When it's time to sell your largest asset, you want to make the most money possible. There's a lot of pressure to get it right. But there's so much information out there! You need help interpreting the data - you need someone to guide you through your options and make choices that will deliver the best outcome.
So, you decide to hire a real estate agent to help you. Make the wrong choice, and you may end up forfeiting thousands of dollars a different agent could have helped you achieve. Here are three things to watch for in order to avoid that mistake:
1) Don't Treat the Real Estate Market Like the Stock Market
During the Florida real estate bubble, Realtors treated beach homes and beach condominiums like shares of stock in a company. Forget amenities, forget condition, forget updates; beachfront property became a commodity. In determining what a property was "worth," all that mattered was the prices paid for similar beach properties in the past.
We all know how that turned out.
And yet, today many Realtors continue to treat real estate market listings like stock quotes. They assume that historical sales prices of "comparable" beach properties are the only reliable benchmark for pricing homes and that they are soothsayers who can predict which way the market winds will blow. Those are huge mistakes.
2) Don't Trust Realtors Who Focus Only on "Comps" and Sales Metrics
The fact of the matter is, no two beach properties are identical, and no real estate agent has a crystal ball. Two beach condominiums with the same floor plan, in the same building, and with the same asking price may perform very differently in the market. Why? Because if an agent relies on comps alone to set the list price, he's only looking at WHAT buyers did. To keep a seller from leaving money on the table, a Realtor has to know WHY home buyers paid more for one property than another.
How do you avoid a Realtor who sets list prices by referring only to comparable sales? Dodge the Realtor who touts impressive-sounding (but ultimately arbitrary) metrics like SP/LP Ratio (percentage of list price the sale fetched), and ADOM for their listings. A real estate agent who focuses solely on these metrics has an incentive to underprice listings to keep his numbers up. That's good for the Realtor but very bad for the seller.
3) Don't Expect Buyers to Act Rationally
Because no buyer can put all emotion aside when purchasing a home, pricing your property to get top dollar requires a more nuanced approach. Selling a beach property for top dollar is an exercise in matching an emotion-driven buyer with a unique asset, not selling a commodity to a theoretically rational person.
Listings should be marketed based on assumptions about how home buyers behave, many of which predict buyers to act irrationally. For instance, buyers tend to exhibit a phenomenon known as "anchoring," in which the accuracy with which a property is priced affects their judgment of whether the asking price is accurate. Likewise, the number of potential buyers present at an open house has been shown to constitute "social proof" of the asking price's accuracy. Relying on these crucial insights about buyers' emotional behavior can give you an edge that helps you "beat" the real estate market and get higher prices than comparable sales figures might suggest.
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