"Before" Picture - Family Room

I couldn't resist one more "Before" and "After" pairing, showing the game-changing potential of virtual (digital) staging.

See the next blog post, immediately above, for the "After" shot.

Virtual Staging: Ready for Prime Time?

Just Don't Call it 'Doctoring'

What's holding up virtual staging?

Virtual staging is the practice of digitally altering photos to show an empty room as it would look fully furnished and accessorized.

Much faster and cheaper than the real thing, you'd certainly guess that by now the technology isn't rocket science.

And yet virtual staging is just now debuting in housing markets like Manhattan -- and non-existent, at least as far as I'm aware -- in the Twin Cities.

Three guesses as to what's going on (or not, as the case may be):

1. Ethical concerns and lack of guidelines.

What do MLS rules say about virtual staging?

Nothing, beyond proscribing false or misleading advertising.

But is virtual staging false or misleading if the Listing Agent explicitly discloses it?

In fact, that's precisely how Manhattan brokers are handling the issue (see, "Furnished with Pixels").

All such photos are labelled "virtually staged," and juxtaposed with unaltered photos of the raw space.

Works for me -- and I suspect, most Buyers.

2. No Vendors.

I suppose it's possible that I may have missed the flyers and emails from virtual stagers amongst the deluge of other email I already receive.

But I doubt it.

Nor have the professional photographers I regularly work with started offering it.

If no Realtors are demanding virtual staging, and no vendors are pushing it . . . nothing's going to happen (clients don't know enough to ask).

3. Realtor Inertia.

Realtors can be creatures of habit, just like other people.

So, they market listings the way they always have.

They also can be under a great deal of time pressure to get a listing on the market.

Neither of those factors is conducive to trying something new.

It all adds up to a bit of a Catch-22: vendors aren't pitching virtual staging because they aren't sure if there's a market for it.

Meanwhile, Realtors aren't clamoring for it because they don't want to be guinea pigs, possibly incurring MLS' wrath (and fines).

May the (Task) Force Be With You

The solution?

Let the big brokers (Edina Realty, Coldwell Banker Burnet, ReMax) take it up with MLS and the Board of Realtors, and work out some initial guidance (and safe harbors for Realtors operating in good faith).

Consider this post my application for the relevant task force.

And if you're a virtual stager reading this blog, feel free to contact me -- I've got a listing coming up in two weeks that's a perfect candidate.

Staging Lite

Staging on a Budget

Regular readers of this blog know that I'm a big fan of staging.

But what if you don't have the money?

Or you have a 5,000 square foot home, and staging would be prohibitively expensive?

I'd still make the case that a half (or a quarter) loaf is better than none.

Establishing Priorities

So, especially for a home that has a focal "Great Room," staging just that room sets a nice tone -- and can help Buyers visualize how the rest of the house would look staged.

Another version of "staging lite" involves a home with larger spaces that have already been emptied out, either because the owner has moved, or the furnishings were very dated and have been donated or sold (typically, as part of an estate sale to ready the home for market).

Then, a combination of area rugs and inexpensive wall art (prints, mirrors and the like) can define rooms and help Buyers visualize the space better.

Staging Malfunctions, or, Seller Cold Feet

Ready, Set . . . NOT Set

Call it the real estate equivalent of a "wardrobe malfunction": the staging appointment, made weeks (or months) earlier, finally arrives, and . . . the client just can't go through with it.

That just happened this week to a stager I regularly work with.

Unfortunately, she had been planning to use the home to conduct her staging workshop (in return for making their home available, the home owner gets free staging worth as much as $2,000).

As a result of the last minute cancellation, the stager had to scramble to arrange backup homes to work on with her students -- several of whom had flown in from out-of-town.

False Start

While not that common, I'd estimate that about 10% of my clients get staging cold feet.

So what is it about?

Usually, the home owner is simply not ready emotionally to sell.

That's most often the case when they have been in their home for decades.

But I've also had clients who were only in their home a few years who unexpectedly put the brakes on, too.

Next Steps

Usually, the hesitancy is temporary; once the owner revisits their original motive(s) for selling, they realize that staging is an important part of the process, and indeed, is an inexpensive way to increase their home's market value (an important consideration, especially if the motive for selling is financial).

Another tack is to switch to identifying the owner's next home, if they haven't already.

Especially when someone doesn't know where they're moving to, leaving their current home can be unduly stressful.

Once in awhile, though, the home owner decides that they truly aren't ready to move.

