Thank you so much for taking the time to look up this Blog Post. It is a short, but heavy read. In the pages that follow, I’ve laid out the concepts and the theory that I use in everyday practice. That being said, this is more than just concept and theory – this stuff works.
The trick here will be learning how to employ what I’ve outlined for your specific property. Every market, neighbourhood, and property requires their own unique application of what I’ve put forth, so you’ll have to take some time to consider how that will look.
Enjoy your reading, and if you are going to put this into practice – enjoy your profits!
Marc Evans
How to Sell Your Home for the Most Amount of Money
The ultimate goal of selling a home is to profit as much as possible. Secondary goals often relate to the timeliness and ease of which this profit is attained. In any event – profit is quite often the primary concern when selling a home, and that is what this book is dedicated to. I will be reviewing every conceivable aspect to increasing value that I have come across in my 15 years as a Real Estate Broker, Owner and Sales Trainer of the most productive office in my City as the Fastest Growing Remax in the World, as well as the Team Leader of the most productive team in that office.
Pricing
The Concept of Market Value
Most sellers have a unique way of establishing value – and that is quite simply by using their own Subjective Value. In other words, what the property is worth to them. In most circumstances, this is a great way to value property, as decision making can often be made based on the worth of options to the decision maker. You’ll hear “That’s not worth it to me”, or “It’s worth more to me than that”. The key here is what something is worth to THEM. While that’s great, when you’re looking to price a home, we’re looking for Market Value.
Market Value is quite simply ‘what a buyer is willing to pay for a home’. As much as beauty is in the eye of the beholder, Market Value is in the eye of the Buyer.
This is opposed to other means of determining value such as (but not limited to): Refinance Value (done by an Appraiser who has never walked through a property with a buyer, but rather a clipboard, and who’s Appraisals state in the ‘Assumptions and Limiting Conditions’ section that Realtors have more experience pricing homes and they are the experts), Insurable Value (which is cost to rebuild), Purchase + Appreciation Value (Bought for 500K+100K renovations+5% per year appreciation over 8 years) or any other type of Subjective Value (Neighbour thinks/says, Dad thinks/says, Coworker thinks/says).
Again, while these are all valid ways to value a home, what we are interested in is the value that will allow us to SELL this property for the MOST amount of money, and that value is Market Value.
In order to determine Market Value, we use what is called the Direct Comparison Approach, and that is taking the best comparables to the subject property, identifying the differences between them, determining the value of those differences in today’s market, and then accounting for any time difference between the properties. Not only does one need access to information to get this done, but they also need recent and comprehensive experience with both Buyers and Sellers to assign the appropriate values to those differences and determine the proper ‘adjustments’ in pricing.
In order to determine what Buyers are exactly willing to pay for a home, we must not only consider value from their perspective, but we ALSO have to take into consideration their recent experiences of both buyers and sellers to anticipate the property movement of both the list and sale price – and that is where 3D pricing comes into play. In this book, we will not be going through exercises or examples of specific adjustments in value, but rather the concepts and theory behind it.
The Concept of 3D Pricing
3D pricing is a term that I recently coined, which essentially refers to the ‘three dimensions’ of pricing, or the three different considerations that have to be observed when selecting the right price to list a home. I’ve identified those dimensions as follows:
The First Dimension: Median Pricing
This is not a revolutionary concept; however, while many of the concepts I’ll explore are not revolutionary – they are much like common sense, and not too common 😊
Looking at the Median Price refers to looking at where the bulk of the data is as opposed to taking a straight average. For example, if we have 3 sales at $500K and one at $350K, the three homes at $500K should almost be considered exclusively, and the outlier at $350K would not get much consideration at all. Using the average here wouldn’t paint the proper picture of value.
The Second Dimension: Weighted Pricing
This refers to giving more consideration to the best comparables, which begs the question – what’s a good comparable?
A good comparable is one that is AS SIMILAR to the subject property and that has sold AS RECENTLY as possible. The reason for this is that the more differences between the comparables and the subject, the more adjustments in value have to be made, and the more room for error is possible. We’d like to keep things as straightforward as possible. In the same vein, the further back the comparable has sold, the more differences the market has experienced since then. Whether it be supply/demand, outside contributing factors or simply buyer preferences – there are many factors that can change over time and impact pricing. If a comparable sold last week – perfect. If it sold last year, now you have to consider everything that happened from then until now and price out those changes.
