Lake Tahoe Experts

Sometimes Getting More is Not Getting Less.

(LAKE TAHOE REAL ESTATE BLOG) This is the last in a series of five articles on the subject of the value of using a REALTOR to sell a house. They are the 4 immediate posts below, and please read this one in particular about a Sellers Market. (Read the other three of them here, here and here.)

Though the concepts are essentially the same, the strategy to get top dollar is somewhat different from one market condition to another.

A Seller’s two greatest  fears are traditionally “did I sell for too little?” and “will my house sell in my time frame?” We discuss that in the article immediately below this one.

Recently though, and it is characteristic of a Buyers market, Sellers have a third fear: “will my house sell at all?

What is a Buyer's Market, anyway?
A buyers market is defined as having more than 6 months of inventory, which means it will take more than 6 months to sell every listing that is currently on the market. So, it is “demand” that defines the difference between a buyers or a sellers market.

A Buyers market can also, but not necessarily, be in a state of value decline. Value decline is also a function and economic principle driven by demand, or more precisely the lack of it.

There are various stages of market decline. Most decline is gradual, rather than precipitous, or sharp. In South Lake Tahoe, there was a market decline in the late ‘70’s into the early ‘80’s. Since then there have been periods of little growth in both the ‘80’s and ‘90’s. Otherwise, until 2006, there has been no decline in the South Lake Tahoe real estate market of any significance in the last 35 or so years.

Demand changed first in South Lake Tahoe, from a sellers market to a buyers market in late 2005. There was virtually no growth in value throughout 2006, only 1% up, but demand continued to decline throughout the year resulting in a 35% drop in the number of home sales from 2005 to 2006. Another 15% decline in demand came with 2007 compared to 2006.

Therefore, since the South Lake Tahoe real estate market changed there has been a greater decline in demand than in value. Since the last quarter of 2005, we have seen only a 12% decline in demand.

Since 1997, however, the South Lake Tahoe real estate market has increased in value by more than 100%. From 2000 to 2006 alone, it increase in value by 99.6%. Compared to growth like that, a 12% “correction” in value is manageable, especially if one has owned their home for more than 4 years.

If one purchased their home in 2003, for example, and sold in it today's market, on average one could anticipate a return on their investment (ROI) of about 30% to 35%. And that ROI would increase by another 28% if the home were purchased in 2001. These increases include the 12% correction as cited above if one were to sell today in this Buyers market.

Making More in a Buyers Market  :
So, first things first, market knowledge is still the basis for making the most money possible on the sale of your house. Be it in a buyers market, or a sellers market, information is paramount; it is king.

Lets do some examples first, then finish with a few brief points about Information, Price and Marketing, thereafter, which are also found in the article below this one.

What to do to get top dollar: (and what your Agent can do if you let them)
The owner of the house at right is an-out-of-town real estate agent. He contacted us via our blog. Yep, a blog lead. He wanted to have someone represent him that knows this market, and he also wanted to follow the advice he gives to the Sellers he represents in his market: “position your house to be the first choice of any buyer in its market segment.”

We gave him a complete home evaluation and recommended a marketing strategy with a listing price of $730,000 to $760,000. But, sticking to his conviction, he instructed us to list it lower at $699,000. We were stunned. But the Seller was right in one sense; it was the most attractive house, and the best buy with the greatest value in his price range.

A week later we got a “low-ball” offer for $635,000. Because we had taken all of the “air” out of price at the onset, we countered at $690,000, and carefully worked with the buyers agent, a very good one, to best help their Buyer understand the excellent value the house was, even at full price. But the Buyer, another one of those who knows our market better than we do, re-countered their offer at $665,000.

That was it for us, and the Seller allowed us to proceed according to the recommendations we gave him. First we called the buyer’s agent and told him that not only was his Buyer’s offer rejected, but we were raising the price to $729,000.

We told the other agent to make sure his Buyer watched what was going to happen, because when it did, it would help his Buyer better understand our market, and perhaps be more reasonable with any other future offers on reasonably priced homes. Even in a buyers market, there are homes that are flat-out priced right. (In fact, 34% of all 2007 South Lake Tahoe home sales sold at 95% of list price within 90 days of being listed.)

We sold the house two weeks later for $717,000. The Seller was elated. We made him $27,000 more because of two things: our market knowledge and his acceptance of our recommendation constituted the teamwork found in every successful sale. And the buyers agent? He has not heard from that Buyer since. Lessons for some, we guess, are sometimes difficult to accept.

Something to Avoid: The “lets see if we can get lucky” strategy  :
When marketing a home, particularly in a Buyer’s market, the idea is to get ahead of the market, not let the market get ahead of you.

This means pricing the house to sell from the onset. If one overprices, causing the house not to sell (the “lets see if we can get lucky” strategy), then when the Seller finally reduces the price to where it should have been in the first place, it’s possible, if not likely, that the market has further retreated below what the house would have sold for in the first place.

But now the reduced price is still too high, and the process starts again, and then repeats itself until the Seller ultimately reduces the price to get ahead of the market, or takes the home off the market altogether. (Or even worse, faces foreclosure.)