In which case, it's better for all involved -- owner, Realtor, and prospective Buyers -- to simply acknowledge that fact, and wait till the timing's better.

P.S.: It's also invariably the case that unmotivated stagers . . . make unmotivated Sellers.

Staging & "Critical Mass"

Are More Sellers Staging Today?

It sure seems that way.

No doubt, that's because every $1 spent on staging can easily add $3 (or $10) to the value of a home.

And because, in a Buyer's market, there are lots of competing homes for sale, and to attract a Buyer homes have to look their best.

Virtuous Cycle

But therein lies another reason why staging is becoming standard practice: once enough homes begin to stage -- call it a majority -- the remainder have to stage, too, or suffer by comparison.

So, pretty quickly the % of homes at least minimally staged jumps from 50% to 90% or higher (excluding foreclosures and what I'll call "pure" estate sales).

P.S.: I inherited my Dad's corny sense of humor. I can just hear him saying, "virtuous cycle?? Isn't that like a Schwinn?"

Bloomingdale's Cologne "Pre-Sale"

"Pre-Selling's" Many Guises

"A rose by any other name would smell as sweet."

--Shakespeare

Anticipation, anticipation
Is makin' me late
Is keepin' me waitin'

--lyrics, "Anticipation" (Carly Simon)

There is a convention in real estate to whet prospective Buyers' appetites by doing what's called "pre-list marketing."

While the owner is typically doing any last minute repairs, finalizing the home's staging, etc., their Realtor is (or should be) networking the home to colleagues and the general public to make them aware that the home will be on the market soon.

So I had to chuckle (to myself) as a Bloomingdale's sales rep approached me today to let me know that the store was "pre-selling" a hot, new cologne that wasn't set to debut until later this month.

I guess it comes down to how you define "pre-selling" and "debut" . . . .

Why I Don't Price Other Realtors' Listings

Real Estate's "Heisenberg Uncertainty Principle"

The observer influences the thing observed.

--Heisenberg uncertainty principle

It seems self-explanatory, but as a principle, I don't price other Realtors' listings.

The issue usually comes up when I do a listing presentation -- essentially, a job interview for Realtors.

In the course of interviewing Realtors, homeowners (and prospective Sellers) naturally want to know how you'll market their home; your qualifications; and what their home is worth.

While I always come to listing presentations armed with the latest, nearby market activity (and am happy to offer a ballpark range), I decline to name a specific price until the homeowner commits to using me as their Realtor.

Rationale

There are four reasons why I take that stance.

One. Time.

Carefully pricing a home (vs. haphazardly) takes a great deal of due diligence.

At least for me, the steps include: identifying and analyzing the Comp's (Comparable Sold Properties); learning the history and condition of the client's home (vs. taking the 10 minute tour after first arriving); previewing the Active listings that the client's home will be competing against; identifying any Pending homes similar to the client's home and estimating what their likely Sold price is; and pouring all the foregoing into a CMA, or Comparative Market Analysis, then crunching the related numbers.

All of the foregoing takes . . . time. Done properly and well, lots of time.

As a Realtor, the two things I ultimately have to sell are my time and expertise.

If I spent undue amounts of time working for non-clients, my actual clients will suffer.

That hardly seems fair to them.

And spending the requisite 6-8 hours carefully pricing a home that another Realtor is ultimately going to list isn't fair . . . to me!

So, I don't invest that time . . until I'm hired.

Two. My price for any given home isn't a fixed number.

Rather, it depends not a little bit on the homeowner themselves.

So, do they need/want to sell quickly, or can they be patient waiting for an offer?

Can the home benefit from staging, strategic updating, etc. , and if so, is the client willing and able to do it?

Does the client want to price aggressively -- and take the risk that goes along with that -- or do they want to price more conservatively?

And so on, and so on.

Three. My price may not be the same as another Realtor's (call this phenomenon "Real Estate's Heisenberg Uncertainly Principle").

Whereas homeowners tend to think of their home as having a fixed, objective value, Realtors (and anyone who knows marketing) understand that the actual price is a range -- a fluid range that is influenced by the skill of the professional(s) involved in the sale.

A home that is optimally staged and photographed, then aggressively and expertly marketed by an excellent Realtor at a top-flight Broker is likely to sell for one price; a home where a less-talented and motivated Realtor simply shows up, gets the requisite signatures, then puts a "For Sale" sign in the front lawn, is likely to fetch . . . another price altogether.

Four. "Buying the Listing."