The Third Dimension: Pricing Climate
The best way to predict a buyers’ behaviour is to look at their past behaviour. It is very important to put yourself in the shoes of a buyer for your home, and ask yourself how many homes like this have been on the market, if they’ve had to compete for them or not, what the difference between list price and sale price has been and how many days they’ve been on the market. The reason this is important is because the brain works by identifying patterns and relying on them for decision making (which is why you don’t study every door you walk up to and ask yourself if you’re going to open a portal to another universe or perhaps fall down into a bottomless pit on the other side, but rather you’ve gone through enough doors to know that it’s just another room on the other side of it, and it’s probably safe to go through it), and that pattern will reveal to us how to price a home to take advantage of a buyer’s expectations. For example, let’s say there have been 4 recent sales for a home like yours, and they’ve all been priced around $599,000 and sold for $750,000 in 5 days. If you tell yourself your house is worth about $750,000 and price it as such, buyers will know that houses like yours have been selling for $150K over asking, and you must want $900,000 for yours – which doesn’t make sense to them, and rightfully so.
The Science and Art of Pricing a Home
There are many situations in which pricing a home is more straightforward than not, but sometimes it is not so straightforward.
For example, pricing a townhome that has plenty of great comparables is a lot different than pricing out an “Age Unknown” farmhouse with 85 acres (50 of which are leased to a farmer), 4 outbuildings, a rubble foundation, half of the major systems updated and a geothermal heating system. In a situation like this, relativity to other sales or homes that a buyer would also consider has to be considered, experience with these types of buyers and plenty of site visits (drive by’s or granted tours of homes). This is much more of an ART, and not a subject we will explore in depth.
When you look at all 3 dimensions of pricing as I’ve outlined it here, you’ll be able to see where the price range likely lies, but also where to price your home in order to end up in the higher part of that range.
In the following sections we’ll explore how to refine the home itself to ensure the absolute top of that range is where you end up.
Positioning, Preparation and Marketing
Concept of Value
The basic concept of value is ‘what you’re getting for the price paid’. Getting a lot for what you paid? That’s a great deal. Not getting much for the price? Bad deal. Keeping this in mind, we’re going to work to make your home seem as valuable as possible for the price by being strategic with how we prepare and describe the property.
Target Market
How we prepare and describe the property depends on the concept of the Target Market, that is – WHO is your buyer? Better yet – who is your BEST Buyer? And ultimately – Who is the BEST Buyer that is willing to spend the MOST amount of Money?
THAT’S WHO WE’RE INTERESTED IN FINDING.
To refine the definition of Market Value we explained earlier, I would change “What a home is worth to a Buyer” to “How much the Best Buyer is willing to pay for the home”.
We aren’t interested in just ANY Buyer, and we know that there are many types. Two important ones to consider are the CHEAP BUYER that wants the best price on EVERYTHING. We all know this Buyer – cheapest clothes, car and virtually everything else. “What’s your best price?” is the mantra for this buyer. The buyer we want is called a QUALITY BUYER, that is – a buyer that is looking for quality and is willing to pay for it. It’s important to know that not every buyer is looking for the cheapest house. In fact, most aren’t. Most buyers are looking for a GREAT house that will make them happy, give them the life they are looking forward to, and make them feel safe and proud. We have all kinds of emotions and different motivations to work with here – and that is the plan.
In determining how we will prepare and market a home, we first look to identify that Target Market. Typical Targets are young couples, first time home buyers, young families and investors. Not so typical Targets include very specific demographics relating to age, culture and even socio-economic status. It’s often considered taboo to market housing to a specific demographic for fear of discrimination, however ignoring clear signs of groups or types of people that absolutely pay more for specific houses in certain areas is a little reckless and is leaving money on the table. Of course, there is a tactful and respectful way to market homes as well.
First Time Home Buyers are looking for things like value, security, stability and excitement at the same time.
Young families are interested in yards, parks, school bus routes, rec rooms, open concept spaces, and community.
Investors are looking for opportunity, growth and stability.
Once you’ve identified the Target Market, you then need to consider how to prepare the home in a way that appeals to them the most. This is where staging and design comes into play. What types of upgrades are they looking for specifically? What style are those upgrades? What type of quality are those upgrades? What types of décor speaks to that buyer and attracts them? You can even get down into certain smells and sounds in the home they will appreciate. How should the home smell and sound when they walk in during showings?
When properly executed, preparation of the property is an incredibly powerful way to attract the highest and best offers, and for this reason, we put in a great deal of effort into carefully curating an environment that will showcase the most value to our target market.
