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Thursday, October 19, 2017

The Rules (continued)

In April, I shared with you Jones's Rules of Real Estate.

After careful reflection and conversations with fellow agents, I decided add to my original list of 15 Rules.   I am now adding Rules 16 - 21, to create Jones's 21 Rules of Real Estate.

Rule #16 - New construction doesn't stay new.
New construction turns into a used home, so buyers beware.  There is a premium price for new construction... but - just as with a new car - once you "put some mileage on" the house, that premium price erodes. The value of a property begins with the value of its location.  An old home in a desirable location is going to have a better long-term resale capability than a brand new home in a marginal location.
Rule #17 - The house sells the house. 
Agents don't sell homes.   Their role is to facilitate the marketing and sale of a home, but the house has to sell itself.  Buying a home is not only a practical, financial and strategic decision -- it's also an emotional experience for buyers.   They have to envision themselves in a home before they will buy it. 
So sellers, stop looking to your agents to "sell your home."  Your agent may be great at getting people in to see the house; negotiating a contract and assisting with the details of the sale.   However, all the marketing, encouraging and pushing will not make a buyer buy something they don't want.  If agents had the power to make a buyer buy your home at the price you want, trust me -- they would.   Agents simply don't have that kind of power.   
Rule #18 - A home is a place to live -- it's not an investment. 
If I had a dollar for every time a seller said to me, “I have $XX invested in this house and I’m not going to sell it for less than what I have in the house,” I would be a very wealthy agent. 
  • Everything in your house depreciates with time.   That new kitchen, which was installed ten years ago, is not new.   "Newer" construction that is 30 years old is not new.   
  • Maintenance expenses are not capital improvements.   
  • Landscaping improvements help with marketability but rarely increase the value of the house.
Any money you've put into the home historically is somewhat irrelevant.   The value of a home is driven by the market.  Yes, often you will make money on the sale of your home, but don't bank on it.   Just remember a home is no substitution for retirement savings.    
Rule #19 - More often than not, when it comes to figuring out the fair market value of a home, the buyer usually knows best.
Sellers, I know you don't want to hear this, but it's usually the case, that buyers know best. They are out there going to open houses, touring properties, studying the comparables in the MLS and familiarizing themselves with the market.   They know when a house is a good value... and they also know when a house is overpriced.   
That's not to say that there isn't wiggle room in negotiating or some buyers don't know best.  But sellers think seriously before you "test the market" or before you let a buyer walk away.  The next buyer may not be so forthcoming or willing.  
Which brings me to... 
Rule #20  "The first offer is usually the best offer."
Rule 20 is actually a classic real estate adage.  There are exceptions and a seller might get more the next time around, but the probability is slim.   The market is littered with sellers who rejected an early offer, only to find the next offer less desirable.    A general rule of thumb:   The longer the market time, the lower the offers become.
 Rule #21 - Take the long view. 
I've seen buyers and sellers quibble over cents, when there are literally thousands of dollars involved.   Keeping a house empty or maintaining an expensive property can be like throwing money away.  Yet I've seen sellers do just that, when they could have accepted a reasonable offer.   Walking away from a purchase over a few thousand dollars only to kick yourself later is both penny-wise and pound-foolish.  
Sellers: Consider this, "What is the value of 'done'?"   
Buyers: Consider this, "If you really love the house, think of those extra dollars as something that will be amortized over time."
Look at the big picture.  There is always middle ground and it's worth trying to find it.  

Like I said before -- if everyone understood The Rules, this business would be so much easier!

So here is my list of rules for now -- although like Gibbs, I might keep adding to the list. 

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