A 2% reduction on the list price of a $225,000 home might not encourage any additional activity on the home but the same money spent might attract lots of buyers if it is applied to an interest rate buy-down. Of the five marketing factors that affect the sale of a home, most agents concentrate on price. While that will certainly cure a lot of what ails a listing, terms for the buyer is another alternative.

Assuming that the current market rate is 6.5%, a seller could prepay the interest so the buyer would make payments based on 4.5% on their mortgage for the first 12 months and 5.5% for the next 12 months. At the end of two years, the payments would be based on the note rate for the balance of the term which is usually 28 years.

It is a fixed rate mortgage so the buyer will know what the payments will ultimately be. It subsidizes the payments for two years that will allow the buyer to get into the home and get settled. In the example shown, the buyer’s payment is $227.73 less for the first year and $104.00 less the second year.

The seller prepays the interest at closing. The terms offered to the buyer makes the home more attractive and will cause more activity in the form of showings. This strategy may even help the home sell for more money.

Let’s say that you get your seller to agree to participate with $5,000 in financing incentives that the borrower can apply to the mortgage of their choice. In this example, the borrower would be getting a market rate loan but the first year’s payment would be based on a two-percent lower rate and the second year’s payment on a one-percent lower rate.

The borrower doesn’t have the risk associated with an adjustable rate mortgage but they do have lower payments for the first two years that will ease them into the new home while they get settled with their other expenses that always accompany a move.

The sad fact is that I have not seen incentives work in this market.  I have had sellers offer new in-the-box 42” flat screen TV’s, $1,000 agent bonuses, 1-year home warranties, carpet allowances, gas cards, even “price reduced” riders on their sign, and just about anything else you can think of.  All those things cost – or will cost – the seller money at closing.  Here’s why they generally haven’t worked:

• TV’s are nice, but aren’t enough incentive (they’re not very expensive any more) to sway a decision on a major purchase such as a home.
• Agent bonuses:  the agent does not make the decision on what to buy, the buyer does, so putting money in the agent’s pocket is nice for them but doesn’t help sell the home, especially since buyers are doing their own research on the internet.
• Buyers are going to ask you for (and probably get) a home warranty as part of the contract, anyway, and they know it.
• Advertising a carpet allowance (or any other allowance) up front only tells potential buyers that the home is in bad shape.
• Gas cards:  Even a $500 gas card only translates to 5 or 6 fill-ups, and that’s not enough incentive to buy a house.
• “Price reduced” signs say one of 2 things… “This house was overpriced to begin with” or “This house is failing to sell” so maybe there’s something wrong with it.

Of course, if they don’t work, most of the incentives cost you nothing, but they don’t gain you anything either.

However, since they don’t really work, the better strategy is to take what you would have spent on an incentive and deduct it from your price.  As a matter of fact, I believe that you should price your house as close to your bottom acceptable price as possible, then just negotiate hard to get as close as possible to that number when you get an offer.  Having listed your home with Crawford Realty, you have at LEAST a 2.5% advantage (and maybe as much as 5 ½% over traditionally-listed comparable homes because of the higher commission structure they are locked into.  In this market, other buyer requirements like bedrooms or school systems being met, price will be the winning factor.  Many people out there on the market are keeping their prices up so they have “wiggle room” to negotiate, but the fact is they’re missing the boat, because price-conscious buyers are passing them by, not even looking at their home.  Better to bite the bullet up front and get the activity if you can, because you can’t sell anything to someone who isn’t even looking at it.

There is only one thing that I can think of other than rock bottom pricing, and that is a “purchase money mortgage” or seller financing.  If a seller can hold a mortgage for a buyer, the buyer who might have a tough time getting a standard mortgage now might be able to buy, and an appraisal isn’t necessary.  Most sellers can’t afford to do it, so it’s a huge advantage over your competition, if you can.  Of course, if the buyer defaults, you still get your collateral…the house…back!  Talk to me if this is interesting to you.

Finally, it’s tough to catch a fish when the fish aren’t biting.  Of course there are buyers out there, but relatively few, with a huge selection to choose from.  So patience may be the only final alternative…things will come back, but with the bank failure news of last Friday, they were saying on TV this morning that getting a mortgage is going to become even more difficult right now, so with gas prices, oversupply of homes, too few buyers, people’s savings dwindling on the stock market, and the tough economy, we are in a perfect storm for real estate sales.  It will come back, but probably not soon. 

I hope all this makes sense.  I desperately wish I were a house selling wizard, and I’ve tried to get as close to that as possible, but I just can’t seem to find that magic wand…yet.