The last reason I won't casually price a home is because I don't want to get caught up in what Realtors call "buying a listing."

Pretty much what it sounds like, the practice consists of appealing to a homeowner's vanity (or ignorance) by throwing out an unrealistically high price for their home, and thereby beating other Realtors' "bids."

With the listing secured, the Realtor then focuses on getting a price reduction -- or several of them -- when the home proves unsaleable at the quoted price.

Bidding wars are great for Sellers, but not so great for Buyers.

That's true for Realtors, too.

As a prospective listing agent in an already tough market, the last thing I want to do is get into a Realtor bidding war to list what is certain to be an overpriced home.

P.S.: For the record, when prospective home Sellers interview both me and another Realtor . . . they hire me the vast majority of the time.

Bees, Bats & Ants (Oh, My!)

Unwanted Tenants

Most people like to live in a quiet, undisturbed dwelling where they're afforded a modicum of privacy.

It turns out, so do critters.

In the course of showing any number of vacant properties this Summer, my Buyers and I have encountered (so far): wasp nests; bats (or evidence thereof); ant colonies; and the occasional squirrel's nest in (or under) the roof.

None of those things are good for a home's resale value -- or make for good showings.

And that's just the exterior.

Inside, a vacant home is almost never as appealing as a well-staged, occupied home.

P.S.: Think Winter spares owners any of these concerns? Think again.

While there may not be critters, there is the risk (at least in MN) of frozen pipes, ice dams, etc.

"Avatar" Meets the Housing Market

Is Virtual Staging "the Next Big Thing?"

The "next big thing" in real estate likely has nothing to do with "social media" (Facebook, LinkedIn, etc.).

Rather, my guess is that it's "virtual staging" -- using software to simulate what an empty house would look like (nicely) furnished and accessorized (wall art, area rugs, mirrors, etc.)

I'm aware of several companies that either have products on the market, or are just about to be released.

The pitch to clients?

Spend $500 on virtual staging, $5,000 on actual staging -- or list it $10,000 lower (if they're already on the market, make that a $10,000 price reduction).

I know what I'm going to recommend . . .

Did They Really "Give it Away?"

How to Tell if it's a "Fire Sale"

Realtors hear it all the time (often from neighbors or prospective Sellers protesting about the value of their home):

"Oh, they gave it away."

"The Smith house? That was a fire sale."

"They sold for way too little."

How to Tell

Whenever I hear the foregoing, I typically respond with the following three questions:

One. How long was the home on the market?

It's awfully hard to make the case that any given home sold too low once it's gotten a couple months -- or years -- of market exposure.

That's true even if the marketing has been, shall we say, lacklustre (see "Fire Sale" Factors, below)

Two. Did you see the inside?

It's surprising how many people who are convinced that a home sold for too little . . . have never been inside! Or, if they were, were last in 25 years ago.

It's pretty hard to assess the value of a home you really don't know very well (if at all). Which leads to . . .

Three. Did you inspect it?

I'm aware of several transactions where the ultimate selling price was at least partly explained by major issues uncovered during the inspection.

In one case, a slate roof that looked fine from the street . . . wasn't. Replacement cost: north of $30k.

True Fire Sales

Of course, none of the foregoing is to say that some homes do appear to sell for too little.

In fact, I'd (conservatively) estimate that as many as one-third of the homes on the market fail to maximize their selling price.

Here are the factors that I think are most responsible:

--Poor (or no) staging
--Poor (or no) marketing, including unflattering or out-of-season photos
--Initially overpriced, which leads to too-long market time, which ultimately leads to a discounted selling price
--Major discount due to minor deferred maintenance (I tell Sellers that every $1 in deferred repairs can easily subtract $3 from their selling price).
--Bank-owned property
--For Sale by Owner ("FSBO"): usual pattern is, from way-too-high, to, way-too-low
--Restrictive showing instructions: Buyers won't buy something they can't get in.
--Estate sale with out-of-town owners (sometimes, they don't have a clue; other times, they explicitly tell the listing agent that selling fast is more important than maximizing the price).

Plus, perhaps the biggest yellow flag of all: the home sold the first week (or day) it was on the market -- or even before it hit the market.

The Buyer's agent?

The same agent representing the Seller (called "single agent dual agency").

(Note: to really know if the price is below market . . . you (still) have to know both the home in question and the market.)

What is a "Cooperative Client?"

How Realtors Grade Clients

Clients may have a select few words for their Realtors, but Realtors also have some favorite words for their clients.

No, not %!%*#!

