Buyer Feedback: 'Win, Place, or Show'

Category #4: 'Out of the Money'

My favorite metaphor for how close a listing is to selling is temperature ("Listings and Pots of Water").

So, a new listing starts out at room temperature, heats up as showings (and second showings) accelerate, and reaches a boiling point by the time a strong offer (or two) comes in.

I still think that that applies, but based on the feedback my listings have been getting recently, a new metaphor seems in order: horse racing.

Four Categories

Specifically, listings these days seem to fall in to one of the following four categories:

Win: The best of what's out there. Offer imminent.

Place: First or second. The Buyer's next likeliest step is a second showing, to see both homes "fresh," dig in on the Seller's Disclosure, etc.

Show: Top three. The home had many nice attributes, and the price is in the ballpark -- but it was eclipsed by the finalists being considered by the Buyer.

Out of the Money: Didn't make the cut -- no further interest.

If a home is repeatedly "out of the money," action on the Home Seller's part is indicated: that can be either reducing the price and/or enhancing the home's appeal (by addressing whatever the most consistent objections have been).

On the other hand, if the home is making Buyers' short list, "standing pat" -- i.e., waiting for the competition to sell -- can be an option (and is certainly the path of least resistance for Sellers).

However, in a Buyer's market, I wouldn't recommend it.

That's because it risks being overtaken by new, better-priced horses -- er, listings, as well as existing listings that are not standing still, and instead are aggressively improving their price and/or appeal.

"Phil Dunphy," (TV) Realtor

"Modern Family" & the Housing Market -- or,
"Why is Ty Burrell wearing my blue button-down shirt?"

You can't get back on the horse until you fall off.

--"Phil Dunphy," Modern Family

In the closing weeks of 2010 -- 4+ years into the worst downturn since the '30's -- a prime-time TV show has finally alluded, humorously, to the punk housing market as seen through the eyes of a Realtor and his family (or at least, Hollywood's take on a Realtor and his family).

In this week's episode of "Modern Family," ten-year old(?) Luke Dunphy asks if he and his siblings will have to get jobs because his Dad's real estate business is down.

Later in the episode, holding a toy electronic organ, he asks his parents, Phil and Claire, for directions to the "black market" so he can sell it and use the proceeds to help the family make ends meet.

They then have to explain that that's not exactly what "selling organs on the black market" is all about.

Slack Business

And while it's not a major plot line, at least twice in the episode, Phil Dunphy is shown fielding phone calls from clients who are cancelling their afternoon of showing appointments.

Phil professes to be happy for the free time, which allows him to be home with his sick wife and daughter (and to hunt for the source of the chirping smoke alarm).

The cancellations also afford him an opportunity to show his resolve and positive attitude.

"What do I always say?," he quizzes Luke.

"You can't get back on the horse until you fall off," Luke dutifully answers.

Notwithstanding the foregoing, the Dunphy's don't appear to be in any real financial jeopardy; near the end of the episode, stay-at-home Mom Claire gives Phil a supportive hug -- and everything appears to be all right again.

Out here in the real world . . . it helps to have a spouse or Significant Other with a steady, full-time job -- preferably one with health care benefits.

P.S.: So, exactly how do you depict a slow housing market in a compelling narrative format?

Unfortunately, many of the attributes -- listings that don't get showings, negotiations that start miles apart and seem to span years, etc. -- don't translate very well.

The "Non-Conforming" Catch-All

Missing by a Little -- Or a Lot?

What does a "non-conforming bedroom" look like?

When it comes to real estate listings, it could mean a lot of things.

At one extreme, a Realtor might list a bedroom as "non-conforming" because the egress window is smaller than allowed by code, or there's no closet.

At the other extreme, there is no egress window; you have to be a (short) child to stand up straight without hitting your head; there's no closet; the room is smaller than 8o square feet; and the walls, ceiling, and the floors are unfinished.

Oh, and there's no heat.

Call it "hitting the trifecta (plus)" of non-conforming.

Most Common: Too Short

In practice, "non-conforming" is perhaps most commonly associated with height issues.

So, the 1 1/2 story home has a finished Owner's Suite on the upper level, but the overhead averages less than 7.'

Or, the nicely finished lower level (basement) is just a tad low.

"Will it 'Fly'?" Test

Ultimately, whether to bill something as "non-conforming" or just omit it altogether (the more conservative approach) is a judgment call.

