No Deal. Qualified Seller? Maybe Not.
The moments we remember fondly always involve wonderful times in life when everyone seems contented and things just hum along happily. In real estate terms, good markets are when things are more or less "in balance." In the Berkshires, we remember this period as the all time great "seller's market" and it occurred between 2002 and 2006. Everyone was getting into real estate sales, investments and upgrading homes to flip. The economy was sound (neither weak nor overheated) and unemployment was low. An idyllic period we remember fondly. Then came 2007 and unemployment rose as companies were sold, employment was shipped overseas and Berkshire property sales began a decline that continues even now in 2010.
I write this at the end of April of 2010 and the economic pendulum has swung from a bustling economic boom so far, far downward in the direction of unemployment (Berkshire record numbers) and loss of portfolio values brought about the Wall Street debacles documented in the papers daily. Jobs are as scarce as qualified buyers are. Unfortunately, many of our Berkshire sellers are remembering, "the way we were."
Selling a property in this buyers market requires a seller to focus on the "way we are" right now, right here, today. Some sellers are not "qualified" to sell for one of several reasons. We typically think of qualifying buyers as buyers who can obtain a mortgage. Brokers and Realtor® must often dig down into a seller's unspoken words and feelings about the house sale to ascertain if a seller is qualified enough to sell their property.
To be fully "qualified", a seller must meet several standards:
- The seller needs to have sufficient equity over and above their debt, to be able to sell in the open market or the sale becomes a short sale requiring bank approval, which is not easy to get.
- The seller needs to be informed and realistic about the current market conditions. Like analyzing a stock portfolio, this will require shifting priorities and accepting the point at which the cost of keeping a house far outweighs the benefits of other current investments.
- The seller needs to have a strong reason to have to or want to sell at today's soft prices. Those who say they will sell if they get their price are an example of sellers not qualified. A passive aggressive seller move toward a bank who threatens foreclosure may be setting a price so high the property cannot possibly achieve that return; however, the seller by listing the property will meet the qualification of the bank to show good faith in attempting a sale.
- The seller needs to demonstrate confidence in and cooperation with their Realtor who is out there where the tire rubber meets the road: We are in the market daily watching the listings, sales and closings of properties in the area and comparing those sold properties to the seller's property.
- The seller must select a qualified agent to represent them. Experience, diligence and skill really do make a difference and agents vary greatly in these qualities. Finding a Realtor® with a proven record of accomplishment who exceeds at selling in a down market is about as easy as finding a needle in a haystack. Unfortunately, the agent turnover rate in real estate can rival that of professional shark trainers. A skilled fortunate few remain in the business for more than 5 years full time and even rarer is a 20-year veteran. At times like this, you do not need a friend in real estate, you need an experienced businessperson with the wisdom to bring in the buyers and then negotiate a fair price without losing your sale.
- All involved on the sell side need to be of one mind. Unless all decision makers are of one mind, it is almost impossible to sell, especially when concessions are the norm in a buyers' market.
- The property must be priced on the low side of realistic and must be displayed like a Ferrari auto on a luxury lot (shining, spotless, in perfect repair).
- Focusing on special features or attractions is even more important now. Spectacular views and settings, a unique attribute such as exceptional energy efficiency, knock out decorating, or the "ideal floor plan" will go far in this competitive market. With so much to choose from, buyers naturally will have to find something especially appealing to be convinced to tour your house.
In sum, when times are challenging, simply putting property on the market does not begin to prove a seller's qualifications. It takes skill and perception by both parties to determine the level of qualification of the seller. The highly "qualified sellers" are the ones who are walking away from the closing table this year, maybe not with glee, but with the comfort of knowing that they did well in an otherwise very challenging market and can now move on in their lives to the next phase.
What is equally important to recognize is that these sellers, rather than fight against the market, have been able to trade from one property to their next with relative ease since whatever they are purchasing will also be at a value relative to what they sold. Experienced sailors say, "The tide raises and lowers ALL boats at the same time." The same is true of the housing market.
Paul Harsch III is President of Harsch Associates Real Estate located in Williamstown MA, home of The Clark Art and Williams College. Paul has been a Broker in the Berkshires for over 35 years and speaks from the experience of many real estate cycles. Harsch Associates serves all of Berkshire County MA, Southern Vermont and New York State. He can be reached at Paul@harschrealestate.com