Kansas City North Real Estate Blog

Worth vs. Listing Price

Worth vs. Listing Price 

Very often when people are approaching me about selling their property in the Kansas City Northland they ask, "Ok, what is my property 'worth'?"  'Worth' is a very misleading concept and very often confused.  'Worth' is often confused with appraisal values and personal factors.  'Listing Price' is the real question.  'Listing Price' is driven by what people are willing to pay for your property at any given point in time.  This is mostly driven by sales in the immediate area of properties with similar makeup and features.  'Listing Price' is extremely important to reaching the goal . . . selling the property.  There are pitfalls that many fall into when it comes to the "list price":

1. Upgrades.  There are many types of upgrades (i.e. pools, floring, windows, etc.) to a property, but the common misconception is that they contribute equally to the list price with what the owner paid for the upgrade.  For example, a $25,000 pool should add $25,000.  Not true.  The "value" of the upgrade is of 'worth' what it means to the buyer.  For someone not interested in a pool, but it's a "nice thing to have" the pool doesn't add "value" to their buying decision.  So what do upgrades do for a seller, they add attractiveness to potential buyers and can add some onto the list price, but not total price paid for them. 
2. We will just lower the price if it does not sell immediately.  Not the best strategic move especially in a highly competitive market with a lot of properties for sale.  For one, consumer behavior shows us that people are not coming back to a property they don't have an interest in.  Therefore, if the price is not within their range they will move onto the next.  Second, price reductions can create the perception that there is "something wrong" with the property.  The thought process with this is that others must have seen it and weren't willing to buy it, what did they see that's wrong. 
3. That's my price and I'm sticking to it.  Real Estate is all about offers, and sellers must be open to reasonable offers if they want to sell.  I am not suggesting anyone should ever just take what is offered.  Offers can be "unreasonable".  The ultimate decision is always the seller's.  But flexibility is very important.  We got pretty spoiled, I think, a few years ago when a property would go on the market and sell at the list price a short time later.  That was very abnormal, but has never been the norm.  Negotiating is back, and we have to be open to it.
4. Pride.  We all take pride in our properties, and rightfully so.  A lot of our heart goes into where we live.  But when it comes to list price, again, it is about what others are willing to pay for your property in the area.  It's difficult, but one has to approach the pricing decision objectively and open to the information presented to them that goes into determining the price.   
5. Every situation is different.  We hear alot about how the neighbor's house sold for$xxx,xxx and that is what the person expects to sell their's for.  99% of the time, there very obvious reasons for this namely different features that the subject property doesn't have.  It's not all about square footage and the number of bedrooms and bathrooms. 
6. What's owed.  What someone owes on a property cannot go into what the list price is.  That is a factor in the determination of whether that point in time is a good time to sell or not.  Again, it's about what others will buy at. 

The Art of Negotiating

                                           The Art of Negotiating

From the very first time I speak with another agent, although they may not realize it, I've already begun negotiating for my client.

The area of negotiating is probably the single most important trait of defining a great real estate agent, but also the most often overlooked. Thousands of dollars can be won or lost in the negotiations process and an inexperienced or talkative real estate agent can inadvertently say the wrong thing to the wrong person and "tip the scales" in the other persons favor.

Below are some excerpts of actual statements that other real estate agents have said to me:

• "My clients are getting divorced and really need to sell this house."
• "The builder has several homes almost finished and he's screaming at us to get them sold right now"
• After showing a particular home to one of my buyers, the listing agent called me to say,"I was calling to see if your client will be making an offer this week. If not, we're going to lower the price by $5,000 next week."

These statements make for great dinner conversation, but it's actually quite frightening to think there are agents out there saying these things. A friend of mine told me once, "If I ever found out that my real estate agent had said something like this, I'd fire him on the spot." The problem is most sellers will never know their agent is costing them thousands of dollars.

For me, the negotiating process begins with our first conversation. Typically I'll start by being overly friendly to the opposing agent and thanking them for their help. It's been my experience that playing to the other agents ego will produce the best results. After I feel their guard is let down (because they believe I'm their friend in this transaction) I'll ask a few questions.

If I'm the listing agent, I'll ask them, "How many homes have you shown this client? What do they seem to like about this home? Is there anything they don't like?" These seemingly innocent questions can elicit responses such as, "Oh I've shown them at least 20 homes and they just haven't found anything they like as much as your listing." Or "They just absolutely adore this home and it's exactly what they're looking for. They love everything about it."