Rather, how "cooperative" they are.

What do I mean by that?

For Sellers, client cooperation boils down to these three things:

1. Pricing. A cooperative client picks a listing price consistent with what the Comp's suggest is fair market value for their home.

Should no offers emerge after a reasonable amount of market exposure (40 to 120 days, depending on the price bracket), they'll entertain a 3%-5% price reduction, as market conditions and feedback indicate.

2. Staging and Prep. A cooperative client repairs anything that's broken, and, if their city has a point-of-sale inspection, does what's required to pass.

Depending on their home's size and condition, they also spend a reasonable amount -- typically anywhere from $200 to $2,000 -- on staging and cosmetic updates (painting, light fixtures, etc.). Or, they expend the equivalent in "sweat equity."

3. Showing-Ready. Once their home is on the market, a cooperative client keeps their home in impeccable condition, and is accommodating about allowing showings.

In addition to the foregoing, a cooperative (model?) client is someone who refrains from calling after hours, unless there's a major issue (negotiating a deal qualifies); is relatively conversant with technology (the easiest way to shuttle documents around is electronically); and is generally appreciative of your efforts.

And guess what?

A client who does all those things makes it easy for their Realtor to do the best possible job for them!

"It's Too Nice for Us"

Quirks of a Buyer's Market

One of the more surprising things Buyer's agents are hearing in today's market is clients who say, "it's too nice for us" (or at least, I'm hearing it).

Huh?

What I think is happening is actually a couple things.

One, prices of bigger homes, in very nice neighborhoods, have now dropped enough that there really are some steals out there. And Buyers viewing these homes know it.

However, the home represents such a big step up for the Buyer, it would literally swallow all their existing furniture and not even burp.

So, the prospective Buyers have to factor in a small fortune to furnish and re-decorate the home.

That contemplated expense, plus the much higher mortgage payment and property tax bill they'll be assuming, can be a deal-breaker.

"Our kids will trash it"

Another, more practical consideration is what their kids will do to an impeccably maintained, fine home (assuming it is).

I think there's a legitimate debate about whether kids today have worse manners, or, their parents are both working so hard that they have less time to supervise them.

Regardless, my clients who have several, young kids want homes that they can "let their hair down" in.

Homes that are owned by down-sizing empty nesters, full of lots of fragile collectibles and fine art, make them nervous -- really.

As objections go, that's certainly a good one ("the location stinks" is tough).

However, I think it's something for prospective Sellers -- and their stagers -- to consider.

"They're Just Not That Into . . . Your Home"

"The No Feedback" Feedback

Unbeknownst to many prospective Buyers, their agents receive emailed "feedback forms" immediately after showing a property.

The templates vary, but the general format is to ask for comments regarding the home's interior condition, exterior condition, curb appeal, staging, and price. Ratings can be either numeric (1-10), or qualitative ("good," "fair," "poor," etc.)

Unfortunately, if you've just showed clients eight or ten homes, your recollection of each one may be foggy, at best. And yet, thanks to computerization, the feedback forms keep filling up your mailbox, until you oblige and fill in . . . something.

So, you get a lot of variations of what I just got back from an agent yesterday:

Interior condition: 'good'
Exterior condition: 'good'
Curb appeal: 'good'
Price: 'good'
Any further interest? 'No'

Huh?

Even when a prospective Buyer is cool to a home, the reason(s) can be (genuinely) vague. In the real estate equivalent of the famous "Sex and the City" line: sometimes "they're just not that into . . . your home."

As I like to tell clients, the only feedback I'm really interested in is a full-price offer from a well-qualified Buyer. Even better: two such offers.

In the meantime, if I really want an agent's feedback from a showing -- if I know they know the neighborhood -- I'll call them.

P.S.: if the feedback is a surprise to your Realtor . . . they're not a very good Realtor! The one major exception to that is the projected selling price of a highly unusual or unique home.

Realtor Compliments

Realtor "Atta-Boy": 'Nice Listing!'

A new listing has a surprising number of parallels with the opening of a Broadway play.

There's the opening night anticipation.

There are the hopes (and fears) about whether the audience (prospective Buyers) will like it.

And there can be a sense of dread about what the toughest critics will have to say.

In real estate, the toughest critics are invariably . . fellow Realtors.

One of the best -- and earliest -- signs that a new listing is going to meet with a strong reception is when other Realtors weigh in with a "nice listing," "Congratulations," or the equivalent.