This morning I checked MLS and found that there are 16,733 active listings in the Birmingham market (not including non-listed FSBO’s.)  Of those, only 1,636 are pending (9.7%), leaving 15,097 (90.3%) in available inventory.  This is the highest number I have seen.  Add that to the never-ending media gloom and doom reporting, which, as of today, was predicting that housing market pricing will probably not bottom out until sometime early next year, causing many potential buyers to wait for even lower prices.   So we end up with a discouraging mix of vast over-supply and not enough buyers to pull homes out of availability.  All of this is even more true for more expensive homes, with average days on market being higher as prices go up.  The bright side is that Birmingham remains in far better shape than much of the country, and we are pretty much at the top of the summer selling season.  Remember that YOU only need one buyer, and finding that buyer is a matter of timing and exposure. 

If you are not getting any showings, there are 2 possibilities;

1. re-sales in your particular neighborhood are not moving at all, perhaps because you are competing with new construction, where builders are offering incredible deals to entice buyers into new homes, or perhaps it’s just not a “hot” area.  (Gas prices are driving some buyers closer to their workplaces.)
2. You might be competing against similar homes at lower prices. 

If either of these could be the case, you might consider a price reduction, but unless it’s substantial it might not make much difference.  Consider other marketing venues…I’m not really big on newspaper advertising, but if you haven’t tried it, you might place an ad and hold an open house to see what happens.  I can place a photo ad for you in “Home Tour” in the Sunday real estate guide that will get more attention than a text ad.  The cost is $75 for one week and $115 for two consecutive weeks with no changes.  Try taking copies of your flyer to neighborhood real estate offices, give the receptionist a Starbucks gift card and ask her to distribute them to all the agents in the office.  Put a bonus for a contract that closes by a certain date in the flyer.  Put copies of your flyer on the public bulletin boards at grocery stores, drugstores, libraries, anywhere they could get exposure.  Make sure you have a stocked flyer box in your front yard.  If you can post a flyer at your church, other social organizations, or workplace, do that, too!  Make sure EVERYBODY knows.

If you are getting showings but no offers, your price is probably okay, but there might be some factor about the house itself that potential buyers don’t like.  Always follow up with agents within 24 hours after each showing for feedback from their clients.  If you hear the same thing 2 or 3 times, that’s a clue.  Ask the agent specific probing questions, like, “how does my house compare with others your client has been looking at in the same price range?” or “What, specifically, did they like or dislike about the house?” or even, “What could I do to encourage your client to make an offer on THIS house?”  Don’t settle for an answer like “the house was lovely” or other useless comments.  You need specifics!  Step back and try to look impersonally at your house as “inventory” rather than your home.  If the house needs cleaning, yard work, some more neutral paint colors, or minor repairs, consider investing a small amount to do these things.  It could bring a much quicker sale.  Make sure first impressions are good…especially at the front door, where buyers stand and look around while the agent opens the lockbox.  But also remember, you can’t worry about things you can’t change, so don’t invest emotional energy on them.  Just fix what you can.

Like I said, timing and exposure will eventually bring you a buyer, but it may take a long time, so don’t get discouraged.  Keep marketing, and keep the house close to show-ready.  I know it’s inconvenient, but if you want to sell….

One last thing…I’ve heard recently that there are agents out there seeking listings from Crawford clients by telling them that their house won’t sell because it’s not a full-service listing, and they could sell it faster.  First of all, it’s illegal to solicit a listing on ANY property that is already listed with another broker.  Second, it’s illegal and unethical to imply that any listing is boycotted because of its listing broker.  (Besides, we ARE full service the minute you get an offer.)  Third, you have all the exposure (and MORE) than the full-price agencies are giving their clients, and your listing in MLS looks just the same as any other company’s listing.  Fourth, you are offering the selling agent who brings the buyer a full commission, so why wouldn’t they sell it if they could?  (When they say “list with me and I’ll get it sold for you” just say, “Well, you can sell it now.  Why haven’t you already brought me a buyer if you can sell it?”  If you’ll look on our website, we list all the agents and their companies who have sold our listings, and it’s virtually every company in town.  So if you’re approached, just remember, the agent is starting out on an unethical foot anyway (what else might you find untrustworthy that they’d do) and what they’re saying is purely a drummed up untrue plea for your business.  Good agents are already too busy to have time for this kind of stuff.  You’re okay where you are.  You made a good decision when you listed with us; it’s not Crawford, it’s the market.  (I checked all of Crawford’s expired/cancelled listings since last September 1^st.  Of those 63 listings, 33 just withdrew from the market, 30 re-listed with another agent, and only 4 of those have sold, leaving 26 still active and unsold, and those poor sellers are now locked into a 6% [okay, maybe 5 ½%] commission with their “full service” agents who could sell their house faster.  Hmmm.)