When working on the buyers agent side I'll say things like, "Where are the sellers moving to after they sell this home? Do they already have another home picked out? How motivated are they to sell right now?" I'm sure you would assume the listing agent would surely see through this, but when presented in a casual, unassuming atmostphere they will typically give responses like, "Oh they have a beautiful new home all picked out and they're just dying to get moved into it." One of my favorite responses to this line of questioning was from an agnet I worked with last year. She explained to me, "They are VERY motivated and just between you and I, they'd be willing to take much less than the asking price." As if that comment wasn't enough, their agent then proceeded to tell me how they don't really need the refridgerator or the washer and dryer because they've already bought appliances for the new home. We intended to make an offer anyway, but as you can imagine, my buyers offer was not at their full asking price.

One other point I'd like to bring up here for home sellers. It would stand to reason that in a perfect world your home would be absolutely flawless when you put it on the market. It would have fresh paint, trimmed landscaping, new carpet, and all the little minor things would be repaired and/or replaced. It simply amazes me how many agents don't have this conversation with their sellers. The problem is that buyers in this market don't think in terms of hundreds, they think in thousands. What I mean by this is if you have something to fix in the home that might cost you hundreds of dollars to fix, buyers will want to discount this repair by thousands of dollars when they're making an offer. Don't give them this opportunity to use anything as a negotiation tool. Fix it now before putting your home on the market.

I suppose I can't entirely blame the agents because for the most part, they don't know any better. As far as I can tell, not one single real estate brokerage offers a class on negotiations and it's typically not something that we learn in high school either. Most experienced negotiators will tell you they got that way through years of experience or for some of them, it just comes naturally. For me it's a little mixture of common sense and just knowing when to keep my mouth shut.

Most people in sales are a "high I" personality. Basically that means they get excited and love to talk, so keeping their mouth shut is a major stumbling block. I like to talk, but I've learned it's critical to not "spill your candy in the lobby" so I've trained myself to listen to that little voice in my head that says, "QUIET, let the other guy talk and you just might learn something!"

Choosing a Realtor in the Northland

Top 10 Tips for Choosing the Right Realtor in the Northland

For most people in the Kansas City Northland, their home is the biggest investment of their life. Whether you're buying or selling a home in the Northland or anywhere else in the Kansas City area, you want to be sure you're maximizing that investment. Choosing the right Realtor can make a big difference in how fast you find or sell a house, the price you pay or receive and the smooth completion of the transaction.

You'll need to do some research to find the one that's right for you. It's not hard, but it will take a little time; however, finding the right match will pay off in the long run. Here are some tips:

1. Experience Counts
   Whether you're looking for a Realtor to help you buy or sell a house, you don't want to be part of someone's learning curve. The real estate profession has a high rate of turnover, which means lots of untested agents are constantly moving in and out of the industry. One of the first questions you should ask a potential Realtor is how long they've been licensed and how long they've worked in the area. You should also ask them how many transactions they’ve done in the last year (one a month is the bare minimum) and make sure they are a full time Realtor.
2. Get Referrals
   Friends, neighbors and co-workers are often good sources for referrals. Get as many details as possible about their buying or selling experience with a particular agent. Were they happy with the service they received? Would they use the Realtor again? You can also check the local real estate magazines or search the Internet to scope out your options and find leads for locating a great real estate agent in the Kansas City Northland. If you're selling, look for sold signs in your neighborhood and don’t be afraid to knock on their door to ask questions about how they like their agent.
3. Interview a Few Candidates
   Don't hire the first realtor you meet. Invite several agents to visit your home, evaluate it and come back with a full proposal showing you how they plan to sell your house. Of course, price is important, but make sure they show you how they came up with their prices and how they will advertise and market your listing. By gathering this information, you can compare apples to apples and feel confident you're choosing the best agent to represent you in every step of the transaction.
4. Think Locally
   "Both buyers and sellers should look for a Realtor who is familiar with the Northland areas of Liberty, Gladstone, Kearney, Smithville, Parkville and Kansas City North.  Ask what they have sold or listed in the neighborhood recently." If you're buying, a Realtor should be able to provide you with information on the community, the schools, taxes and other facts. If you're selling, you want your agent to be able to talk to prospective buyers about these details.
5. Stay in your range
   Whether you're buying or selling, choose a Realtor who concentrates on your price range. For example, if you're looking to buy a house in the range of $150,000 to $200,000, you should make sure your Realtor knows what’s available in that market and has actually sold several homes in that price range. A Realtor who focuses on more expensive homes won't be as knowledgeable about what's available in your price range and vise versa. Also, some agents are only interested in representing properties within a certain price range. If your home isn’t in it, they might not give it their all.  
6. Don't let an Agent tell you what you want to hear.
   If one agent says he or she can sell your house for substantially more money than the other agents quoted you, they're probably telling you what they think you want to hear in order to get your listing. Or, they may not be familiar with the market in the Kansas City Northland or your particular neighborhood. "Statistics show that properties which are over-priced when they are listed stay on the market longer and sell for less than if they had been properly priced from the start.
7. Agree on Expectations
   If you're selling a house, ask your agent to put together a written marketing plan detailing the steps they will take to sell your home. Make sure they're advertising your home both locally here in Kansas City and nationally through various online service providers. The agent should offer advice on how to prepare your home for the market and whether anything will need to be fixed, removed, or repaired. If you're buying a home, make sure you know how often your agent will supply you with listings, how many houses you can expect to see in a week, etc.
8. Look for a Personality Match
   Once you know you've narrowed your search down to qualified professionals with the right expertise, make sure you choose someone you trust and who you like. Regardless of whether you're a buyer or a seller, you'll be spending a lot of time with your Realtor and it should be someone you feel compatible and comfortable with.
9. Marketing your Home
   Ask any prospective Kansas City real estate agent what they’ll do to sell your home. It sounds like elementary, but not all agents work the same way. Some agents will advertise your property in the Northland and spread the word to other agents they know. Others will just add your property to the MLS (Multiple Listing Service), stick a sign in the front yard, and wait for someone to call. The more proactive your realtor, the better.
10. Negotiating the Offers   
    This one area is probably the single most important trait of defining a great real estate, but the most often overlooked. Thousands of dollars can be won or lost in the negotiations process. Make sure you have a Realtor that understands this and is committed to explaining the process and all of the options that may be available to you. An inexperienced or talkative real estate agent can inadvertently say the wrong thing to the wrong person and “tip the scales” in the other persons favor.

Do's and Don'ts When Purchasing New Construction Homes

Do's and Don'ts When Purchasing New Construction Homes
 
The vision of a new home with the ability to upgrade finishes, alter floor plans and be the first to occupy a property lures buyers into builders and developers model homes every day. According to industry sources over 70% of home buyers want a new home. These new construction focused buyers might see a picket fence, but they should be prepared to ask the right questions and see red flags before signing on the line

Do's 

*    Have your own agent. Believing they might get a better deal or out of ignorance many buyers use the developers sales agent to represent them. All homebuyers should be represented by an agent who has a fiduciary responsibility to them. Buyers shouldn't forget that most developers require that your agent must accompany you the first time you visit a sales center.

*    Ask how much is this home as we see it. Models can be filled with every upgrade the builder offers as an example for buyers. Buyers should ask freely how much the model costs as they see it. Typically this cost will vary dramatically from advertised starting prices for a development.

*    Pick the right builder. Working with a builder is like a short-term marriage. Ask for references from the builders sales agents. Do your own investigation of the builders previous projects, length in business and complaints filed with business bureaus.

*    Consider resale characteristics. The allure of being the first to occupy a home sometimes clouds a secondary location or poor craftsmanship. Consider a resale home in a primary location before signing on the line just because it's new construction.

*    Question percent of project sold. Developers love to promote the sell-through of projects. Inquire how much of the percent sold are reservations (dating the project) versus contracts (engaged to the project). Some reservations don't go to contract because of a change of heart, financial concerns or occupancy timelines.

*    Have your Realtor review all contracts before signing. Builders contracts favor the developer and are different from standard local real estate board approved contracts. Be sure you read the contracts and more importantly, you use a Realtor that is familiar with the builders contracts and can explain them to you in detail. There is little wiggle-room once you sign a builders contract.

*    Investigate property taxes independently. Property taxes can be a financial surprise you weren't expecting with the purchase of a home. Because tax assessors haven't valued a home or project, developers can underestimate how much the property taxes will be. Complete your own due diligence and call the local taxing authority to find out the worst-case scenario.

