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.

Finding "The One"

Prelude to a Deal

Courting my wife in Manhattan in the late '90's, I remember my (quick) progression from "Friend," to "Special Friend," to "Boyfriend," to "fiance," to "husband."

(The only interim title that I really objected to was "Special Friend," which sounded vaguely insulting.)

Is there a similar progression in a real estate "courtship?"

Reading the Signs

Usually, there is.

To the Buyer's agent, something about the client's demeanor during the first showing will be a little different, more serious -- see, "Like (vs. Love) at First Sight."

Afterwards, the Buyer's Agent will typically appear on the Listing Agent's radar with some positive feedback and follow-up questions (see, "When Do You Tell the Seller?"), and to make sure no other offer is imminent.

The next step is typically a second showing, and, if the Buyer is contemplating major work, a third showing.

After that comes the offer and negotiation.

The "Fickle Factor"

Just like in real courtships, occasionally Buyers who look poised to make a deal suddenly flake out(?) and disappear.

At the other extreme, some lucky Sellers' homes will be swooped up by a Buyer who seemingly appears out of left field.

In general, however, most deals -- like relationships -- are characterized by a promising introduction, followed by steady, intensifying interest.

Realtor as Conduit -- and Filter

When Do You Tell the Seller?

The Buyer's Agent called you up after the first showing to say it went well, and to ask a few questions about the house's condition.

The second showing was yesterday.

Then, mid-afternoon today, the Buyer's Agent called to say that she is meeting with her client tonight to write an offer, and that she expects to have it to you tomorrow morning.

Question:

When do you tell your client, the Seller, that you're expecting an offer?

My answer (and most experienced Realtors'): never.

(Sorry, it was a trick question.)

Rather, the time to tell your client that you have an offer in hand for their home . . . is when you actually have an offer in hand for their home.

Managing Expectations

Which is not to say that my clients don't know what's going on -- they do.

Depending on their guidance and wishes, I'll typically relay showing feedback as I receive it, and give periodic reports about what's happening (or not) in the market around them.

But I've learned from experience that nothing's worse than calling an anxious, expectant client to alert them that an offer is imminent, then waiting.

And waiting.

A small percentage of the time, I suspect the other agent (or their client) of purposeful manipulation.

However, by far the more common scenario is that their clients cooled off on the home, warmed up on another, or simply got busy at work, home, etc. and couldn't find the 2-3 hours it takes to meet with their agent to formulate an intelligent offering price, then write a careful and thorough Purchase Agreement (add 50% for first-time Buyers).

As a Listing Agent, I'll certainly be in regular touch with the Buyer's Agent (and any other Buyer's agents who've expressed interest).

However, it 'ain't a real offer till I have it in hand.

P.S. As far as I'm concerned, it's not a done deal till my (Selling) client's proceeds check shows up on their bank statement!

Is the (Home) Buyer Serious? Here's One Clue

Requesting a Sat. Showing on Wed.

I don't have any statistics backing me up, but it sure seems like there's a relationship between how far in advance a showing is booked, and how serious the Buyer is.

The explanation?

Here's my theory:

Serious buyers are methodical, and methodical Buyers carefully plan what they want to see.

Which is smart: the best way to learn the market is to see a succession of homes at the same price point, in the same general location, all in a row.

That takes a little more advance planning.

It's also the case, that, in late Fall in Minnesota, the market is slower-moving.

So you can set up showings for the weekend several days in advance.

The bottom line?

As a listing agent, when I see a showing booked on Wed. for the upcoming weekend, I take it more seriously than one I see booked two hours -- or two minutes -- ahead.

The latter are almost always what I call "what the hell showings," by Buyers who are already on the block looking at something else.

Or . . . maybe they just have a very disorganized Realtor.

P.S.: contrast this post with an earlier one, "Unserious Buyers."

