Latent demand – The importance of getting it right the first time when offering your home for sale.

No one wants to be #2.

photo credit: a loves dc

I had to scratch my head on this one for a minute. Who needs a liquid pencil?

Then, the more I thought about it, the more sense it made. I recalled the time, a couple of months ago, when I was assembling some of my daughters’ old school treasures for scanning and preservation only to find that the pencil writings and drawings had faded into the land of undecipherable over time. A temporarily erasable yet ultimately permanent pencil would have avoided this domestic crisis of enormous proportions. And, suddenly I found myself looking for an excuse to visit the office supply store.

This is what you call latent demand. I didn’t think I needed a liquid pencil – didn’t know I would ever want one, in fact, until the opportunity was presented to me.

In my old traffic engineering days, we spoke of latent demand in the context of building new thoroughfares. You take the same freeway to work every day, and it works. Suddenly a new road is available and wham! All the little cars redistribute. You take the new road, which frees up room on the old route; now that less-congested route is suddenly more attractive to others who in turn change their paths.

I like this definition from Business.com best: “(Latent demand is the) Desire or preference which a consumer is unable to satisfy due to lack of information about the product’s availability.”

Latent demand is an important factor in the real estate market as well. Every time a home hits the market, in fact, it is this demand that the seller should primarily be out to satisfy, because it is the folks in this category that represent the biggest segment of the buyer pool. They exist today; repel them, and you will likely not enjoy do-over. Instead, you will now find your home in the category of the “known” versus “previously unknown.” After a couple of weeks, your home is no longer a new must-have, but the well-traveled road, that same old ball point pen we’ve seen a thousand times before.

The whole latent demand concept is the single biggest reason why the first days and weeks of marketing your home for sale are critical.  And the two biggest mistakes we see are improper pricing and ineffective or essentially non-existent advertising.

Price

You’ve heard it before. This is a favorite subject for real estate agents to beat to death. Allow me to grab my stick.

If your home is priced close to or within a reasonably expected range of market value, you will have the best chance of attracting a buyer willing to pay what it is worth. If you are priced too high at your coming out party, you will find yourself, weeks or months down the road, in a defensive negotiating position.

This is because the shine will be off the rose. The initial crowd you drew will rarely come back for a second look; they are off to the next new thing. Meanwhile, for the new buyers in the market, gone will be the sense of urgency to grab it while supplies last. Instead, they are in full-contact negotiating mode now. Consequently, the seller’s bottom line almost always suffers.

Advertising

This is the one, pardon the pretty visual, that really makes my face turn red and the veins in my neck stand out. If you agree you have one shot at the majority of the buyers, the ones in the present, the ones who are going to be most inclined to come to the negotiating table with money guns blazing, then why would you hit the market with any less fervor than you (and your agent) can muster?

Bad photos or no photos, no brochures or grainy third-generation gems pulled from the home office copy machine, and not even a feigned attempt at sprucing things up around the home front for the incoming herd: How are these things going to help you appeal to the buyers? How does this differentiate you from the competition? As for the latter, you will differentiate, all right, but not in the way you had hoped.

The same argument for level of attention and detail to quantity and quality advertising applies to the online space.  Consider the birth of a listing. In the old days, your agent would order a yard sign, add your vitals to the MLS, and voila! All of the other agents would be put on notice so that they might tell their clients about your home.

Today, things start out the same, but that’s where the similarities end.  The MLS is no longer just for agents. When the active status toggle is flipped, all form fields (save the showing instructions and offer of compensation) are magically transported to countless destinations throughout cyber-space.

In some cases, your listing is shuttled off to points beyond through no action on the part of your agent. This happens because of IDX, or Internet Data Exchange, agreements between various sites and our MLS. In other cases, your agent has to actually do something proactive – “feed” their listings to the various sites to ensure maximum exposure (and you should be sure that they are doing just that). Either way, when that switch is flipped, if you haven’t donned your fancy shoes in order to put your best foot forward — if you don’t have a lot of stellar photos or if your agent forgot to run their spell check — it’s too late, at least if you want to appeal to the latent demand.

In short, gone are the days when homes just sold themselves. (For the record, that was 2005). No longer can you just list it and know they will come. Well, they may, but striking a chord with the first waive – the latent demand – is critical to maximizing sale price. They’re a fickle crowd. You get one chance. Do it right. You can be a liquid pencil, an exciting new opportunity, or you can be the same old #2.

Treasury Department puts kibosh to Fannie/Freddie mortgage debt forgiveness rumors.

It all started here.

From Reuters:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion.

Rob Hahn offered his thoughts on the rumor and raised many good questions.

If after a homeowner receives this “mortgage reset”, house prices rise, and he ends up selling for a profit… would he have to pay that back to the Fed, or is that his to keep?  Would only primary houses be eligible, or investment property as well?  Would the loan have to be delinquent to be considered, or would there be relief for homeowners who have kept current, despite being underwater?  Would second or third mortgages or even refis be eligible, or only the primary mortgage?