What they're really saying: the home is attractively priced, well-staged and presented, and -- perhaps most importantly -- likely to sell quickly.

P.S.: notwithstanding the foregoing, I like to tell clients that the only feedback I'm really interested in . . . is a full price offer from a well-qualified Buyer. Even better: two such offers!

Jim Buchta Reassigned?

More Turmoil at Star Tribune

The stager I work with most often, Lori Matzke, mentioned in passing that her regular Saturday column in the Star Tribune is ending. The column was a highlight for many readers, and juxtaposed "before" and "after" staging shots with Lori's (always insightful) commentary.

That's one less reason for people to read (or buy) the paper, which is not a good omen for a publication already in bankruptcy protection, and suffering a precipitous decline in advertising and subscription revenue.

Lori also mentioned that the "dean" of the Strib's real estate reporters, Jim Buchta, had been reassigned to the Travel section. Not sure what the motive was -- and I haven't independently confirmed it.

However, Jim's byline has been conspicuously absent from the real estate section lately.

If true, that would be a real loss: Jim's regular articles (many with me as a source!) were always well-reported and well-documented, and gave readers real insight into the Twin Cities housing market.

P.S.: I wish this was only an April Fool's joke . .

Staging How-to

Star Trib features (my) Lake Calhoun Listing

Want to see a nice piece of staging? Check out the Star Tribune's online housing section (the print version appeared yesterday):

http://www.startribune.com/homes/sell/37008899.html?elr=KArksLckDiUvckDiUiD3aPc:_Yyc:aULPQL7PQLanchO7DiU

The "before" and "after" shots are of an upstairs bedroom -- one of three, and four total - that was initially an afterthought. Post-staging, it's both inviting and a home highlight. My stager, Lori Matzke, worked with the homeowner for several weeks to arrange furniture, recommend paint colors, add accessories and generally show off the home's charm and curb appeal.

Click here to see the rest of the home, 3929 Washburn -- just two blocks south of Lake Calhoun in Minneapolis:

http://matrix.northstarmls.com/de.asp?k=411903X1JL0&p=DE-39096412-320

For more info, please call (612-925-7701) or email me -- I'd be happy to show it to you!

Realtors, Chauffeurs, & Investment Bankers

What Do Realtors Really Get Paid For?

[Note: this post is a companion to "Do Realtors Really Add Value?]

If all realtors did was chauffeur clients around, realtors should -- and would -- make what chauffeurs do: about $20 an hour.

But what realtors really do -- at least in their capacity as listing agents representing Sellers -- is actually much more strategic, and therefore valuable: they position the Seller's home in the marketplace, suggesting how to look at it, and yes, what to pay for it.

In politics, it's called defining your opponent before they define you. In real estate, it's about maximizing each home's potential, then presenting it to prospective Buyers in the most flattering (yet truthful) light.

Every house, even the most impressive, has warts and blemishes; likewise, even the humblest home has hidden virtues and at least a few redeeming features.

Price Imprimatur

Kim Pease, one of the best realtors in the Twin Cities (and a competitor), once advised me to think twice about holding price opinions (price opinions are a popular way for realtors to solicit input from colleagues on a house whose "comp's" (comparable sold homes) are tricky or unclear). If the realtor does their job correctly, according to Kim, realtors (and prospective Buyers) don't give the listing price a second thought, or if they do, it's an almost subconscious, "oh, yes, it's priced right."

By contrast, if you put a spotlight on price, you invite scrutiny and second-guessing. That's one of the reasons why homes that languish on the market forever get especially beat up on price.

Where the Freakonomics authors (realtor-scorners both) get it wrong is that they assume houses are widgets: fungible, interchangeable, homogeneous. In other words, a commodity.

To a talented realtor, homes are very much malleable and unique.

I like to tell clients that a listing is like an iceberg: the part below the surface is what happens before the first prospect walks through. It's not unusual for me to spend months working with a client getting their home ready for sale, directing value-adding home improvements, orchestrating the staging, working with my photographer and desktop publisher to get the marketing materials -- online and print -- just right.

Identifying and unlocking potential value, then correctly pricing and selling it isn't what chauffeurs do. It's what *investment bankers -- er, venture capitalists do.

*While it's true that underwriting a new stock issue typically involves a lot more zeroes than selling the average home, as a percentage of the entity value, home selling is much higher. How so? IPO's typically involve selling just a fraction of the company to the public; the "public slice" then establishes the value for all the rest. By contrast, there's no way I'm aware of to sell just 10% of a single family home.