Why Your Home Will Or Won't Sell In 2007

Before you can develop a plan that will create a successful sale of your home, you must know the current trend within your local housing market. Are you in a seller's market where there are more home buyers than sellers? Are you in a market that is level with steady demand and a normal number of homes for sale within the market? Or are you in a buyers market where the number of homes for sale vastly outnumbers the number of buyers in the market?

Regardless of the type of market you are experiencing, that doesn't make for a good or bad market. Whether you sell or not, will determine how good it will be for you. The following advice comes from 20 years experience, and has helped sellers get sold in all types of markets.

There are three major reasons that will determine if you will sell. Price, condition, and marketing. There are three major reasons that will determine if you don't sell. Price, condition, and marketing. Location is set for home sellers. There are buyers for every location, or you wouldn't have people living there.

Using the Springfield Illinois market as an example we first will determine the type of market. In 2006 4153 homes sold through the member brokers of The Capital Area Association of Realtors MLS (CAAR). The second best year on record and only 30 closings shy of a new record. A decline in the number of sales for the first time in 11 years, a meager drop of seven tenths of a percent.

Does this mean it is a sellers market? No, not enough information to determine. What about the supply of homes for sale? How many listings did not sell in 2006? Are prices rising or falling? You must add these three components to the equation to determine the type of market.

In 2006 a record 3189 CAAR listings expired or withdrew from the market without a sale. The median price fell 1% to $99,000, the first price decline since 1994. A record inventory of homes remain for sale within the market, over a six month supply based upon last years rate of sales. The conclusion is Springfield is in a buyer's market. Although demand continues at near record levels, the number of homes for sale vastly outnumbers buyers, and in 2006 sellers began lowering their asking prices to obtain offers, resulting in the 1% price decline. Is Springfield in a bad market? No, simply put, a highly competitive market. You can still get sold, and at at a good price.

No matter the type of market you are in, you should have a pricing plan in place before you go to the market. Too many people list their home at a price they want or need. What you want or need bears no relationship to what the market will pay. Since 2000, using our pricing plan strategy, 598 home sellers got sold. That's more than any of the other 600+ agents or teams in our market. Proof is in the pudding, having a pricing plan works.

The type of market will determine where you can start your asking price within your plan. You should price the closest to fair market value as possible, based upon verifiable closed sales. There will be a range within which similar homes have sold. In the case of a sellers market you can actually begin slightly above the price range because the market is rising. In a level market begin slightly below the top of the sales price range. In a buyers market, knowing the sale price range of similar homes isn't enough. You must know your competition too. Most likely you will begin at mid or slightly below mid range.

The first three weeks you are on the market are the most active. You will get more showings the first three weeks than in the next ten combined. If you don't get any showings, or if you get showings but no offers the first three weeks, the market has rejected your initial asking price. Adjust the price by 5% or below the next price point. Follow the same procedure the next three weeks, if not sold adjust again by 5% or below the next price point. If you are not sold within the first six weeks, you will be waiting for new buyers to enter the market. Your odds of selling after six weeks go down dramatically, and you could end up as one of thousands of expired listings. Pricing appropriately in the beginning will create a sale at the best price you will ever see. Time is the enemy of the home seller. The longer you are on the market the less valuable your home becomes.

The following is critical to pricing correctly in the beginning. When interviewing real estate agents, never tell them what you want, need, or think your home is worth. This will prejudice their thinking and viola, they recommend that price. Never hire the agent that tells you the highest price, especially if you are in a buyers market. The risk to you is that you will stagnate on the market for the first six weeks without an offer, the agent starts calling and telling you to reduce the price, which you do. Then the agent places a price reduced placard on your yard sign, and in their advertising. The kiss of death. Never allow your agent to advertise price reduced, it implies there is something wrong with your home, you are desperate, and invites low offers. If you are desperate, advertise that fact if you want to get sold at an extremely low price to a bargain hunter.