I am still wishing you a quick and profitable sale.  Hang in there, keep doing your marketing and think positive thoughts.   Good Karma can’t hurt.

From “Realtor.org”

1. Trim bushes so they don’t block windows or architectural details.
2. Mow your lawn, and turn on the sprinklers for 30 minutes before the showing to make the lawn sparkle.
3. Put a pot of bright flowers (or a small evergreen in winter) on your porch.
4. Install new doorknobs on your front door.
5. Repair any cracks in the driveway.
6. Edge the grass around walkways and trees.
7. Keep your garden tools and hoses out of sight.
8. Clear toys from the lawn.
9. Buy a new mailbox.
10. Upgrade your outside lighting.
11. Buy a new doormat for the outside of your front door.
12. Clean your windows, inside and outside.
13. Polish or replace your house numbers.
14. Place a seasonal wreath on your door

What’s In, What’s Out

Each year, Mark Nash of Coldwell Banker Residential Real Estate in Chicago asks subscribers to his e-zine what buyers want most. His most recent poll shows:

IN

• A reduced carbon footprint: How your home and you impact the earth matters to more buyers who want a home that lets them save energy and lessen their contribution to global warming.

• Outdoor living: Massive fireplaces, outdoor kitchens, and under-patio heating to extend the season are not just for the Sun Belt anymore.

• Fully concealed appliances: That wood-printed cover for the fridge is not enough any longer; now appliances are hidden behind hinged doors.

• Floating homes: Not your father’s houseboat, these nonmobile homes are basically ranch houses sitting on stationary barges in a lake or river.

• Home elevators: Even builders of mid-priced homes are adding this essential for boomers wanting to age in place.

• Pet showers: Clean pets mean clean homes, and who wants to mess up the bathtub when this feature can be a part of the garage or mudroom?

• Freestanding bathtubs: These oversized soaker tubs, or “bath thrones,” have supplanted whirlpool baths as the must-have bathroom centerpiece.

• Bathroom suites: Whether it’s multiple flat-screen TVs or a mini fridge and cappuccino maker, you’ll soon have a whole home inside this one room.

(This information was re-printed from realtor.org)

Here is a brief article that appeared in the Friday, 3/21 issue of the Birmingham Business Journal:

Friday, March 21, 2008

Birmingham area near top of pack in affordable homes

Birmingham Business Journal - by Lauren B. Cooper and G. Scott Thomas ACBJ

Birmingham now ranks third in the nation for affordable housing, outpacing at least seven other Southeastern cities.

According to a study of the nation’s largest 50 metro areas conducted by American City Business Journals, parent company of the Birmingham Business Journal, the metro area’s median monthly housing payment was $753, taking a little over 20 percent of local homeowners’ median monthly household income of $3,711.

That’s $86 more than No. 1 ranked Oklahoma City, $391 less than the national average and $2,738 less than Los Angeles, ranked the least affordable city in the nation.

The Magic City ranked highest in the Southeast as well, listed above other top affordable cities such as Memphis (No. 9), Louisville (No. 11), Charlotte (No. 12), Nashville (No. 16), Atlanta (No. 17), New Orleans (No. 1 and Jacksonville, Fla. (No. 25).

An open house might give your home the exposure it needs to find your buyer.  It’s easy to hold open houses, and I highly encourage you to do them often.  Now, I don’t want to alarm you, but there are some common-sense precautions you can and should take to protect yourself and your property and to be prepared for your open house.  Below are things that agents know and do to minimize the threat of a “crime of opportunity” against themselves when holding an open house.  These are important things to think about, because, after all, when you hold an open house, you are inviting absolute strangers into your home to wander around and see everything you have.  If you plan to hold your own open house, please be sure to follow these guidelines:

1. Never do it alone.  Have a friend or family member with you at your home at all times during the open house. 
2. Set up a call schedule with a friend or neighbor (one calls the other every 30 minutes) and a coded distress signal, so that you can call with a message that would appear harmless to a prospect but would alert others to potential danger.
3. Prepare ahead.  Remove from view any object that could be used as a weapon (i.e.; stow knife blocks inside cabinets, make sure guns are secured in a gun safe, scissors are not left out on the desk, etc.)
4. Do not wear expensive jewelry or carry large amounts of money.  Do not have valuables (coin jars, jewelry boxes, silver settings, pocket-sized pieces of crystal or valuable knick-knacks, car keys) in view.  Safely stow credit cards & cash.
5. When prospects arrive at your home, ask them to register on a sign-in sheet (or in a guest book.)  Get their name, address, telephone, car make & model, tag number, and driver’s license number.  It sounds like a lot to ask, but legitimate prospects will not mind, and remember…you are giving an unknown person complete access to your home.  You need to know some information about them first.
6. Keep groups of lookers together.  Do not let anyone wander around the house unattended.  Stay with them and carry your cell phone or a cordless phone with you in case you need to make an emergency call.  Don’t hesitate to call your friend, neighbor, or 911 if you become suspicious of a prospect’s behavior.
7. Always let a prospect enter a room first and follow them in.  Stay between them and the door.  Never let them get between you and the doorway.  If you need to get out of the room, don’t let them block your exit. 
8. Finish the open house while it’s still light out.  Do not hold an open house after dark. 

3/4/08

You want to sell.  You must try EVERYTHING.  Here are some more tactics that are worth considering.  Be prepared…you might need to spend some money to sell, and you might need to invest some time and effort.  You can’t just turn it over to a Realtor® who is going to get it sold for you, it honestly just doesn’t happen that way.  YOU and YOUR HOUSE are going to sell your house.  A Realtor® is an expert with ideas and marketing access; an invaluable asset in the process.  But unless you get intimately involved in the details, it is going to be difficult to find your buyer.  You don’t want to waste your marketing opportunities by being less than completely prepared when timing and exposure bring your buyer your way.

Re-think open houses: 

The most serious buyers are looking in the evenings and off-times like Saturday mornings.  Hold an open house THEN instead of the usual Sunday afternoons, when you will be attracted more “lookie-lu’s” than serious buyer prospects.  Make sure you get everyone’s name and number who looks at your house, and call them back within 24 hours for feedback.  Ask them what it would take to get an offer from them.  What can you lose?  Whenever you have an open house, stick out a fish bowl with a note that says “Drop your business card here for a chance to win a free lunch.”  You’ll get an email, a work number, a name…every opportunity to connect with a possible buyer.  All for the cost of one lunch…payable when you get a binding contract or actually close!  (And you really should follow through, draw a card and buy lunch…it’s great PR.)

Organize a neighborhood open house day: 

Ever notice how car dealerships are bunched together in the same area…or the bars & restaurants…or those big neighborhood yard sales?  Why?  Because that attracts bigger crowds, and everyone benefits.  You can do the same thing with an open house.  Why not go around the neighborhood and talk to the other sellers…they have the same problem you do…they haven’t sold yet, and they need a buyer.  Get all your neighbors with homes for sale together and organize a neighborhood open house day that will attract volumes of potential buyers, and split the cost of the ad.  Offer some food or drink or door prizes or drawings at each house.  (That’s how they get agents to attend those agent open houses.)  The great thing is that, as we learned in Real Estate School, ALL real estate is “non-homogeneous,” which means that no two properties are exactly alike. Real Estate is always local, and unique.  And that means that the buyer who would buy your neighbor’s house probably wouldn’t buy yours anyway, whether it’s the number of bedrooms, shape of the back yard, or any of a hundred other things.  By making it a neighborhood event you can buy a bigger ad, share the cost, and attract buyers and agents who know they can see a variety of options in one trip. 

Google “St. Joseph statue:”

You’ll find lots of places you can buy one for just a few bucks, with instructions on what to do with it.  Many sellers swear that they’ve sold their property in the past by burying the statue for good luck.  Maybe it works, probably does if you believe it, and it certainly can’t do any harm!

Participate in an agent open house:

They are usually held on Tuesdays, from 10AM – 2PM.  We don’t do them, but you can let your selling neighbors know that if their agent will set one up, you would like to participate.  Agents will “caravan” through 4 or 5 homes.  Each home provides something; first, soup and/or salad, second, lunch entrée, third, dessert & coffee, last, a drawing for a gift or gift certificate or cash.  I’m not sure this sells houses, but it does expose them to agents who might influence a buyer and, after all, you only need ONE buyer.  At any rate, if you’re going to try EVERYTHING, this is included!

Post notes:

I love this idea!  Make signs on neon-colored 3×5 cards, and post them (with removable tape) throughout your house to point out details that prospects might otherwise miss.  Is the refrigerator or washer/dryer included?  Put a note on them saying so.  New carpet?  Custom draperies?  Italian light fixtures?  Home Warranty included?  Electric pet fence?  Gas fireplace starter?  Make sure visitors are aware of everything that adds value to your home.  Are notes tacky?  Absolutely.  Do buyers mind?  They LOVE them, and will walk around looking for every one to find and read.  And here’s the BEST one:  Right inside the front door, put one that says “KINDLY REMOVE YOUR SHOES.”  Some people will, some won’t, but they will all get the impression that it’s a well maintained home that the owners have really cared about.  I’ve known sellers who have put out a basket of those blue shoe booties at the front door.  I know having those signs around will annoy you, but they work.  Remember, you don’t sell a house the way you live in it.  Buyers have no emotional attachment to your home, and you are selling a product.  They need information, so give it to them.

