Selling a home is often seen as one of the most stressful financial decisions in one’s life.  Committing to such a long-term decision regarding this type of investment, with so many variables to consider may lead to poor or ill-thought out decisions, if a seller is not careful. Trulia recently published an article detailing the 5 mistakes sellers often make when putting a home on the market.  With this list in mind, sellers can keep an eye on these common pitfalls during the process of selling their home.

1.    Price reduction paralysis.  Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.”  But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.

In cases of overpricing, the seller has most often started out as overconfident in their home’s prospects on the current market.  But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined.  This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast. (more…)

The key to a successful sale is to eliminate any surprises from the beginning to create a seamless process for you and your broker. Knowledge being power, you want to arm yourself with as much market data and building information as possible. Also, have a clear grip on your personal finances as they relate to the property. Finally, be ready to present your property in the best condition.

Find a Good Broker:

• To start, finding a broker is the most important part of selling your home. You should look for someone you enjoy working collaboratively with on a daily basis. Interview a few brokers and make sure your personalities match. Your broker should also have a clear grip on the state of the market and be able to give you basic information about your building in the first meeting. From there, your relationship should flourish into a successful transaction.

Market Research:

• Know what has sold in your building over the last few years.
• Review the comparable market analysis with your broker so you are educated about value.
• Determine the best time of year to bring your property to market with your broker. You want to be competitive and maximize your exposure.

Building Financials:

• Flip Tax: Find out if your building has one and who pays it.
• Mortgage: Know the amount of the mortgage on the building and its terms.
• Reserve Fund: Know what is in the building reserve fund as it relates to cash on hand.
• Special Assessments: Ask if there are any special assessments planned.
• Approved Lenders: Find out the banks that have approved the building for lending. This is very helpful for perspective purchasers.

Structural- Building and Apartment:

• Construction: Know if there is any planned in the near future before or after you sell.
• Local Law 11: The law requires structures over 6 stories be professionally inspected every 5 years to make sure the façade is secure. Inquire if the building is compliant.
• Structural: Ask when the roof and mechanicals were last replaced or updated.
• Renovations: Be aware of any renovations that may hinder a potential purchaser from renovating the apartment.
• Legal: Tell your broker if there are lawsuits or bed bug issues and how they are being dealt with.
• Equipment: Make sure all your appliances including windows, plumbing, and electrical are in working order.
• Leaks: Be prepared to discuss any leaks that may have occurred because the buyer’s attorney will ask it to be disclosed in a rider.

Board Package:

• Managing Agent: Make sure the managing agent knows that you are selling your property to be in compliance with any building rules on marketing, etc.
• Transfer Cost: Confirm the amounts of associated transfer cost and who pays them.
• Financials: Get the last two years financials and offering plan as the broker will need to give them to the buyer. Alteration Agreement: Get a copy of the alteration agreement from the managing agent for the buyer to review in case they plan to do a renovation.

Seller’s Closing Cost:

• Broker Commission: 6% of purchase price
• NYC Real Property Transfer Tax: 1% of purchase price if $500,000 or less 1.425% of purchase price if over $500,000
• NYS Transfer Tax: 0.4% of purchase price
• Attorney: If you do not have an attorney, ask your broker for a list of at least three NYC Real Estate attorneys. They will discuss fees with you.
• Move Out Deposits: These vary per building but there is normally a non-refundable and a refundable fee. NYS Capital Gains Tax Withholding: The tax for out of state sellers is 7.7% of gain.

Personal Finance*:

• Loan Balance: Get the amounts of your loan payoffs and who you are writing the check to.
• Capital Gains Taxes: For a single individual there is no tax on gains up to $250k and a married couple is $500k in gains. Speak with your accountant for a more in-depth explanation.

*Discuss with your broker and banker if you need to sell in order to buy. That may mean you will need a bridge loan, a holdover agreement, or a lease back.

Relocation:

• If you are relocating find out what expenses are covered by your company versus those that are personal. Since the agreement can be very complicated, find out how your broker and closing costs are paid.

ie: The relocation company may step into the role of the seller and assume the sale and its fees after a buyer is found.