*    Never skip or waive the right to a inspection, the benefits far out weigh the costs and could save you numerous headaches and expenses later. New construction is not immune from defects and lackluster workmanship.

*    Get a certificate of occupancy. Local municipalities issue a certificate of occupancy after a unit has passed all building code inspections. Most mortgage lenders require a certificate of occupancy before they will close on a loan. If you are paying cash, verify prior to closing that the developer will deliver you a certificate.

*    Understand why builders request upgrades paid for in advance. Experience has taught builders that some buyers will not purchase the unit which they have specified the floor-coverings, countertops and kitchen cabinets, that have been installed by the builder. Other buyers will want to select their own finishes and a unit that has preselected finishes by a terminated buyer is a marketing problem for the builder. Plan on paying upfront for all upgrades and changes you make to a unit, and if you decide to walk from the project once you have paid for upgrades, expect a fight from the developer if you want a refund on installed changes and upgrades.

*    Whenever possible request copies of blueprints, floor plans and surveys. It's easy to forget to get clean copies of blueprints and floor plans of your new home with all the activity and decisions during the construction process. In the future when you want to make changes or sell, having the footprint of your home will save you expense and time. NOTE: When purchasing a "spec home" do not expect the builder to hand over copies of the floorplans.

*    Research warranties on structure, finishes and appliances. Builders typically offer five or ten year warranties on structural elements of a home and rely on manufacturers warranties for appliances, furnaces, windows and overhead garage doors. Beware of one-year warranties on structural elements.

Don'ts

*    Forget to ask for holdbacks on unfinished work. Weather or material supply problems can interrupt completion of a home. If some items aren't necessary for occupancy the developer will want to close on your home. Make sure any substantial items or features that are not completed in your new home, have designated funds set aside for their installation or completion. Request these funds be held back and deposited in an escrow account at closing.

*    Omit final written punch lists. You should have a final walk-through at least three days before closing on your new home. Create a punch list of all uncompleted or unfinished items. Punch lists can also call attention to items that need to be repainted or need additional attention. Both the builder and the buyers should sign the final punch list in agreement. Builders should complete punch lists within 30 days of closing.

*    Tune out during construction process. Family, work or distance can shift your focus away from closely monitoring the construction and completion of your new home. Proactive buyers can catch design mistakes or irregular materials by visiting the job site on a regular basis. For insurance purposes some developers limit access to construction sites, but a good builder should appreciate you paying attension. NOTE: if issues arise or something is not built correctly, do not talk to the builders "subs" that are working on the job site.  The correct procedure is to alert your Reator and have him bring this to the listing agents attention.

*    Be fooled by low assessments. Developers can use artificially low monthly homeowner assessments in new construction marketing materials. Plan on at least a twenty-five percent increase in assessments the first year after the developer delivers the association to the homeowners.

*    Overlook costs between standard and upgraded features. There can be a large difference in quality and useful life spans between builder grade and upgraded finishes and fixtures. It could be worth the additional expense to install better carpet, cabinets and faucets. Cross-check builder prices for upgrades at your local home center.

*    Ignore builder incentives as a signal of slow sales. Free condominium assessments, stainless appliances and plasma TVs are thrown in to induce buyers to write contracts to purchase. What many buyers think are a freebie are actually signals that a builder is slow to sell from increased competition of a lack of buyers. Incentives are a band-aid for a languishing development.

*    Be surprised when builder holds firm on pricing. Builders of popular projects don't typically negotiate on unit prices. However sometimes a builder will throw in upgraded appliances or hardwood floors in place of standard carpet. When a builder doesn't move on prices it is because they have a investment formula for the project, which is typically costs plus twenty percent profit.

*    Disregard risks of buying pre-construction. Pre-construction pricing can attract value-driven buyers. There is some risk entering into a project before it has started. Verify that the developer has received a green light from local building authorities and has a proven track record of timely completion in the community.

*    Postpone discovering costs of construction loans. Variables beyond a builders control can prolong the completion of your home. Have contingency plans for cost overruns, temporary housing and bridge loans. Investigate rate-lock expiration dates on mortgages, construction or temporary loans.

Realtor Designations

Ever wonder what those funny little designations are for when you're looking at a Realtor's business card?  You know, the ones that have 3 or 4 letters after the real estate agents name? Here are some of the most widely recognized designations given by the National Association of Realtors.

