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C H A P T E R 1
The Big Decision: Is This the Right Time to Sell Your Home?
As you think back over your life, you can probably remember all of the homes that you or your parents have lived in. If you’re like me, you might even remember the rooms—the places where you slept, ate a fought, played, and laughed. A home is a special place. It’s more than just four walls and a roof; a home, your home, is a reflection of where you are in your life. It’s a reflection of your lifestyle.
This may be one reason why today nearly 70 percent of American families own a home, more than at any other time in the nation’s history.
What’s more, according to the most recent data from the National
Association of REALTORs, on average these same families will sell their current home and buy a new one in the next two to six years.
Imagine that: The entire country will be selling their homes and buying new ones in the next 24 to 72 months.
Why so often? For first-time homeowners, a first home, like a first car, is a temporary stop on the way to bigger and better things. The cute cottage that was once cozy, even romantic with a blushing bride a can now seem cramped with two kids climbing the walls and a retriever doing laps down the hall. Then there’s the fact that as we become more successful, what we want in our home often grows with us, changing and adapting to our needs. A home office, a family room, a formal dining room, or a master bedroom suite—they’re all just stops on the road to living the American Dream. Likewise, as life
“happens,” we may have a sudden need to downsize because of the loss of a job or a medical emergency, or a move may be necessary because of a job transfer, or because we need to cash in our chips because of a divorce.
Table 1-1 gives the most common reasons for selling.
TABLE 1-1
PRIMARY REASON FOR MAKING A HOUSING CHANGE
Home is too small 19%
Neighborhood has become less desirable 13%
Change in family situation 11%
Move closer to job 10%
Move closer to friends and family 9%
Job relocation 9%
Home is too large 7%
Retirement 5%
From National Association of REALTORs, 2006 Profile of Home Buyers and Sellers.
There is a psychology to selling that many sellers experience but rarely take the time to analyze. It is the process of moving from being completely satisfied, happy, and content in their present home to being dissatisfied, unhappy, and downright miserable. It doesn’t happen overnight, but it does happen relatively quickly, as most of us will move on to our next casa before the warranty runs out on the new
Honda parked in our driveway.
So how does this process take place? Often it starts with a homeowner beginning to notice other, more desirable castles. This could be a friend’s condo that has an extra bathroom or a home theater room a or maybe it’s a ranchette that you notice on the way to work that has a covered porch and a picturesque view of a valley. For others, it might be as simple as picking up a real estate guide and flipping through the pages while daydreaming about how nice it would be to get out of the city. From there, it’s easy for homeowners to find themselves search-ing the Internet, attending open houses, talking to a REALTOR, or even randomly driving through neighborhoods in search of their next address.
Yes, it’s interesting; almost all sellers first arrive at the doorstep of the real estate market as buyers in disguise, and while it may take months to roll this decision up a mountain of doubt, anxiety, and concern a as soon as we begin to see homes that better reflect our current lifestyle, many of us will decide that we can hardly wait to purchase our next home.
Of course, unless you have won the lottery, have a trust fund, or made it big in pork bellies, in order to buy your next dream home, you will first have to sell your current residence. So hold on to your hat.
It’s time to park the car, put down the mouse, and close the magazine.
Why? It’s time to get to work selling your home!
Finding Your Pain
Here is a weird but absolutely true fact: The reason you are even considering selling is because continuing to live in your current home is too painful for you. Now when I say painful, I don’t mean that you go home crying every night or that something is physically hurting you, but that there is something that bothers you about your current residence. In the real estate business, we call this finding a client’s pain, or what it is about your current abode that sticks in your craw enough to make you consider a move. This pain can range from extremely mild, bordering on nonexistent, to extremely irritating, and in some cases lifestyle threatening.
You see, there are really two kinds of sellers in the world: the necessary seller and the optional seller (see Figure 1-1). The necessary seller has no choice but to move; it’s a forced sale. For instance, the seller may have been transferred, or he may be going through a divorce a or perhaps he is entering bankruptcy. So selling is a given; it’s something that he has
Figure 1-1
Necessary Seller
High Need to Sell
^
M
O
T
I
V
A
T
I
O
N
v
Optional Seller
Low Need to Sell to do because he has no choice. For these sellers, their pain level is very high; in other words, if they don’t sell, bad things are going to happen.
They could lose their job, they could end up living with their ex-husband or ex-wife, or they could lose their credit rating.