That last one was the first question that came to my mind. The majority of underwater homeowners we talk to have not only a first loan to contend with but a second, and in many cases the second came after the fact in the form of a cash-out event. If the Fed did in fact implement such a bold debt-relief edict, I can’t see this applying to those who made that ATM withdrawal.

But, this is likely much ado about nothing – except politics – according to Calculated Risk. And most recently, the Treasury Department itself, according to National Mortgage Professional Magazine, put the kibosh to the rumor.

“The administration is not considering a change in policy in this area,” said Treasury spokesman Andrew Williams.

In other words, move along. There is nothing to see here. But, it did make for some fun blog fodder this week.

The sky is falling. Or is it?

I recently wrote what has become my annual summer refrain, warning that we should all brace ourselves for an expected August slow-down in market activity. And then, as if by cue, the phones started ringing. Everyone, it seemed, was suddenly interested in buyer or selling.

What do I know?

Maybe I was wrong. Or maybe I was right save this little blip in the local interest barometer. I will only know for sure when I am looking back through the changing leaves. (OK – Leaves don’t “change” in San Diego, but they do in some places, I am told.)

What I do know is that right now we are personally seeing a mini spike in interest levels among would-be home buyers and sellers. Too bad the sky is falling.

As reported in the San Diego Union-Tribune and on SignOnSanDiego:

County home prices will decline 9.6 percent in the first quarter of 2011 vs. the first quarter this year, says an analysis from Fiserv, which provides the data for the widely watched Case-Shiller Indexes.

What the analyst is really saying is that we giveth and we taketh away.

Still, Stiff tried to sound a slightly positive note. While a 9.6 drop sounds pretty nerve-racking, he said San Diego has already hit bottom. By his calculations, the prices of single-family homes hit their trough in the second quarter of 2009. Through the first quarter of this year, prices have increased by 11 percent so even with the projected decreases the region will be above the low, albeit by just a bit — between 1 percent and 2 percent.

On the one hand, I could point to Mr. Stiff’s remarks and say something cogent like, “Neener, neener. I told you so!” But a 10% do-over feels a smidge excessive (a “smidge” being roughly equivalent to 5 to 7%), even to a double-dip girl. The bigger point is that our market is volatile and will be for a while. On this point, you’ll get no argument from me.

The beauty of housing forecasts, and news in general, however, is that they are much like Zestimates. We tend to buy into them when they are convenient. For those who have had enough of this housing correction talk, Zillow’s COO Spencer Rascoff provides the welcome news that San Diego prices have seen their trough and are back on the upswing. If you are short on time, hit this Fox Business video at the five-minute mark to cut straight to the part where the clouds part and the angels sing.

Our three readers know that I tend to be a student of the gut check, intuitive school of analysis. Accordingly, here is what I know from our market.

• The attached, condominium market is more sluggish than we have seen in a while. Prices have been affected since the tax credit spigot was turned off.
• Detached homes in the I-15 Corridor in the $400,000s (if you can find them) and $500,000s are drawing big crowds, as are detached homes in the $700,000 to $800,000 range.
• The tweeners and higher priced homes are most challenged when it comes to securing that coveted fully-executed purchase agreement.
• Buyers are picky. They still want a smoking deal or gold-plated perfection – or both – across all price points.
• Buyers are fickle. “Bounce rates” remain high and failed escrows are sadly commonplace, a result of a purchase agreement that tends to give buyers a lot of talk-back latitude and an environment of market uncertainty and shaky consumer confidence.

So, are we in for a 10% price slide in San Diego County? I don’t think so. Are we in for a couple of years more of this same wild ride? You betcha.

More on the Zillow "Zestimate" as I am called to the carpet

I am off for a 48-hour whirlwind to UCSB shortly to confirm that they are really going to accept Daughter #2 into their hallowed halls in September. They call if “Freshman Orientation;” I call it “Operation Empty the Savings Account.” Either way, I thought I would take a moment to feed our blog before I depart.

I received this love letter in my email inbox this week about a fun (I thought), flippant (certainly) article I wrote here a million years ago on the magical, mystical Zestimate:

You know what, I am not amused by your article re: Zillow. In the first place, if the zestimates are not accurate and furthermore, misleading, they should not be on the internet.  Zillow listed my custom, three story house, on a lake, just recently with a value of under $90,000.00.  I happen to have had this property appraised before I put it on the market.  Oddly, the appraiser did not concur with Zillow’s zestimate.

This zestimate, which as far as I’m concerned, is utterly meaningless, however, it does suggest to prospective buyers that my house is A. Non-existent   B. In a terrible state of disrepair C. Inhabited by the beavers who reside in the lake D. Possibly built by the same beavers.

There is no rhyme or reason for any entity to claim that it can value a house at a distance, thereby negating the need for real estate appraisers, or for that matter, you people.  Who needs a broker or real estate agent or real estate appraiser – we have a zestimate.  We can just cruise around with our zestimates and buy and sell houses without any help from any so called professionals. Especially professionals who think that  misleading zestimates are not harming homeowners.