The NATIONAL ASSOCIATION OF REALTORS® has nine affiliated Institutes, Societies, and Councils that provide a wide-ranging menu of programs and services that assist members in increasing skills, productivity and knowledge. Designations acknowledging experience and expertise in various real estate sectors are awarded by each Affiliated group upon completion of required courses. In addition, NAR offers five certification programs to its members.

	ABR, Accredited Buyer Representative With over 40,000 members, REBAC is the largest association of real estate professionals focusing on all aspects of buyer representation. Over 30,000 ABR® designees have completed the REBAC course, passed the test and provided documentation of buyer agency experience.
	ABRM, Accredited Buyer Representative Manager Geared to real estate firm brokers, owners and managers that have or wish to incorporate buyer representation into their daily practice, designees have taken and passed both the ABR® and ABRMSM course and provided documentation of past management experience.
	ALC, Accredited Land Consultant ALC’s are the recognized experts in land brokerage transactions of five specialized types: (1) farms and ranches; (2) undeveloped tracts of land; (3) transitional and development land; (4) subdivision and wholesaling of lots; and (5) site selection and assemblage of land parcels. Acquire valuable skills through educational offerings leading to the ALC designation.
	CCIM, Certified Commercial Investment Member® CCIMs are recognized experts in commercial real estate brokerage, leasing, valuation and investment analysis. The CCIM business network includes more than 7,500 designees and an equal number of candidates principally in North America, but also in Asia and Europe. CCIMs are backed by a respected education program, as well as superior technology products and business resources.
	CIPS, Certified International Property Specialist The CIPS network is comprised of 1,500 real estate professionals from 50 countries who deal in all types of real estate, but with one common element: they are focused specifically on the "international" market. Whether traveling abroad to put deals together, assisting foreign investors, helping local buyers invest abroad, or serving an immigrant niche in local markets, CIPS designees are consumers' best resource to ensure they are dealing with a professional skilled in the unique aspects of international real estate.
	CPM, CERTIFIED PROPERTY MANAGER® Acquire valuable real estate management skills through educational offerings leading to the CPM® designation. CPM® members have the competitive edge in every area of real estate management from residential to commercial to industrial.
	CRS®, Certified Residential Specialist® Agents can maximize their potential by earning the CRS® Designation and joining the organization that has served top-producing residential sales agents since 1977. The more than 35,000 CRS® Designees benefit from nationwide referral opportunities, a professional image that attracts customers, and sales and marketing support. The CRS® Designation is awarded to experienced REALTORS® who complete advanced training in listing and selling, and meet rigorous production requirements. CSP, Certified New Home Sales Professional The CSP designation was designed for specialists in the sales of new home custruction to enhance their professional image, increase their marketability in the home building industry, and sell more homes! This is a 4 day course provided by the National Association of Home Builders www.nahb.org covering an extensive array of topics that include new home community planning, local building techniques, custruction planning and costs, plus marketing and closing strategies. GRI, Graduate Realtor Institute symbol is the mark of a real estate professional who has made the commitment to provide a high level of professional services by securing a strong educational foundation. REALTORS® with the GRI designation are highly trained in many areas of real estate to better serve and protect their clients. Developed for members of the NATIONAL ASSOCIATION OF REALTORS® and offered through State REALTOR® Associations, the GRI program includes 90 hours of coursework on topics from marketing and servicing listed properties to real estate law. e-PRO® e-PRO® is a revolutionary training program presented entirely online to certify real estate agents and brokers as Internet Professionals. It is specifically designed to help real estate professionals thrive in the competitive world of online real estate. In addition, the e-PRO Certification Course is geared to ensure continued success in online real estate after the course has been completed and certification earned, by online participation in the e-PRO Community and the e-PRO Referral Network.

Welcome to my NEW blog!

Welcome to my NEW real estate blog! I'm starting this blog in hopes of using it to educate consumers about real estate and related topics of interest in the Kansas City area.  My website at www.clayandplatte.com gives consumers a place to search for homes and get some general information about working with me, but by using this blog, I'll be able to expand this information into a series of more detailed stories, articles, and real estate news that might be of interest to you.

This blog will be updated on a weekly basis and I hope you'll "bookmark" it and return back from time to time to see what's going on here.  I hope to keep the information relevant and timely and would welcome your comments.  Also, if you have information or articles that you believe would be a benefit to the readers of this blog, please feel free to email them to me.

Thank you for taking a minute to check this out and don't forget to forward this to a friend.

Ron