Get Feng Shui Savvy:

Get a book or research it online, and then arrange your furniture and accessories by the principles you’ve learned.  Your house will look better, you might sell faster, and you’ll feel more peaceful about the whole process.

Hire a home stager:

For $150-200, they will honestly and objectively tell you what you need to do.  It will probably include de-personalizing (removing an abundance of family photos, etc., religious wall hangings that could possibly eliminate someone who might otherwise have made you an offer but was offended.)  It will include “editing” or removal of a lot of stuff.  I know you don’t want to spend money on the house now that you plan to leave, but you might have to.  You might need to rent a storage unit to put stuff in for awhile.  (The garage might hold some stuff, but if you fill it up more than it already is buyers will get uncomfortable.  You probably should “edit” the garage, too.)  It could include re-arrangement of furniture, artwork and accessories.  This can make rooms feel larger, traffic flow work better, and it can help people to imagine their own stuff in your space, if it’s done right.  Another recommendation might be re-painting.  Sure, you love your chartreuse hall bath, and the jelly-bean purple master bedroom is your childhood dream.  But as easy as it is for them to re-paint, most buyers can’t see beyond what they are actually looking at to the potential of a room.  Not only that, they want the house to be move-in ready so they don’t have to launch right into renovations.  They can usually live with neutrals or earth tones, where pastels or extreme hues might rule you out.  Couldn’t you live with new bland paint for just a little while if it will help market your product…you house…to a wider audience?  So, invest in a home stager, and follow the recommendations you get.  Remember, you need to turn your house into a product. (Think of model homes you might have been in…lovely, well decorated, yet impersonal and with as broad an appeal as possible.)   You could hardly spend more than the cost of another month or two’s mortgage payments, and, in the long run, a quicker sale could save you more than you spend.

Stand out front and check the curb appeal, and hang out awhile at the front door:

Take action.  Buyers have so many choices these days that if the picture they see on the internet…or the house they see driving by…doesn’t really grab their attention, you will never get to show them the spectacular floor plan and interior drama.  WhatEVER it takes, it must look good outside.  This means new mulch or pine straw, new flowering annuals, trimmed and pruned shrubs (if they’ve overgrown the house, you MUST cut them back, unless you are trying to appeal to the curator of the botanical gardens,) lawns, sidewalks and curbs mowed and edged, mailbox painted, gutters and trim paint clean and fresh.  The single place that buyers spend most of their time is on your front porch waiting for their agent to finish fumbling around to get the key out of the lockbox.  And they are looking around.  They see everything from old rusty front door hardware (lets face it, you never even look at this…you come in through the garage), cobwebs in the corners to sickly plants in the urn to cracked mortar on the brick steps, peeling paint on the wrought iron, and faded shutters and window trim.  You know what they say about first impressions, so what will they be saying about yours?  Make sure you make this a fun, beautiful, spotlessly clean, well-maintained place.  Investing a few…or a few hundred…dollars on a new front doorknob, updated light fixture, and necessary upkeep can not only pay off…it will bite you badly, if you don’t do it.

Bake a pie.  Or a chicken.  And turn on the lights.  Oh, you’ve heard this before:

When you list, get your carpets cleaned. 

Sniff your closets…pare down the Imelda Marcus shoe wardrobe, and keep a mild deodorizer in each closet.  Put a bounce sheet in every shoe. 

When you have a showing, go all out with the good smells.  Bake something that smells great (leave out the curry, don’t bake a fish, and don’t cook cauliflower or broccoli for a day or two before the showing.)

Remove litter boxes to a faraway place outside during the showing, and clean their usual area well.  Pet odors = bad.

A mild potpourri or Aroma candles - good ones – are okay in small doses, but be sure not to leave candles burning after the showing.  You want to have something left to sell at the end of the day, and it’s easy to forget they’re lit in the daytime.

Bright idea:  Turn on Every light in the house.  Saying this goes against my inclination to be “green.”  But bright rooms appear larger and happier, so turn them ALL on, then just turn them off after the showing.  Of course, they shed light on dirt too, so be sure you have cleaned, cleaned and cleaned again.