No matter which agent you hire, no one is right all the time. Your agent and you can have your opinion of price, but it will be the market that ultimately determines the price. Hence the pricing plan. To place your home for sale, and not get sold, sitting month after month on the market is embarrassing, frustrating, and avoidable. In the final analysis it will be price that sells your home, as long as it reflects the condition of your home.

Condition is absolutely within the control of the seller. Think what a car dealer does with your vehicle when you trade it in. You take it to the car wash, and vacuum to look good. You receive a fair trade in price, but never top dollar. What does the dealer do with your old car? They detail it, every nook and cranny, inside, and out. Then they sell your old vehicle for top dollar, all within a matter of days or weeks. Never rush to the market. Don't allow an agent to rush you to the market. Do not place your home for sale until you have the home in the absolute best condition you can get it before the first prospective buyer walks through the door. You only have one opportunity with each buyer to make a first impression.

Marketing. How will you market your home? Sell by owner, or list your home with a professional? The value of a home is not determined by whether a fee for services is being paid by a seller. Do for sale by owners net more money than with a broker? Most do not. Most don't even sell. For sale by owners that sell for more money usually don't even market the home. There are many sales between friends and relatives. These sellers didn't have to face the rigors of the market. They don't count. Real estate is a supply and demand commodity as witnessed in the sellers market with prices skyrocketing, and now in the buyers market where prices are falling. It's simple; the more buyers there are for a home, the more valuable it becomes. Who can produce the most buyers for a home? A for sale by owner or a real estate broker affiliated with hundreds of agents working with buyers? NAR studies show that the changing market has affected the number of by owner sales, down 50% in three years. Doesn't it make sense that for sale by owners would have more success in a seller's market? If you try to sell by owner, and don't have success, and then list the home with a broker, the broker will be starting with a stale product. OK, I'm a real estate broker, but this is the truth, you are better off using a broker than trying to sell yourself. Beyond price, there are a significant number of liabilities a by owner isn't aware of, the least of which is simply getting sold.

Marketing isn't advertising. You don't need a professional to run an ad in the newspaper, to place a yard sign, or hold an open house. Marketing is the manner in which your home is presented, and to whom it is presented. Here's the truth, print advertising generates about 3% of all sales. Prospective buyers that call about a property off all types of ads, buy the home they inquire about one in four hundred times. Buyers want to see all the homes that meet their requirements. More proof in the effectiveness of newspaper advertising, we have not advertised a home in the local paper since 2002 while producing more closed home listings than anyone. Open house results are even more dismal. Only one percent of home buyers purchase a home found at an open house. Makes sense to me, the only qualification to attend an open house is the ability to read two words. Be prepared to say hello to all your curious neighbors at your first open house. A note of caution, open house creates a security risk. Proceed cautiously.

Advertising is advertising. Deep pockets agents will promise to advertise your home in the paper, and hold open house to obtain your listing. They won't tell you the truth about the effectiveness of both. They rely upon your perception that this will sell your home. The truth is you don't need an agent to perform either, and a good agent doesn't need either to get your home sold. Promising newspaper advertising, and open house is a listing tool, more than a sales tool. Do some homes get sold using these tools? Of course, about four percent that sell. When a friend or coworker tells you they got sold using these methods, you'll know how lucky they were.

If you must sell, or want to sell your home in 2007, interview two or three of the top agents in your market. The Illinois Association of Realtors reports that among its member Realtors, 60% have less than three years experience. Many people became enthralled with real estate during the boom years. This means 60% of the agents have not experienced a buyers market. You will be seeing many leave the business in 2007. You will see real estate brokerages merge, or go out of business. My advice; if you want to get sold, and get sold in a reasonable amount of time, at a good price, develop a pricing plan, and hire an experienced agent with an established firm with proven marketing systems.