Positioning
Positioning refers to how we are priced and marketed compared to our competition and the past sales. In order to do this, the first step is some in depth market research. It begins with looking at the comparables closely and seeing if there is a pattern between the homes that sold for the most amount of money, and if that pattern is something that we can take advantage of. For example – did the highest sales all brag and boast about having home offices? Was it that they were turn key and freshly painted? How about mentions of the street or block?
Next, we physically get out and go and look at the competition. What this does is reaffirms our list price, but also gives us an idea of what our relative strengths and weaknesses are compared to them. Then, you guessed it – we describe and market our home in a way that specifically plays to our strengths and negates our weaknesses. Do we have slightly larger rooms? Sounds like OVERSIZED bedrooms to me. Slightly larger yard? Let’s call it a RARELY OFFERED extra-large yard PERFECT for a swimming pool. Is our layout incredibly unique and abnormal? Sounds like a RARELY AVAILABLE model with a great use of space. There are many ways in which you can do this, but the point here is to make sure that when people glance over your description, they pick up on a few keywords that set you APART and BETTER than the others. Don’t WASTE those precious CAPS on RANDOM words WITH no benefit.
Another incredibly important aspect of Positioning is inherent in HOW you list the home, at least in my professional opinion and experience. Earlier I made mention of a COST buyer VS a QUALITY buyer, where the COST buyer is always looking for the best deal, and the QUALITY buyer is looking for …well… quality – AND they are willing to pay a premium for it. In other words, if you can increase the quality of your home, you will realize a gain on that investment. An easy way (again, in my professional opinion and experience) has to do with the platform in which you sell your home.
Take a used car for example. If you drive a Ford, do you think you will attract a better buyer on Tony’s parking lot on the side of Main St, or on the Ford dealership? The dealership obviously. Why is that? Well, the people that walk on the Ford Dealership lot are QUALITY buyers, who are willing to pay a premium for a Ford because they VALUE (KEY WORD) the reliability in the car being serviced, maintained, warranted and sold by the dealership. They are NOT concerned with the cheapest price, but rather a SAFE and SOUND investment.
Real Estate is no different.
There are certain circumstances, depending on the representation of the home, where the Buyer may perceive the home being offered as a ‘bargain’ or a ‘deal’, and on the equivalent of a discount market. Inherent in this representation is the TYPE of buyer that will be attracted to it. Think: Most buyers looking for quality don’t shop at garage sales.
On the other hand, certain platforms (brands or methods) of selling a home give the entire opposite effect. The most reputable brands, recognized brands or luxurious brands often carry with them a sense of quality that comes with it. These brands are often expensive to be a part of, require a large investment to work at and to market properties with, and as a result often (not always) attract agents that are that much more focused on production and sales. You see more full-time agents working with these brands/platforms as well – which carries stigmas with it about professionalism and quality as well. Inherent in this representation is the TYPE of buyer that would be attracted to it. Think: Most buyers looking for deals don’t pay retail pricing.
Of course, these are general principles that I have observed and believe, but they are certainly NOT absolutes. There are and always will be some exceptions to the rules, but nonetheless – I would pay close attention to getting as many factors on your side that help.
In my experience, that margin that is to be made by investing in the QUALITY of your home and attracting a QUALITY buyer that is willing to pay more is part of the commission earned by a Realtor. I personally have listed many homes where a simple change in representation attracted more, better buyers and ultimately more money on closing day.
Preparation
One of the most underrated ways to increase value in a home and ensure you get the highest sale price is Preparing the property for sale. Two professionals you will want to rely upon are a stager and a home inspector. You will want to have both of them in as soon as possible to identify any issues that will need to be addressed, as well as any opportunities to showcase the property to your target market. What you will need to do here is consider how much time, energy and money you are willing to invest in your home to prepare it, but safe to say that the more you listen to these professionals, the more money you will get, and it will be quicker and easier than otherwise. They will give you solutions for whatever you are willing to commit to.
Other things you will want to consider include; a professional cleaning service, appropriate soft music in the background (think: Target Market), simple and non-offensive smells (think: fresh cookies, laundry, a soft smelling candle), and activating any dynamic features of the home (think: fireplace ON, hot tub ON, Projector in the movie theater ON (sound OFF)). You want the home to appeal to as many senses in as many appropriate ways as possible.