If zestimates are as meaningless as you suggest, then you should not allow them to post your client’s listing on their website.  Furthermore, if you think that putting out false information and/or completely misleading information on the internet about property values is an amusing little fortune cookie undertaking I wonder what you are doing in the business at all.  When the people who I know who reside in the local area put their homes on the market I’ll remember your firm, you and your position with respect to Zillow.com.  I will strongly suggest that they avoid a real estate company that believes that Zillow.com does not do any damage with its wildly inaccurate zestimates and that further believes that people who believe Zillow.com should not put misleading information about property values are in fact stupid.

She gave me permission to reprint this, even said I could use her name, for the record.

Now, by “you people,” I think she meant me. But, in my defense, I have long been a critic of the Zestimate — at least in the sense that the margin of error is not more prominently displayed on Zillow’s website. Further, I am a daily victim of Zestimation as well. So, as a soft rebuttal and to defend my honor, I offer Exhibit A, a post I published in April. Here is the teaser:

If you are a home buyer, you know the Zestimate as the indisputable, final word in a property’s value – unless, of course, it seems high. Then you just disregard it as so much drivel. Ditto home sellers who peer from the opposite end of the looking glass. To sellers, when it’s a big, attractive number, the Zesimate is revered on par with a tablet delivered from Mt. Sinai, while lower numbers are discounted quicker than a spiral ham on the day after Easter.

Truth in Agent Advertising – A little continuing education for those who need it.

Condos to Castles… “It’s Your Move!”

It’s the bane of all real estate agents. Sure we have happy past clients and that thing we, in the industry, call a “sphere of influence.” It’s that old business from whence much of our future employment will come. But, every day, we wake up unemployed and must focus at least some of our attention on developing new business.

Marketing ourselves and our services is a necessary ingredient of our business, and it is oh-so-hard some days to come up with fresh, eye-catching concepts which might speak to the consumer — scream, actually — serving as that all-important call to action. So, I was thinking I might run the visual above on a snappy little postcard and hire some guys to litter the front porches of a few hundred or thousand homes with my message. That should get some attention.

The only problem is that, while the words do represent our tag line (Note to agents: It’s our very copyrighted tag line),  I didn’t really sell the White House. On second thought, why should that stop me? Who’s to know?

This is a cropped excerpt of a flyer that appeared, as if by magic, on my own front porch yesterday. Notice I say cropped because, while the National Association of Realtors (little “r”) Code of Ethics does not prohibit me from making truthful, verifiable statements about other Realtors (only false and misleading statements), I just didn’t feel like going there.

This is innocent enough, if we set aside my paranoia that the whole “neighborhood on the move” thing is a weak knock-off. It’s innocent enough except for the fact that the piece represents about four violations. With that, let’s commence with our real estate advertising primer.

1. From the Sandicor MLS Rules and Regulations (Section 12.7): “Only real estate brokers or r.e. salespersons who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have ‘sold’ the property.” If you are a civilian, you have undoubtedly seen many advertising pieces with secret little words at the bottom along the lines of “This represents the activity of various brokers.” Absent those words, the advertisement might lead you to believe that the author was responsible for all of the sales, which violates the concept of presenting a “true picture” as defined in the NAR Code of Ethics. In this case, the agent team who crafted this flyer never came within a hundred miles of any of these homes. (Dudes – One was our own listing, and we represented the buyer on another!) “But, it’s the Broker who actually owns the listings!” you say. Well, their Broker had nothing to do with three of the six homes.
2. From the Sandicor MLS Rules and Regulations (Section 12.10, True Picture Standard of Conduct): “Participants and subscribers may not engage in false or misleading advertising, including, but not limited to, advertisements or representations regarding… about any property listed with the service.” Just in case you didn’t read Section 12.7.
3. From the California Business and Professions Code, Section 10140.6: “A real estate licensee shall disclose his or her license identification number… on all solicitation materials intended to be the first point of contact with consumers.” The idea here is that a license number allows the consumer to check up on the agent, on their licensing status and on whether any past or pending violations exist. In this case, not only was there not a license number given, but the name or names of the agents associated with this “team” doing the advertising remain a mystery. In their defense, the name of their large, national brokerage did make the cut.
4. There is a little matter of copyright infringement here. Now, I am no attorney, but using the photos for which I and other listing agents paid, for the purposes of advertising our clients’ homes, without our permission and for your own purposes of marketing yourself is a no-no.

I know that it has been a difficult market for many agents who are trying to establish or reestablish themselves and for a lot of agents just trying to stay in business. I am also a big fan of creative advertising. But, creating half-truths or flat-out fabricated messages in an attempt to be recognized as the Neighborhood Specialist is disingenuous, ethically misguided and a violation of the many rules and regulations we have in place to protect the consumer.

This makes me sad because it is the consumer that loses. Unless you are reading this, if you are one of the many who received this solicitation, you are none the wiser. Unless you are reading this, you might find yourself selecting representation based on misrepresentation and false claims. You might find yourself doing business with people who conduct their own business in this manner.

The California Association of Realtors has a page on their website allowing you to “Print a stylish color poster of the NAR Code of Ethics suitable for framing and hanging in your office.” I suggest we all do so.

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