Real Estate Myth #37: Sunday Open Houses

"Open House Available For a Terrific Listing That Always Gets Great Traffic"

One of the more durable myths out there is why Realtors do Sunday open houses: many clients (and prospective clients) seem to believe that the primary motivation isn't to sell the client's home, but for the hosting Realtor to troll for future business and ultimately sell other homes, down the road.

The reality is a bit different.

If Sunday open houses were such a great way to pick up clients, you'd see more listing agents doing them.

In fact, the majority of listing agents avoid doing them.

Instead, they try to line up replacements -- typically, newbie Realtors -- by dangling carrots like this: 'Open house available this Sunday for a terrific listing that always gets great traffic.'

Just once I'd like to see a listing agent level with would-be pinch hitters with a hook like this: 'open house available this Sunday for a not-so-appealing home in an out-of-the way location that's already been for sale for 8 months, is (still) priced above market, and may get 3-4 people through -- if you're lucky.'

Notoriously Low Yield

What the (experienced) listing agents know that the newbie's don't is the following:

--Most people coming through open houses aren't interested in buying a home at all.

They're just curious about what the home looks like inside; are interested in interior decorating ideas; want to see what prevailing home prices are so they know how much their home is worth. Etc., etc.

--The distinct minority of prospective Buyers who are serious are invariably already working with a Realtor. Which means they're strictly off-limits.

--The remainder of Sunday open house prospects -- people who maybe, kind-of are looking -- usually are characterized by one (or more) of the following: a) they can't afford the house (or any house); their timetable is next year (or century); they have no idea what they're looking for, at what price range, or where.

So, yes, a new Realtor who has time on their hands and plenty of patience is welcome to follow up with such prospects -- assuming they leave valid contact info -- in the hopes they'll eventually buy something.

Or not.

The Case for Open Houses

All of which begs the obvious question: if open houses have such a poor track record, why do them at all?

For two reasons:

One. As a convenience to serious, already-represented Buyers, who are typically off work on Sunday afternoon and can cover more ground going through open's (vs. having their agents set up private showings during the week).

Two. Because, while the odds may be low . . . you never know. (See, "The (Mythical?) Serendipitous Buyer").

In truth, the vast majority of things Realtors do to market homes -- at least individually -- have a low probability of success.

So, the odds of a private showing leading to a consummated transaction are less than 10%; the odds of exposure at a Broker Open (Tuesdays) leading to a sale perhaps only a little better.

Ditto for blast emails to neighborhood Realtors; direct mailings; high-end photography and literature; "plugging" listings at various Realtor meetings, etc.

But therein lies the rub.

Precisely because you don't know which marketing effort will ultimately sell your client's home . . . a good Realtor does all of them.

P.S.: the foregoing recalls the marketing director of a Fortune 500 company who laments that she knows she's she's wasting half her marketing budget -- she just doesn't know which half.

Single Men, Taxi's, and "For Sale" Homes

"Serious" vs. "Non-Serious" Home Sellers

Men are like taxis. The theory is that when a man is ready for, or open to, the possibility of a relationship he turns his taxi light on. If you happen to be the girl that hails the cab (him) while the light is on, you've got a possibility of a decently long ride. But if you grab a cab with the light off, it doesn't really matter what you do, it's just not going to go anywhere.

--Candace Bushnell, "Sex and the City"

Substitute "serious home sellers" for "men" in the quote above, and you have a pretty good shorthand for what's going on in the housing market at any given moment. (And no, this isn't meant to be sexist; arguably the same phenomenon applies to single women.)

Just consider all the contrasts between "Serious" and "Non-Serious" home sellers ("motivated" and "unmotivated," if you prefer):

Serious: Price their home consistently with the Comp's ("Comparable Sold Properties").

Non-Serious: List their home at a price that nets them "what they need" -- or what their neighbor got 3 years ago.

Serious: If feedback and days on market indicate the price is unrealistic, reduces the price 3%-5% at regular intervals.
Non-Serious: Won't budge from the original list price. Or, after an eon of market time, will cancel-and-relist . . . at the same price.

