Location and condition are NOT what sells a house!

Written by Posted On Wednesday, 29 January 2014 16:38

I recently read a real estate article that claimed price was the only thing that matters in selling a home. The author later said," You've heard the old saying - "Location, location, location: Then she said..."The real truth is "Location, condition, and price."

Well, she got one of them right. There are 3 things that sell a home. Location is NOT one of them. Neither is the condition. Now, before you start yelling at your computer that I am an idiot... Please bear with me and I will show you I am right. And once you realize I am right, it will help you help your sellers get the maximum money for their home, in the least amount of time. And finally, I will show you how to get a needed price reduction.
So, let me repeat myself. There are THREE things that sell a house. Just three. Each of them equally important.
Yes, price is one of them. However, from here I will rebuff a few other things I have heard are selling factors.
Location: Location only helps or hinders the price you will get for the home. It's not like you can tell your sellers, "Well, if we move the house to the Country Club, you can get a lot more!" The property is where it is. You cant move it. So the location affects the price, and that is all. Here is the proof location is irrelevent. If your new listing is right next to the freeway. And right next to the fire department. And a half mile from the refinery. I think we can all agree that it's not a great location. We can also agree it won't fetch as much money as the same house in a "great area". However, it WILL sell. Lets use the ridiculous figure of ONE DOLLAR. Do you think you could get someone to buy that house, in that location for a buck? I'd say yes. In fact, you'd probably get multiple offers. How about $100? Or $1000? Keep going up. Eventually you will hit an asking price that the buyer pool is only a few people. THAT is the value. Your job as an agent is to know your market well enough to deduce the housing need in your area and figure out what the price will be. In THAT location.
The next misnomer is the condition. Actually, all the same rules for location apply to condition. Let's say your new listing is right next to the freeway, right next to the fire department, a half mile from the refinery, needs a new roof, new kitchen, new baths and has $5000 in termite damage. Do you think you could sell it for a dollar? Of course you could! How about a $1000?
You get the idea. Again, it's your job to figure out how much it will sell for.
So, can we throw out location and condition as one of the factors that sells a house? Can we just agree that location and condition get you more money or less money, but they are NOT what sells the house. Once you get a firm grasp on that concept, it will become easier for you to make your sellers understand that they can't get as much for their home as they can in the Country Club. They can expect to get more money if they fix and paint and clean. But if they don't, you'll sell it in whatever condition it is in.
Ok. If it's not location and condition, What DOES sell the house? What are the three things?
They are Price, Terms and Exposure. And it's ONLY Price, Terms and Exposure.
Let me show you how and why that is the truth.
Terms are very important. Many agents never explore the possibility of terms offered by the seller. They can range from the seller carrying the 1st trust deed. Or carrying a small second. What about the Seller carrying a 10% second? 80-10-10s are still available. This can help a Buyer avoid PMI and drop their payment a few hundred dollars per month. In dropping that weight, they can afford to pay the Seller a few more dollars for the house, and the Seller gets a monthly income for a while. Plus, the Seller might avoid some capital gains tax by disbursing it over a few years. Something to think about. Meanwhile, there are LOTS of other terms that don't include carrying a note. In a hot market you can ask for a rent back. Or a FREE rent back for several months. I even had a Seller make the buyers keep their dog! They couldn't take the dog to the new house, and they wanted the dog to feel safe. The buyers agreed, and the sale went through. The Sellers could have gotten more money and dumped the dog. But they got a price they could live with, and the terms they wanted. So, it's not always price. It's price and terms.
Exposure. Lets say you have the hottest listing in town. Everyone wants this home! It's priced super cheap. Motivated Seller! All the good stuff. But here is a question.... How quickly will it sell if no one knows its for sale? Yes, that sounds stupid. Of course you will tell people. But when you are trying to sell a tough listing, or any listing really, you need to expose the property to a large buyer pool, so the property can get as much interest as possible. So we advertise promote and expose the property to the market.
The final segment is how you can make this all work for you. (And ultimately for your Sellers) No one likes to take a listing that sits and sits and doesn't sell. After an appropriate amount of time, you sit down with the Seller and go over the 3 things... Again, you MUST believe in the 3 things or this will not work. First, explain to the Seller the 3 things. Price, Terms and Exposure and the role they play. Once you have explained all 3 things, go back and discuss terms. Verify they cannot offer any special terms. Next, show them ALL the things you've done to expose the property. For Sale Sign. Open Houses. MLS. Broker Tour. Internet ads. Craigs List... What ever you have done. And get them to agree that the world knows your house is for sale. Once you have covered those 2 points, remind them there are ONLY 3 things that sell a house. They can't do any special terms? No. And the world knows your house is for sale. Yes. 
So the only thing left is... AND YOU LET THEM SAY.... Price.
At this point in the conversation one of two things will happen. 1) They will begin to tell you some great feature of their home. Or how the neighbors told them they could get more money. Or this area has the best schools. Or SOMETHING. This only means they did not absorb what you said about the 3 things, or they don't believe you did enough to expose it.. Start over. They MUST believe there are only 3 things. If you don't get a price reduction, the Seller convinced YOU that you were wrong.
2) The other thing that will happen after your explanation is the Seller will see your logic. They will see that you have done all you can to sell the house at the asking price, and will make the smart move and lower the price!
Glen Hurley
Platinum Realty
Past President Santa Rosa Chapter of Realtors
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