Marketing
Marketing as it relates to Real Estate involves taking all the hard work we’ve already put forth, and ensuring it reaches the appropriate audiences. Now I’ll be the first to admit that there aren’t many creative placements for homes, as the market is pretty focused on going on the local MLS or perhaps “GOOGLING” for properties, however there ARE certain circumstances where a property might be well suited for a creative placement. For example: A property with a stable and paddocks might be placed on an online equestrian group page. A property with an excellent break water on a large river might find its way onto a local yacht page. A property next to the Trans-Canada Trail might end up on a cycling, running or cross-country skiing enthusiast’ page. Think: who would LOVE this house? Where are they?
Unique properties might also benefit from overhead drone video/photos to showcase land, or perhaps 3D Matterport tours and HD Video Tours to provide unlimited access to the inside of a home that requires more time to absorb or access. Think: How can the target BEST appreciate this home?
A unique selling method we’ve employed has been a “Virtual Showing”, in which we will guide a camera man around the unit and showcase the property as if they were a buyer themselves. We upload this link to a private YouTube account and share it with interested parties who otherwise couldn’t get to the home in time due to either time or location constraints.
It should go without mention that all information about a home should be accurate, of the highest quality possible, and very clear with information on where to find additional information. Every point of contact that a Buyer has with your home should be of the highest quality in order to attract the quality buyer.
Showings
Showings are a great opportunity to get feedback from the most important source of all – Buyers. The impediment you will have here will be the agents that don’t provide the feedback to you on behalf of their buyers. In my experience, only about 30% of Realtors give feedback. In order to overcome this, you must quite simply call them yourself. But this is only half the battle. The other half is figuring out what would make your home the right home for their buyer, and to see if that could be done. For example: Let’s say you ask the agent what their buyer would rate the property from 1 to 10, and they say an 8. If you ask them what would make it a 9 or a 10, and it’s something that you can change or modify with a great offer (like paint, flooring or a bathroom renovation) then simply suggest that you could do that WITH a great offer. If it’s something you can not change (layout or location), then simply thank them and move on. The trick here is to have vision and be a problem solver. If you don’t do it, don’t count on the other side doing it either. You could be passing up a great deal if you don’t dig. Worst case, you need to ask them what they AND their buyers thought of the home, the price and the condition compared to the other homes they’ve seen. Take note, and listen closely. Again – consider making changes to your marketing of the property itself before you consider changing the price.
Negotiations
Negotiations are so incredibly important, as this is where the money that was attracted with the pricing and preparation of the home is secured all the way until closing. What I mean is, quite often the properly executed marketing plan will attract very high offers that are mainly driven by emotion, and once the logical brain sets in to reconcile everything, buyers often start trying to recalibrate the deal so they can feel justified in the purchase. They will try to lower the price, get a better closing for them, negotiate some repairs, or maybe some extra inclusions. They might even threaten to walk away from the deal if they don’t get what they want. So how do we KEEP the money on the table that we worked so hard to attract? There are a few key fundamentals here that I’ll explore.
Communication and Relationships
This might be the biggest one. It’s not always what you know – sometimes it’s who you know. You can be the best communicator, have superior knowledge, be equipped with all the objection handles and rebuttals, but if you don’t have good rapport with the person on the other side, then your message will likely not get to the buyer the way you wish. In the Real Estate industry, having relationships with other Realtors is key. Why? Because they need to know that they can trust you. They need to know that if they rely on you for anything, that they won’t regret it. This goes two ways. When you know you can trust the agent on the other side of the transaction, and that they mean what they say – things get done. Consider this: If an agent you don’t know says “Trust me – they will close”, or “Trust me -they just need 2 days to get their financing in order and it will be fine”, or “Trust me – the inspection is just to look for major issues”, are you going to feel secure with your confidence in them? On the other hand, these words from a trusted Realtor who you’ve done business with for over a decade or two means a COMPLETELY different thing.
Sometimes this relationship can also come about rather quickly, and that’s achieved by building rapport and gathering intelligence about the agent and their buyers. Finding things in common, having similar goals in achieving a win/win outcome, showing respect, being agreeable, showing evidence or support to claims upfront as to not leave anything to question, asking intelligent questions and even doing a little more work than would normally be needed to inject good will into the deal. These are all things you or the other agent can do to increase good will into the deal, build trust, and increase the odds of a smooth transaction.
From a Realtor’s perspective, this is a small world. We’ve dealt with nearly every Realtor in City, and let me tell you – we know who the nice ones are, the meaner ones, the easy ones, the difficult ones, the disrespectful ones, and who the trustworthy and untrustworthy ones are, and this makes or breaks transactions over and over again.
