Want to Get More Money for Your Home? Don’t Sell too Quickly!

I have written before that 4 days on the MLS is the right amount of time to get the highest price for your home. That was based on an analysis I did several years ago, so  it’s time to do a new analysis.

Looking at the 4,015 most recent sales in Jefferson County, here’s what I discovered.

Roughly 5% of those sales showed zero days on the MLS, meaning that they weren’t even exposed to agents or the public until they were under contract.  The median ratio of sold price to listing price for them was 100%. Some sold for over the listing price and some for less, but the median was the listing price.

Meanwhile, 200 homes went under contract after being on the MLS only 1 day.  The median home for this group sold for 3.03% over its listing price.

There were 379 homes that were active on the MLS for 2 days before going under contract. The median home in that group sold for 3.08% over its listing price.

502 homes went under contract after 3 days on the MLS. The median home in that group sold for 3.3% over its listing price.

The highest number of homes, 608, were active on the MLS for 4 days before going under contract.  The median home in that group sold for 3.6% over its listing price.

As in my prior analysis, being on the MLS for 4 days netted the highest price for the seller.

413 homes went under contract after 5 days on the MLS.  The median home is that group sold for 3.3% over its listing price.

Another 206 homes went under contract after 6 days on the MLS, but the median home in that group sold for just 1.6% over listing price.

Skipping ahead to the homes that were on the MLS for 10 days before going under contract, the median home in that group sold for 0.4% below the listing price.

Those statistics are displayed graphically on the chart above. Not shown in that chart is how low the ratio of sold price to listing price went for homes that languished on the market, usually because they were overpriced at the beginning. Here’s that other data:

223 homes were active on the MLS for 30 to 45 days before going under contract, and the median home in that group sold for 3.8% below the listing price. Looking at the 106 homes that were active on the MLS for 46 to 60 days, the median home in that group sold for 4.3% below listing price.

Lastly, 285 homes were active on the MLS for over two months. The median home in that group sold for 5.7% below the listing price.

The lesson for sellers is that you need to price your home to attract multiple offers and not accept the first (or second) good offer that you receive. Four days is the right amount of time, with proper marketing, for all potential buyers to learn about your home and enter the competition for it.

Selling it without making it active on the MLS at all, as too many sellers are currently doing, may be convenient, but it likely leaves money on the table.

There’s another way that sellers leave money on the table, and that is to hire a listing agent who uses the “highest and best” approach to handling multiple offers. It is the most common method used, but the agents of Golden Real Estate use a better approach — being open and transparent, handling bids auction-style.

The auction style of handling multiple offers is simple, but it does require more work by the agent and more patience on the part of the seller. Buyers and their agents appreciate this approach — and sellers are likely to net more money.

I have a good example from last week. I listed a home for $595,000 and got it under contract for $725,000, and I did it with only four bidders. If I had asked for “highest and best,” I would have had many more offers, and maybe the highest and best would have been $625,000 or maybe $650,000. But because I let every agent know the details of every offer I received, I received fewer offers, and those I did receive knew when their offer was exceeded by another offer. At that point they could either resubmit or drop out.

This process truly resembles a public auction, in which everyone knows where they stand and can choose to raise their bid or drop out. No one is blindsided. The worst thing for a buyer is to discover later that if they had only offered a little more money they could have purchased the home they wanted.

It’s hard for me to understand why listing agents won’t reveal their highest offer to other agents. There is no rule against it, but some agents seem to think there is. Some agents claim that their seller doesn’t want them to reveal details of the offers in hand, but I don’t believe that. And if it’s true, then the seller wasn’t told about the advantages of the auction style of managing offers.

If you want to get the most money for your home, use an agent like those of us at Golden Real Estate who are willing to do the extra work of handling multiple offers auction-style.

Zillow’s Offer to Buy Your Home for Its ‘Zestimate’ Price Is a Brilliant But Devious Strategy

I’ve written in the past about various “iBuyer” players — look for my August 22, 2019, and January 2, 2020, columns archived online at www.JimSmithColumns. com.

Basically, iBuyers such as Opendoor and Zillow Offers attempt to lure homeowners in-to selling their home for what appears to be a good price but which is literally intended to net the seller less than if they exposed their home to the full universe of potential buyers.

Literally intended? Yes, all you need to know is that if a company wants to buy your home in order to resell it, it’s because they will make a profit from doing so. Wouldn’t  you want to keep that profit for yourself?

Now Zillow has weaponized its much criticized “Zestimate” for the purpose of getting their “foot in the door” with you. Let me share with you a few points to ponder before responding to Zillow’s pitch.

First of all, you and I both know that the Zestimate is a computer-generated number that is by definition not particularly accurate. (Zillow’s estimate on my own home is at least $100,000 over its true value.)