Preparing to List:

• Minimize: The easiest way to prepare your property for sale is to pack up and store clutter, clean out closets and cabinets and minimize the amount of furniture in each room. It will help to define the space and make it feel larger. Organize: Once you have minimized, you should organize all the remaining furniture and accessories to give the property a lived in feel but make it look like a show piece.
• Glamorize: Finally, a fresh coat of paint or newly buffed floors can make a world of difference when it comes to presentation. Everything should look clean and updated.
• Staging: When your budget allows, hiring a professional stager can drastically increase your chance of selling quickly and at the highest and best price. We are visual creatures and pretty always wins!

Note: The consumer today is very educated. They have been in the market for some time looking for a property and most are ready to buy. Because of low inventory, multiple bid scenarios are happening on many properties. This does not mean a property is underpriced – it means it is priced well and the educated consumer is ready to move when they see what they want at the right price.

Happy Selling!

Jarrod Guy Randolph

Real estate brokers have the reputation of being elusive.

With their buyers, with their sellers and generally with their clients.

A rogue economist might rationalize this behavior by saying that agents have an incentive to conduct themselves and their business in this manner. I say no! It is counterintuitive. I argue that agents have the incentive to be transparent, build a reputation of accessibility and be a conduit for free flowing information. In their bestselling book Freakonomics, Levitt and Dubner compare real estate agents to the Ku Klux Klan. A little excessive, but they certainly got my attention and made a point to the millions of readers who made this book a national bestseller! (Thanks for helping our reputation, Fellas).

What I don’t understand is why some real estate agents (in this day and age) still have the incentive to be elusive to one another. This behavior breeds contempt within the industry and within a company, and is toxic. This is why we are strong proponents of a team mentality and maintain a strong culture of transparency within our company. The power of sharing that leads to personal and professional growth is inspiring.

I’ve observed two schools of thought in the industry:

Old School and New School.

- Old School believes that information is power that should be safeguarded. New School knows that information is everywhere and easily accessible to all.
- Old School believes that protocol and hierarchy create strength. New School knows that a layer-less environment creates free flowing ideas which lead to growth.
- Old School believes that business-as-usual in a historically successful company is a formula for success. New School knows that change is a constant and a requirement for success.
- Old School believes that ideas and leads are owned and controlled. New School knows that the collaboration of ideas create growth which leads to innovation.
- Old School thrives on a culture of privacy. New School thrives on a culture of transparency.

I have discovered that New School and Old School philosophies are not defined by age, past success or failure. They are defined by vision, culture and common sense. They are a part of the DNA that makes up an individual and company at its CORE!

WE ARE OUT OF THE WOODS!

An important part of my job is identifying and forecasting trends. I am expected to know market trends of pricing, unit desirability, design appeal, buyers’ needs, and manage agents’ expectations. Our clients rely on our insight and foresight. Everybody knows what the historical data is. Nobody needs a report that shows old closed data. Our value is the interpretation of current data and how that may affect the future. Developers want to know where the market is going. Buyers want to know if the market has bottomed out. Sellers want to know if they should take the offer on the table. Agents want to know if there will be deals to be made.

To achieve this effectively, I need to stay very connected to all of the touch points that determine the market. How well I do this…effectively…defines my value. There are no secrets, just riddles. Here are a few of the pieces of the puzzle I absorb to make a determination:

I measure open house traffic.
I speak to agents everywhere to see what buyers are saying.
I speak to buyers.
I speak to sellers.
I speak with developers.
I communicate with bankers.
I track offer activity – How many and at what levels.
I speak to owners of companies.
I stay abreast of new developments on the horizon.
I read – Everything from blogs to books.
In short – I act like a sponge.

In February 2008, I stated that the market would possibly decline (in some segments) by as much as 40% off the high. I was criticized by some of my peers that I was being irresponsible to the sellers who had property on the market for sale. (We sold and closed on a $6 Million property that was previously asking $11 Million a month after). I contend that the speed and willingness of the markets acceptance of this correction stimulated the recovery we are now seeing.

Right now, I would boldly say that we are out of the woods in New York City. For this cycle. Open house traffic is robust, rates are low, contract signings are on the rise, and there seems to be a shortage of inventory of quality homes. Consumer confidence is also higher than it has been for over two years. Does this mean we can expect prices to appreciate at the alarming rate they did over the previous decade?

Hardly!

Narrow your focus
Because selling and buying is more effective when you have a specific goal in mind.

If you’re a buyer
- set specific parameters

If you’re a seller
- define realistic goals

If you’re a broker
- be an expert

It’s impossible to be effective when you’re all over the place.