Pressure and Bluffing
These tactics are pretty commonplace in the Real Estate industry. Even at the ideal level of incredible communication and rapport between agents, there are certain things that are either not said or are left to interpretation to keep pressure on the other side to keep as much of an advantage as possible. A simple way to use both Pressure and Bluffing while remaining respectful and honest is use what I call “The Smart Truth”.
The Smart Truth
A simple concept to understand here is called ‘The Smart Truth’, which is something my lawyer taught me that essentially refers to ‘the aspects of the truth that the other side needs to know’. You could think of it as selective truth, or the oath people take in court without the ‘the whole truth’ aspect.
For example, if you get an offer on the property and there are still some showings scheduled, it is not bad form to counter the offer before the other showings and then declare “I’m giving this back to you quickly as a courtesy, but the price hasn’t moved much as we have other showings tomorrow and might be getting offers in the morning”. There’s nothing wrong with that. You MIGHT be. This scenario also works well when the property is hot – which it should be if you’ve followed the instructions up until now. Keep in mind that we are assuming there is a good level of rapport between agents, and everyone is acting in good faith. There will of course be situations where there is either EXCELLENT faith or extremely POOR faith where this concept doesn’t apply.
First to Move Loses
This is a very simple strategy that is used nearly ¾ of the time in Real Estate Negotiations. First to Move Losses means that your first counter should be tight (99.5% of asking price) in order to see how high the Buyers will come up. You want to see how serious they are NOW rather than later. This is also a good time to use some Smart Truth on them. Keep in mind that the other side may use this strategy as well to see if you will break. Don’t take it to heart – negotiations shouldn’t be personal.
Straw Man
The Straw Man is a negotiating tactic that’s actually coined from an example of a Logical Fallacy. While reasoning with someone and using critical thinking, a straw man argument often appears when your opponent tries to distort your argument into something that is clearly wrong and then defeats that argument – giving them a false sense of victory. Long story short – it’s a distraction to cause a false victory, and that’s what we do here. In essence, as a Seller, you need to be aware of a savvy Buyer’s agent using this against you. It might go something like this: Regular offer with low(ish) price, a date you don’t really want and some normal conditions-which gives them a couple points to push and pull on and test the waters to see where they can gain an advantage. What they may also do is present you with a problem that will turn out to be a bit of a headache and something that you ultimately are going to be relieved to never hear of again – for a drop in the price of course. Easy pain points are those related to BIG issues that would affect the sale of the home. They will bring up things like ‘cracks in foundation’, or ‘evidence of moisture issues in the ensuite shower’. The reality is there is no such thing as a perfect home, and all will have some issues that should be addressed, but these issues in particular will cause alarms to go off in your head because the solution to them is either expensive or incredibly convenient. Your defense here is to require irrefutable proof and a quote to remedy if they try to use it in negotiations.
Beating Buyers to the Punch
This is a subtle yet powerful way to ensure that monies agreed upon during initial negotiations see their way to the closing table. Quite often, whether intentional or not, buyers will try to get money off (or worse, not close) because at some point they feel remorseful for being so emotional and paying so much money for a home. What they will do is try to blame this on some deficiencies that weren’t known at the time the deal was agreed upon, and use this as grounds to add value or back out of the deal. The way to prevent this from happening is quite simple – you disclose any known deficiencies first. There is no reason to be an alarmist here, so the way we do this is by disclosing it in the “Salesperson Remarks”, which are notes shared between Realtors. You might consider stating the dates of the major systems of the house, and of course – any issues that you know of that might affect a reasonable buyer’s decision to buy the home (known as material facts). In doing this, not only are you being ethical, but you are removing the outs that a buyer might try to leverage.
Big Deposits
Another way to ensure that initial monies agreed upon make their way to the closing table is to insist on a larger deposit. In our City, normal market conditions see a 1% deposit, and in our current sellers’ market where prices are climbing quickly, we are seeing 2% and sometimes 3% deposits. This ensures that buyers will not walk away from the deal because they have simply put so much on the line. I have heard of other Cities having deposits as high as 5%, so I would caution you to seek the highest acceptable amount in your market.
Conclusion
There you have it. Every aspect of maximizing profits from the sale of a home that I can think of. These are all strategies and tactics that I use every day in the capacity of a Real Estate Broker, and that have been proven by the test of time. In your effort to maximize the profits from the sale of your home, the closer you can adhere to the content of this book, the more assured you can be that you will not be leaving any money on the table.
The Evans Real Estate Group Blog 