Media Coverage Harms Real Estate Markets

Welcome to Springfield Illinois where the final sales figures are yet to be released by the Capital Area Association of Realtors (CAAR) for 2006. CAAR placed a request for member brokers to check their files to be certain all sales had been reported for 2006. In its monthly newsletter to member brokers CAAR promised to keep telling the positive story regarding the local market.

The January 2007 issue of Illinois Realtor magazine by the Illinois Association of Realtors (IAR) contains an article from three highly accomplished economists with their view on the economic trends and their outlook for 2007.

What was the common theme from both the local and state real estate leaders and economists? Negative reporting by the media. From economist John Tuccillo writing for Illinois Realtor Magazine: "We have a very strong negative psychology in the market right now. The media will have you believe that the boom is over, the bust is here and the long cold winter is bearing down and the people who bought houses the last couple years are fools. If you pick a marketplace with a steady economy--for example Springfield with state government and a university--and even an area like that with no dip or change or whatever, people still feel the negative psychology.

Amen Mr. Tuccillo. In the year 2005 Springfield Realtors reported 4182 closed home sales, the highest ever, and a new record for an unprecedented 8th straight year. Through January 14th 2007 brokers had reported 4150 closed home sales for 2006. The second highest number of sales in history for a year, and a mere 32 sales from the all time record. You would think everyone would be happy, wouldn't you?

No, there is concern that the continuation of negative press will furthur damage the local and, state real estate markets. In my opinion the local newspaper primarily, The State Journal Register (SJR), and other media outlets secondarily, created the negative psychology in the Springfield market with incessant reporting about the downturn in the national market, while the local market continued on record pace. At least until November.

Just as the liberal press across the nation, attacks President Bush on a daily basis for over 6 years, it's no wonder his poll numbers went down. Whether you agree or disagree with the president is not the point here. The point is the influence the media has in forming public opinion. The point is that most Americans form their opinions around a quick read of the paper and 30 second sound bites. The SJR created a negative view of the real estate market with bold and enlarged headlines, while pertinent content was buried in the fine print, if printed at all. TV and radio only reinforced the negative psychology with the sound bites.

The countless times when fellow agents and consumers asked me; "How bad is the market?" during a time when the market wasn't bad, is proof of the folly of the local paper. More proof came, when for no apparent reason, with no major swing in interest rates, no major swing in employment, sales of homes unexpectedly slowed to a crawl in November. The 35% drop in closed sales in December 2006 from December of 2005 was not caused by the ice storm/blizzard the first week of the month.

Welcome to Springfield Illinois where the real estate market is one of the most stable, and affordable in the U.S.A., where the median sale price of a home is $99,500, the average sale price is $121,000, where unemployment is at 3.5%, and where the local liberal newspaper would have you believe the market had gone to hell in a hand basket. After all local Realtors reported as of Jan. 14th, 2007, closed home sales for 2006 were DOWN .007% from 2005. OH MY GOD, it's the end of the world!

I wonder why so many newspapers are losing money, laying off employees, and are up for sale? Like the SJR? Just curious. I wonder why the three economists writing for Illinois Realtor Magazine when asked what the Positive and Negative factors for the Illinois housing market are, concluded the number one negative is: Negative psychology fueled by the media--"The sky is falling!"

The changing of the SJR into a liberal paper causes me great regret. Over my 20 year professional relationship with the paper I have met some of the most wonderful, caring, hard working individuals one could meet. Knowing so many fine people still employed at the paper, there is no question, in my opinion, the liberal position of the paper comes from the top down. Just as with many papers across the nation, there is scant little objective reporting. When the AP and N.Y. Times wire service are your primary sources for articles, any objective person would realize the agenda. These reporters slant their reporting according to their personal political views. One can safely bet that an objective, or conservative reporter would be classified as an endangered species at AP and the Times. It's a shame so many fine people at the SJR are caught in this predicament, while their boardroom, and editors push their liberal agenda. Good luck with the sale of the paper for the sake of the remaining good folks without an agenda, other than earning a living, and returning the SJR to its' formally objective, respected publication.