On the other end of the spectrum is the optional seller. The optional seller is a homeowner who has made the decision to sell because she is ready for a lifestyle change. For one reason or another, she is unhappy with her current residence. This may mean that she wants to move to a new school district, she wants to live in a more modern home, or perhaps she just wants a larger space to entertain her friends and family. She doesn’t have to sell; she just wants to sell. Of course a this doesn’t mean that these homeowners can’t be highly motivated.
Often an optional seller can be so unhappy with her current living arrangements that her level of pain is extremely high. And yet, unlike the necessary seller, if for some reason she can’t sell her home, nothing bad will happen, other than being frustrated, irritated, and perhaps more than a little depressed. Her world won’t come crashing down.
So can you see the difference? Good, because most sellers don’t understand their own motivation level. I’ll give you a classic example:
We’ll call this couple Jeff and Sally HardNose.
Jeff and Sally HardNose are excited. They just got
the news that Sally has been offered a huge promotion
that will nearly double her pay. The only
downside is that the job is in another city, which
means that they will have to sell their beloved
condo. Despite this, Sally accepts the new job
and agrees to move immediately while Jeff stays
behind to sell the condo.
So what kind of sellers are Jeff and Sally? Are they best described as necessary sellers or as optional sellers? Easy question, right? They are definitely necessary sellers; their pain level is high. They need to sell quickly. But do they know that?
Jeff does some research. He discovers that condos
in their building are selling for between $300,000
and $320,000, depending on the particular unit’s
amenity package. After thinking about it for a couple
of days, Jeff and Sally decide to begin marketing
the condo at a price of $350,000. Their reasoning
is that they can always come down, but they can’t
go up, so it’s probably best to start high.
After a month of advertising, they have received
only five phone calls, four from REALTORs
who wanted to show the home to prospective
buyers, and one from a buyer who hung up after
hearing the price. Jeff decides not to work with
the buyers represented by the real estate agents,
since Sally is against paying a commission. So
they wait.
As another month passes, Jeff and Sally begin
to fight over the house. They are now paying for
two households—two rents, two sets of utility
bills, two of everything. The financial strain is
taking a toll on their marriage. Still they hold out
for $350,000.
After two more long months with no offers
and only three showings, they cut the price to
$300,000 and make the hard decision to list the
home with a real estate professional. Within 30
days the home sells and Jeff and Sally end up netting
$288,000 after closing.
Jeff and Sally fell into a classic trap. They did not understand their own motivation level. If they had accepted the fact that they were really necessary sellers who had to sell quickly, they might have made drastically different decisions that could have saved them tens of thousands of dollars.
What different decisions might they have made? Here are three key decisions they could have made that might have changed their outcome dramatically:
• Price the property to the market. If they had priced the property more accurately, perhaps between $300,000 and $320,000, they would have been more competitive with the other condos in their building.
• Offer incentives to prospective buyers. They could have offered incentives to buyers, like help with closing costs or an interest-rate buydown. (More on this strategy later.)
• Cooperate with real estate professionals. They could also have hired a real estate professional earlier, or at the very least cooperated with those agents who had called with a prospective buyer in mind.
So here is an interesting question: Do you understand your own level of pain? Let’s find out just how motivated you are by doing a quick exercise. Write down your three biggest reasons for selling your home.
My three biggest reasons for selling my home now are:
1. _________________________________________________________
2. _________________________________________________________
3. _________________________________________________________
Next, on a scale of 1 to 10, with 1 meaning that you love your home and never want to leave it and 10 meaning that you need to sell your home today, rate your level of motivation:
My motivation level is a ———.
How motivated you are as a seller will influence nearly every decision you make when it comes to successfully marketing your home.
But here’s an interesting question: What if you and your significant other have different levels of motivation? Believe it or not, this is a common dilemma because often one person in a family wants to sell more than the other person. Why? His level of pain is higher.
The best way out of this bind is to decide as a couple what your true level of motivation is and commit to a plan of action that achieves your family housing goals. This may involve an intense debate, a friendly discussion, or just an extra round of margaritas at your local watering hole.
Regardless of how you get there, once you know as a couple why you are selling and how motivated you are to sell, you will have a key advantage over most sellers in the marketplace. You will know exactly how important it is for you to move and, more importantly, how far you are willing to push the envelope to actually get the home sold.
STRATEGY 1: Determine your motivation level.
This is critical because, as every successful seller knows, it’s not a question of whether you can sell your home, but a question of when and for how much! This is one reason why it’s so important to understand the market.