To facilitate their iBuyer program in Colorado and elsewhere, Zillow made big news recently when they opened brokerages and started hiring brokers. They have opened an office in Centennial and, as of this week, have 15 broker associates, 12 of them members of the Denver Metro Association of Realtors. The others belong to an out-of-state Realtor association.  So far that brokerage has put zero listings on REcolorado, our MLS, whether active, pending or closed. Presumably those 15 broker associates are busy responding to homeowners who responded to Zillow’s pitch about buying their home for the Zestimate price. How will those meetings go?

First, the broker associate will do a true market analysis and explain that the Zestimate was computer generated and overstated their home’s value. “Here’s what we will offer you, now that we know the true value.”

If the seller accepts the lowered price and signs a Zillow purchase contract, it will have the following provisions, assuming it’s similar to the contract from Opendoor that I was able to study.

First of all, the seller will have accepted a 7½% “service fee” in lieu of a commission. Next, they will have agreed to an inspection or  “assessment” of the property, which will be followed by “adjustments” to the purchase price based on “needed repairs,” including, for example, a new roof, a new furnace or water heater based on age — whatever can be justified. The example I cited in my August 2019 column mentioned $38,563 worth of “repairs found in assessment.” 

That contract had an escape clause for the seller, which Zillow’s contract probably does too, allowing the seller to terminate at any time, which is what that buyer did.  The combination of the “service fee” and the reductions to cover supposed “repairs” was so great that they called me. I listed their home for the right price and sold it above asking price due to multiple offers, netting the seller more than they would have netted under their contract with Opendoor.

I got the seller more money, because, as I said above, the only reason for Opendoor or any iBuyer to purchase a home is to sell it at the market, which requires them to purchase the home below its market value.

In the iBuyer marketplace, Zillow clearly has the advantage, because virtually every homeowner is already being dazzled by the Zestimates they get routinely by email, whereas Opendoor and other iBuyer competitors have to canvass and cold-cold homeowners about selling their home “without putting it on the market or paying a commission.”  Zillow enjoys what every brokerage wants — sellers calling them! All the Zillow brokerage has to do is employ enough agents to answer the phone and arrange those in-home “selling” appointments, which are really for the purpose of listing the home for sale once it is owned by Zillow.

It’s a great business model — for Zillow, but not necessarily for the homeowner. That is, unless the homeowner is willing to give up thousands of dollars in proceeds in return for the “convenience” of selling without any showings or other intrusions.

For some homeowners, that convenience is worth the loss of proceeds, and there are probably enough such homeowners to make the iBuyer model successful. What bothers me is that for some it will feel like a “bait and switch” situation. After all those “adjustments” have been made, they might be un-able or unwilling to exercise their right to terminate the contract because they have made life plans based on the expectation of selling their home for an acceptable price. 

Some will have already signed contracts for a new home or at a senior community. They will have already packed some of their belongings or put them in storage, and they may have told their friends that they are selling and moving. For these persons, it may be psychologically difficult or financially costly to reverse course when they discover they have been fooled into selling their home for less than its worth.

If you have responded to the Zillow pitch and would be willing to share your experience, I’d like to hear from you. My email address is Jim@GoldenRealEstate.com.  I’ll share what I learn in a future column.  Subscribe to this blog to get alerts about future postings on this or another topic of interest.

New Report Reveals the True Cost of Selling Your Home to an ‘iBuyer’

Perhaps you’ve heard about the new concept in home selling called iBuyers. Open Door, Zillow Offers and OfferPad are offering this way of selling your home. Basically, these firms use their own cash to buy your home and then re-sell it for a profit.

If you’re a seller who needs to sell quickly and you’re not worried about getting top dollar (or paying less in fees), the iBuyer model is an option that may not otherwise be available to you. You avoid the uncertainty of not knowing how long your home will sit on the market — or whether it will sell at all.

A company called Collateral Analytics has published a study of 4,000 iBuyer transactions in Phoenix which outlines the costs to sellers and the earnings vs. risks for these iBuyer companies. The report’s title is “iBuyers: A new choice for home sellers, but at what cost?”  It was released two weeks ago. To read the full report, click on this link.

   The last paragraph in the report is a good summary of their findings: “These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

In May I got a call from a couple which was under contract with OpenDoor for $548,500, but with a 7% “service charge” and $38,563 for “repairs found in assessment.” This way of doing business annoyed them enough that they terminated with OpenDoor and listed with me at $498,000, selling for $507,000, which netted them more.

Above is one of 3 charts in  the report. The analysis is from Phoenix, where OpenDoor began buying homes in 2016, because they didn’t come to Denver until 2018.

I’ve written in the past about companies which will buy your home “as is” for cash without putting it on the MLS. Then they flip the property to a new buyer for a profit — profit that you gave up  by doing business with them. The same is also true with iBuyers.

Bottom line: Unless money is no object for you, you’ll do better listing your home with a full-service traditional brokerage like Golden Real Estate. Call any of us at the phone numbers below!