Serious: Ferociously cleans and de-clutters before hitting the market. Donates accumulated stuff to charity to make their home feel as big as possible. Spends a nominal amount on cosmetic updating (painting, floor refinishing, landscaping, etc.) as needed. Brings in a stager -- and takes their advice!

Non-Serious: Thinks their home is perfect as is -- so why do anything?

Serious: Accommodates showing requests whenever possible. Cleans, empties the Kitchen sink, turns on all the lights, etc. ahead of first showings -- and especially second showings!

Non-Serious: Does none of the above. Thinks showings are a good time to water the lawn . . . in their underwear!

Serious: Has the municipal point-of-sale inspection done prior to going on the market, and fixes any items listed.

Non-Serious: Leaves the point-of-sale inspection for if/when there's a Buyer (illegal in some cities).

Serious: Hires a good, full-service Realtor who tells them all of the foregoing, markets early (pre-list) and energetically, negotiates well, knows the neighborhood, etc.

Non-Serious: Hires the cheapest Realtor they can find -- or none.

And on and on.

While serious home sellers don't literally turn on the equivalent of a taxi light -- based on all the things they do (or not) -- they're just as easy for Realtors and prospective Buyers to identify.

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!

Suicide and Seller Disclosure

Disclosing, But on a "Need to Know" Basis

[Editor's Note: thanks to Henry Brandis, Edina Realty Senior Vice President, for providing background on this post.]

Currently under Minnesota law, home Sellers have no obligation to tell prospective Buyers that a suicide occurred on the premises (originally, there was no disclosure requirement; then there was; now there isn't again).

Yet experienced Realtors will often advise Sellers to disclose that fact, anyways, for two reasons: 1) the Buyer is inevitably going to find out; and 2) given #1, it's better for the Seller to get ahead of the issue, and defuse it.

"Need to Know" Basis

So, what is the preferred strategy?

Given the sensitivity of the subject, the most appropriate way to handle it is to wait until a prospect shows serious interest in the home -- typically, when they do a second showing.

Then, the listing agent will provide the prospective Buyer with an informal but written disclosure, and ask them to initial it.

Keeping Other Agents "In the Loop"

"Enabling" Non-Committal Buyers?

One of the things that invariably happens in the course of representing a Seller is the Listing agent gets a request from a Buyer's agent to "be kept in the loop."

Translation: 'let me know if someone else is about to buy the home, so my client at least knows about it.'

Some Listing agents will agree to do that, because they figure competition will help their Seller's price.

Other Listing agents decline, because they figure it lets an indecisive Buyer lurk, non-committally, in the background (note to Buyers: waiting until you have competition virtually guarantees that you'll pay more).

Enabling Non-Committal Buyers?

I handle the request on case-by-case basis.

If the agent's client is showing serious interest, and there are three second showings scheduled in the next day, I'll typically share that, to let the Buyer's agent know that time (potentially) is of the essence.

If instead my vibe is that the Buyer's agent (and Buyer) just want to hover, I'll decline.

The only parties I promise to regularly update are . . . my Sellers.

"Asking Price is Negotiable"

Memo to Sellers

Lots of Sellers, in lieu of reducing a too-high asking price, are instead directing their agents to tell prospective Buyers that "the [asking] price is negotiable."

Here's a news flash: they already know.

In the vast majority of these cases, the issue isn't that no offers are coming in -- low, high, or otherwise.

Rather, the problem is that no Buyers are even looking at the (overpriced) home.

No Showings = No Offers

Buyers typically don't make offers until at least a second showing, and often times a third.

If and when they reach the point of making an offer, many Buyers today feel obliged to start with a number that, to be generous, is "unrealistic" -- especially if the home is upper bracket and has lots of competition.

Once that's rejected -- and it always is -- the negotiation can begin in earnest.

P.S.: discussing hypothetical offers on a home that's not even getting showings reminds me of one of my favorite lines, "if your parents don't have kids, you won't either."