Overpricing often leads to a game of catch-up. And it is to be avoided in a Buyers market at all costs.

What not to do: (The “lets see if we can get lucky” strategy at work)
The house on the left represents a tragic story of a Seller, a really nice guy, who just would not listen or accept market fact. Our evaluation suggested a price range between $1.37M and $1.4M. The goal behind it was to garner a sale around $1.35M, which market reality at that time supported.

But the seller insisted on listing it at $1.495M, and then put the home on an aggressive vacation rental program throughout the summer of 2005 that made it often impossible to show. Then the market changed after labor day in 2005 to a buyers market.

We frequently asked the Seller to drop his price, and his wife agreed with us, but he would not. Two verbal offers around $1.25M came and went. The Seller did not want to see them in writing. Finally he dropped the price to $1.4M, but market demand had already retreated beyond that.

Unfortunately, he was behind the market, as he was from the get go. The needs of his wife and children kept us involved, and we have since dropped the price 4 times, the last of which rests at $1.09M. We don’t know where it will finally sell, but we suspect forthcoming offers will be closer to $1M than the list price now.

In a nutshell, this is the “lets see if we can get lucky” strategy at work. It's really not a good strategy, ever. And in this case it has cost the Seller and his family between $250,000 and $300,000. And these are people one would never want to see something like that happen to.

The following is information found in our article immediately below this one, "The Value of a REALTOR in a Seller's Market. It’s included here for those that have not read it, but we encourage you to do so.

About Our Market Information  :
Market knowledge is the heart and soul of our professional practice. We are known for it. It is the first thing that we offer of real value, and any other real estate agent should offer, to address a Seller’s first concern.

Both this blog and our public real estate seminars are testaments to the importance we place on providing market knowledge for you. The left sidebar of this blog is complete with all relevant market performance information, from general real estate trends to those of each neighborhood in particular... on both sides of the state line.

Our real estate seminars are public discussions on current market trends and conditions. Designed to provide as much detail as possible in a fun, easy to understand format, they often become the basis for the information we provide to Sellers to best help them sell their house. Here a Seller can learn how to sell for the most, or the quickest, or hopefully find a comfortable place in between.

Who Uses Our Information  :
Perhaps the greatest compliment to the value of the real estate information we provide for you in the left sidebar of this blog is many of our competing real estate agents also use it, and even better than that, some appraisers do too. Updated consistently, the information is just that good.

The Source of the Information  :
The information necessary to help a Seller get the most money possible for the sale of their house comes from three principal sources.

The first is our MLS. All of the data used for the information and statistics in our left sidebar comes from here. The MLS provides all but SOLD information to various online resources, it is considered public information. (What makes us distinct is we do provide SOLD information for you in our left sidebar 24/7.)

The other public source of real estate information are the county recorders offices across the country.

Real estate information also comes from what we know because we practice real estate full time... all of the time. This is the “insider information” kind, what a good agent on top of their game knows.

Not necessarily known, or made available to the public, and not on the MLS, information of this sort almost always has value and it usually comes from relationships a top tier agent has... with other agents, and with buyers and sellers in particular, and possibly local contractors, developers and city planners, for example.

What we call inside information can also be information about home sales that are not on the MLS, there are always a few of those. There is also tremendous value to be had when an agent has an inside track on future development projects or companies moving in, or out of an area. An example of this is when Vail Ski Corporation purchased Heavenly Mountain a few years ago. It immediately increased property values, and the proposed developments around our new convention center are significantly increasing property value in that area as well.

What “The Most Money” means, and How it Works   :
No real estate professional can get more for a property than the market will allow. “Top Dollar” does not mean a Seller can get $600,000 for a $400,000 house. What getting the most means is “the most that the market will bear.” That very much has to do with proper pricing and exposure. In a Sellers market, right pricing is higher, naturally, than it is in a Buyers market. (Overpricing in a Buyers market, and especially one in decline will COST money, not make more, virtually every time, with the possible exception of that which is a future development zone, of course.)

The truth is, getting the most amount of money possible for the sale of a house comes from effective teamwork between the Seller and the Agent, not from the agent acting, or making decisions solo.

Price is set by the Seller. It is the Seller’s decision, not that of the real estate agent. The agent’s job is to provide all of the information, both that which is public and anything known which is not.

Based on the information provided (see what we provide here), the agent will present a Seller with a reasonable price range for their property. A good agent will also propose an option or marketing strategies for the Seller to consider, each of which are based on the price range. (Not OVER the reasonable range.)

A good agent should also discuss the upside and downside of each option. Ultimately the Seller’s decision about price, marketing strategy, and their instructions to the agent will determine if the agent is able to get top market dollar for their house, or not.

A Seller should also be aware that “price” is always the most important component part of marketing anything. The success or failure of a marketing campaign starts, or stops with price. “Advertising” is also a part of marketing too, only of less importance. (The example we use to describe this is we can not sell Crest for $35 a tube, no matter how much Procter and Gamble gives us to advertise it. See a discussion about that here.)

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