When it comes to real estate marketing, there are many things that we as agents and brokerages do to attract customers. Some approaches are a little more straight forward than others. Its time you know the truth behind those fantastic “deals” you hear about on the radio and television.
“If we can’t sell it, we will buy it!”
This sounds great to a potential seller looking for a guaranteed way to sell. The problem is that it is a complete gimmick. You need to read the fine print. Investors use a formula to purchase homes and it varies depending on the area. In lesser desirable areas investors pay (as a rule of thumb) 65% ARV (After Repair Value) MINUS the cost of repairs. So, without even factoring in needed repairs to bring a property to average or marketable condition, just think about taking 65% of what you are asking for. Does not sound extremely attractive does it? Real estate agents and brokerages that advertise this are essentially doing the same thing. Now in areas like Virginia Beach where the market is consistently hot, investors, including myself, will pay more, in some cases up to 80% ARV. Especially when we are also licensed, and we know we can save ourselves 3% when we turn around and sell it on the back end.
“If you don’t love it within 90 days, we’ll sell it for free”
I have been hearing this a lot lately. Now, I want you to really think about this for a minute. This sounds like an amazing thing. You buy your home; you are super excited! Whether you are a first-time homebuyer or not, it is a big purchase and what is not to be excited about? Except now you have moved in and have a sudden case of buyer’s remorse. But wait! We have a guarantee that if we don’t love it, our real estate agent will sell it for free. Sounds like a good fail safe, and if I had a client that was in this position I would certainly help and cut costs in any way I could. However, when advertising this gimmick, most buyers don’t understand that when they bought that home, they were so excited about, they paid market value for the home, and the home likely appraised at or close to the sales price. What does that mean? Well, Your agent promised to sell the home for free, but what about the cooperating agent (the agent that brings the buyer) There is no way your listing agent is going to convince them to work for free. So, to sell, you will still have to pay that 3% to the buyer’s agent and now what if the buyer is requesting an additional 3% closing costs? You do the math. The fact is, the agents and brokerages that are marketing this know full well you will not have enough equity in 90 days to absorb that kind of loss, nor do you have enough cash on hand to dish out… you did just buy a home! So, guess what, you cannot sell it and therefore it was all a ploy to lure you in and use that company to buy. Do you still trust them?
Buying the listing.
Now this is not a term that is well know in the advertising and marketing arena to sellers. It is what intelligent Realtors refer to as “Sure we’ll list it for that” I have personally been to countless listing appointments that I have lost out on. While that hurts to say, it is the truth. I walk in with facts and statistics that show exactly what you’re home is going to sell for, but you’re not done interviewing agents and you decide to list with another agent that states its worth significantly more. Well, how could anyone blame you. You want the highest dollar your property will fetch right? “Buying the listing” is a term we refer to as overpricing it just to get the listing agreement signed…and then they will just keep asking for price reductions. I have a specific property in mind when this comes up. My father in law referred me to a seller in Norfolk a few years ago. I met with the sellers, had a full listing presentation prepared on paper, bound with plastic cover and all. After My presentation, I asked them what they thought their home would sell for based on the stats and comps I prepared. The wife said “$485,000”. I said, “Flip to the next page” Where I had the value in large font of $485,000.
The sellers ended up listing with another agent at a different firm. The property was listed at $535,000. It sat on the market for 8 months and eventually settled at $482,500. Just $2,500 less than what I had proposed 8 months earlier! They wasted 8 months of additional mortgage payments just to settle at what I had proposed, and the market time for that neighborhood at the time was just 37 days. What is the lesson here? Well you remember the adage… If it sounds too good to be true, it probably is. Trust your gut and the market statistics. At the end of the day, your home is worth what a buyer is willing to pay for it. Sell your home at market value and do it quickly!