOE: $12,500 value drop plus $12-$15k in actual hard costs for a total of let's say $25k, not to mention that the home STILL isn't sold and now he will have to market the home at the correct price for another 3-4 mos, spend another $5k in interest, and who knows what else in utilities, etc.

BETTER ROUTE: "Joe, I can tell the truth, or I can tell you what you want to hear but I can't tell you both. "(Tell me the truth  Jeremy so I can make an informed decision). "Ok, your home is worth $250k and for all of the above reasons probably needs to be priced at  $245k to attract buyers.

Ahhhh.......that's better.

In this scenario Joe now has the opportunity to rent it, deed it back to the bank, "short sale" it, OR just lower the price, list it with an aggressive agent, take it "in the shorts" and get done with it, saving in the process his marriage, his sanity, his credit, and 6 months of pain. (not to mentioned $20k or more in real losses).

If you were my client, which would you choose?

"Giving your house away" doesn't exist...Sellers Facing Music

by Jeremy Larkin

Go to your listing agent right now and DEMAND that they take an honest look at the list price of your home.  Then hold them accountable for the marketing plan they presented to you at listing (if there was one...). It may be the single best thing you can do to get out of where you are and into where you want/need to be.

Alot has been said by the PR people at  NAR (National Assoc of Realtors), UAR (Utah Assoc) and WCBR (Wash. County Board of Realtors) to minimize the public's feelings "being hurt" about the current real estate markets. I can understand why they do this, and for some time now, it's been really tough to figure out just "how bad" it really is. 

I can't quantify how "bad" or "good" it really is. That is pretty subjective and will feel different to each buyer or seller. What I can say is this: 

#1 - there is ALOT of inventory and everyone knows it.

#2 - some people have to sell their home sooner rather than later

#3 - as long as there is air to breath condition #2 will exist.

#4 - every time a seller has to sell, even at a deep discount, it causes prices to go down, period.  

#5 - in every real estate market there are ALOT of sellers who have to sell soon.

We are working with mulitiple sellers right now who have left their residence empty as a result of a job change. There must be hundreds of spec homes sitting empty with huge monthly interest nuts. What is the best solution for most of them? Drop the price. Sounds cruel, doesn't it? Well when the fish aren't biting you've just got to lower than line to deeper water where the fish are, right?

On countless occasions I've heard "I'm not willing to GIVE my house away." Working in the trenches, I've come to learn that "giving a house away" doesn't really exist. Buyers determine value, both in hot and cold markets. Many say that sellers were "naming their price" during the boom. They were, but BUYERS were determining if that was ok, and they did.

When the price is right, they buy. When it's not, they don't.  I mean, if a gallon of gas goes down to $1.50, do you expect the Gas Stations task for $2.00? I doubt it.

Sellers- it's ok to sell right now. You can't control the market, you can only make the best decisions for your family, and if that is a decision to move, then do so. However, if you just want to "see what you can get", don't waste your time, or your agent's, or muddy the pond any more than it already is.  

Buyers - yes, you can buy now. Prices are at or BELOW 2005 levels if you can believe it. "But what if they go lower?" They might, but I suggest the prescription above - make the best decision for your family.

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Photo of Jeremy Larkin - The Larkin Group Real Estate
Jeremy Larkin - The Larkin Group
Keller Williams Realty
50 E 100 S, Suite 300
St. George UT 84770
435.767.9886
Fax: 435-359-5085

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