Part of being a successful agent is having the ability to get back on the horse quickly!

This business, more than most, is filled with disappointment and rejection.

I think that’s why a large number of the industry’s successful agents come from a creative background – you can work on something for hours and have nothing to show for it at the end of the day.

We’ve all worked with “that” buyer. You know, the one you work with for months, the one you show 100 properties, sending them every listing in their price range, only to have them buy something without you at an open house on a Sunday.

Get back on the horse. Don’t look back. Move on to your next buyer.

We’ve all worked for “that” seller. You know, the one you hold open houses every weekend for, the one you are perfect for, working tirelessly to accommodate every appointment, only to have them drastically reduce the price, give the listing to another agent and have them sell it a week after your agreement expires.

Get back on that horse. Don’t look back. Move on to your next listing.

There is no agent who bats 1000. The sooner you realize this, and accept it, the happier you will be – and more successful you will become.

Almost every seller I have ever met believes that their home is valued above what the market will bear. Don’t be one of “those” sellers. This will only hurt your chances of finding the right buyer who will pay top dollar for your home. When you overprice a property, it can have an adverse effect on the marketing effort by alienating buyers, and discouraging brokers from showing it.

You probably feel your home is worth more because you have lived in it and are aware of all its attributes. Remember this – a future buyer won’t get to know these things as intimately as you until they live there. You need to take an objective view.

If your concern is underselling – make sure you have an agent on your team who is doing all the right things to market your home, and the market will dictate your home’s value.

My advice to you, BEFORE you list your property, is to get educated:

1.) Have your broker give you a comparative analysis of homes recently sold, in contract and currently on the market.

2.) Take 2 hours to go and see what the competition is.

3.) Ask your broker to bring in a few more agents to get their opinion on the value of your home.

Chapter 1 for Buyers:

Why on earth do you want to move?

Not many sane people want to pack, relocate and uproot their current home, their nest, unless they have a good reason to! If home is where the heart is, then moving is not for the faint of heart! Trust me, I’ve moved a couple of times in my life!

Real estate is one of those life necessities. Everyone needs shelter, and even though we are a first world country with abundant resources, there are approximately 3.5 million people homeless in the US (In South Africa, my home country, 60% of the 45 million people living there are without electricity, 16 million have no access to clean water and 22 million people lack adequate sanitation). A little perspective is always refreshing! So, if you have a nice home and are happy in it, then you need to make sure there’s a good reason to move.

Of course, almost every mortgage broker and real estate broker wants to convince you to move. And who can blame them? That’s how they make their living so they can pay for their housing. There are certainly a number of compelling reasons to move. A large part this country’s notion of “The American Dream” is that everyone can own a home and Uncle Sam actually does a lot for us in that regard. Having just come out of the “era of irrational exuberance”, the fundamentals of home ownership have never been more scrutinized than they are right now.

Having sold thousands of apartments, I’ve become intimately familiar with the top ten reasons real buyers buy. They are:

1.) I’m relocating for my new job.

2.) I’m getting married.

3.) I’m getting a divorce.

4.) We’re expecting another child and five people in a studio won’t work.

5.) My children have moved out and we don’t need so much space.

6.) I’m tired of making my landlord rich, rates are low, I’ve saved for my deposit, and I want to build equity.

7.) I can’t walk up these stairs anymore after 50 years. I need an elevator and a doorman.

8.) My grandfather just passed and he left me this amazing 7 room co-op.

9.) My commute to work is killing all my time with my wife and family.

10.) I can’t afford to live here anymore.

Here are the top ten reasons NOT to buy:

1.) Look at the Jones family! (Google “keeping up with the Joneses”)

2.) The guy over at the bank said he can get us a cheap loan for a bigger house. (Reminder: That’s what got us into this mess)!

3.) We stumbled upon this open house and loved the views.

4.) My broker said we could make bank on selling our current home.

5.) I’d like to live in a building with a putting green on the roof or a triathlon training facility.

6.) There’s a great club across the street that I frequent.

7.) I could be a part time flipper and make a small fortune.

8.) The most recent “housing report” says it’s a “good time to buy”.

9.) I received an unsolicited bid on my home, so now I need to move.

10.) It would be cool to live in a (insert “starchitect’s” name here) building.

Most of this seems to be common sense, but I have found that when it comes to buying things, small or large, common sense is not always that common.