Springfield Illinois Weathers Storms in 2006

In March 2006 three tornadoes tore through Springfield destroying or damaging over 1700 homes and businesses. Downed power lines and poles brought on extended power outages. Then again in April, six tornadoes were reported in the county, this time with less severe damage. The community pulled together, neighbor helping neighbor, and Springfield weathered the storm.

The first week in December 2006 Springfield, and the surrounding area was blasted with an ice storm followed by a blizzard dumping 6 to 12 inches of snow in ferocious winds. Once again facing extended power outages, downed trees, utility poles, blocked roadways, numerous accidents, and one heck of a mess. Once again neighbor helped neighbor and Springfield weathered the storm.

The national housing slowdown also hit in 2006, and Springfield weathered the storm. As with any major storm there was good news and there was bad news for the local real estate consumer in the Springfield area in 2006.

The good news is that local Realtors sold over 4100 homes for the second straight year. Final year end sales continue to be reported, however the 4146 closed sales reported through 1-03-07 for 2006, come very close to the record 4182 closed home sales in 2005.

The bad news was that 3189 listings did not sell in 2006 which was a record local Realtors did not want to establish. If the Springfield market had anything in common with the national market this year it would be the excessive inventory of homes for sale. The market received a bit of good news as the rate of homes being listed during the 4th quarter slowed. The CAAR (Capital Area Association of Realtors) member brokers reported 1521 home listings remained available for sale on Jan. 1, 2007, compared to 1540 a year earlier.

The good news is and was, interest rates remain historically low, and the unemployment rate of 3.5% is at a 7 year low. That means the fundamentals are in place for a healthy real estate market.

The good news, bad news is that the CAAR MLS has now experienced 9 consecutive years of record sales. Unprecedented for the market, there is no pent up demand. With satisfied demand combined with a continuing record number of homes for sale, 2007 will continue to challenge sellers and their agents, as they fight over outnumbered buyers to get sold. The value of full service agents has gone up dramatically as for sale by owner sales fell 50% from the highs of the sellers market, down to 12% of the sales. Of those sales, 29% were between family and friends, meaning those sellers did not have to face the extreme competition of the market, according to the National Association of Realtors surveys.

The good news is that the Springfield market continues to be one of the most affordable in the state and nation. The bad news for sellers, good news for buyers, is the median sale price dropped in 2006 for the first time since 1994. The good news for sellers was the drop was a mere one half percent down to $99,500 from $100,000 in 2005. The envy of the state and nation, where both exceed $200,000 median sales prices.

There was good news for sellers of homes listed $250,000 and higher, a record 332 sales closed in 2006 representing 8% of all sales. The 287 in 2005 represented 6.8% of all sales. The bad news was for the 195 who did not sell, a 7 month inventory of homes listed $250,000 and higher heading into 2007.

The good news is there has never been better market conditions for home buyers. Home prices stabilizing, even falling slightly, with many home sellers lowering their asking prices to obtain offers, and historically cheap money to borrow to purchase a home. If you haven't bought a home during this record period, you should now.

The real estate consumer of Springfield, Illinois should count their blessings. They weathered the storm of the national housing slowdown better than most, proving once again real estate trends are local. What may be in store for local real estate consumers in 2007 remains to be seen, however their real estate market is on solid footing with the potential for another record year, while other markets in the state and nation struggle.

The good news is that the Springfield market is in excellent condition. The bad news is you would never know it by reading, seeing, or listening to the media. The local media, by repeatedly airing bad news about the national housing market has had a negative impact on the local housing market. I wonder if they realize what they have done to the value and saleability of their own homes with their reporting? Once again supporting the fact that you should never believe everything you hear or see in the news.

May you have a healthy and prosperous New Year.

On a side note I would like to wish Happy Birthday to two members of the greatest generation. My mother Joan Pfister who will be a spry 81 on Jan. 10th, and to my aunt Chloe Rehfield who celebrates her 95th on Jan. 15th. I love you both.