To paraphrase a popular line, "if, but for a technicality, it walks like conforming space, and quacks like conforming space, and looks like conforming space" -- it's reasonable to tout it to prospective Buyers, with the caveat that it's "non-conforming."

On the other hand, if prospective Buyers' collective reaction is likely to be "you've got to be kidding!" -- forget it.

The Serenity Prayer -- Realtor's Version

Passing on Overpriced Listings

Everyone knows this famous passage from The Serenity Prayer:

God, grant me the serenity
to accept the things I cannot change;
the courage to change the things I can;
and the wisdom to know the difference.”

--Reinhold Niebuhr

Here's my version for listing agents (Realtors representing home sellers):

God, grant me the serenity
to accept the listings I can sell;
the courage to refuse the listings I cannot;
and the wisdom to know the difference.

--Ross Kaplan

So what makes a listing unsellable?

Ultimately, just one thing: price.

Everything else -- condition, curb appeal, location, floor plan, etc. -- can be overcome if a home is sufficiently discounted.

Listings and Pots of Water

Quickening Pace Signals Approaching Deal

My clients know that my favorite metaphor for how a listing is doing is a pot of water.

Usually, there is a palpable progression from room temperature, to warm, to hot . . . to a deal!

Typically, that corresponds to the pace of inquiries and first showings picking up; some of the first showings progressing to second showings; then a prospect who's done a second (or third) showing making an offer.

Exceptions

Are there exceptions to the foregoing?

Sure.

Sometimes, the pot seems warms (or hot) for what seems like an eternity, but prospects just don't seem to want to go that last step.

At the other extreme, there are listings that are the real estate equivalent of liquid nitrogen (if you don't remember high school physics, liquid nitrogen goes directly from a solid to a vapor without first going through liquid form).

Translation: one day, nothing's happening; the next, you've got a deal.

That doesn't happen very often -- but it's sure nice when it does!

Taking a Listing -- Or Not

Knowing When to "Take a Pitch"

[Editor's Note: sorry, couldn't resist the baseball metaphor, after last night's dramatic Twins game!]

Just as homeowners must weigh myriad considerations when deciding which agent to list with, listing agents must weigh a host of factors when deciding whether to take a listing.

Yes, that's right: Realtors turn down listings.

By far, the most common reason is price.

First & Last Realtors

A home that's priced too high is costly, both in time and energy.

It's also a drain on one's wallet: ads, literature, new literature each time the price is cut, endless open houses (or at least requests by the owner).

Although many Sellers are loathe to believe it until they see it with their own two eyes, too-long market time almost always torpedoes their price.

The result is that they invariably get significantly less than what they would have gotten months (or years!) earlier had they priced realistically from the get-go.

P.S.: I've never used it personally -- it strikes me as too cheeky -- but there's a famous Realtor line (at least amongst Realtors) to use on Sellers who don't like the price guidance they're being given: 'If I can't be your first Realtor . . . maybe I can be your last."

Part 2: How Close to the Strike Zone Does it Have to Be?

"38-7-4"

Realtors, Prize Fighters & Hockey Teams

Boxing and hockey fans know that records in those sports are tabulated in three columns, corresponding to wins, losses, and ties.

So, a fighter who has a record of 38-7-4 won 38 fights, lost 7, and had 4 end in ties.

I'm starting to think that a similar scoring system should apply to real estate listing agents (representing Sellers).

Keeping Score

In that vein . . . here's my proposed score keeping short hand:

A "win" is a listing that leads to a consummated transaction in relatively quick order, at a good price.

A "loss" is a listing that fails to sell, either because it cancelled or expired.

A "tie" is a listing that finally sells, but only after serial price reductions and (too) lengthy market time.

Similar to boxing, listing agents can also be grouped into "divisions."

So, "Heavyweight," "Middleweight," and "Lightweight" would roughly correspond to Realtors whose average deal is over $600k; between $200k and $600k; and under $200k, respectively.

Typically, the higher the average price, the fewer transactions a Realtor closes.

Sellers' Role

Of course, Sellers themselves have a huge influence on how their homes fare on the market.

Their price expectations, their cooperation prepping the home for sale, their willingness to reduce the price if/when the showing feedback (or lack thereof) indicates that that's necessary -- all those factors affect the sale price, or even whether the home sells at all.

Which is why more Realtors are passing up listings where they don't like the odds (it's the losses and ties that eat up all your time and money).

Picking your battles, indeed.