San Diego Real Estate Blog

How Our Industry Operates: Why do agents take on overpriced listings?

Why is it that real estate agents will list your home, even when they know it's overpriced and will not sell? Here's the truth about how our industry operates. We are taught to take the listing no matter what, even if the agent believes that it is overpriced and will not sell, because we're told to do two things. One, is to build a relationship with you over time and slowly get that price down until it finally sells. Two, is we're taught that we can use your property as a place to play so we can put that billboard in your yard, the for sale sign to generate leads from other buyers, the open houses, so that all the people that end up coming to your property will see it. Even if they don't buy your home, we can still use it to find leads that will buy other properties. We literally are told you could do two or three sales just from having a listing.

If you're ever wondering why would a business person take a listing? And if they don't believe in the price, why will they still accept it? And why do agents do this? That's why. I'm sharing this with you because not everybody operates that way, but you do have to understand who you're doing business with. You have to ask the right questions and we have to take a look at the data. If there's absolutely no support for what's being proposed to be done, then at least raise an eyebrow and make sure that person has the track record. I want a more transparent industry. I want to expose the truth.

Letting the public know what's really going on and how real estate operates and what agents are taught is a really good way for you as a seller and consumer to make decisions around how you're going to do business and who you're going to do it with. 

 

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The Only 3 Things That Really Impact Your Home Value

There are a lot of factors in what determines your home value, but there are only three things that really make the most impact on the value of your home and how much equity you're going to be taking out of it.

#1: Competition

There's always competition for property, but typically the competition is between buyer and seller; the two of them fighting it out amongst each other. The buyer is focused on what the seller wants, what's the best price I could get, what offers should I make to get the best value?

Well, the number one factor here is you have to take the attention of the buyer, away from you as a seller, and instead pin buyer versus buyer. Creating a buyer versus buyer environment where you take control of the sale and have them fight it out amongst each other is the number one thing.

#2: Eliminate Deferred Maintenance 

These are things that are broken, torn, and obvious. Don't think about things like the oven, for example. The oven may not function, but you don't have to place that much focus or attention on it in terms of preparing for the sale because nobody's coming to your house and baking cookies during the showings. Of course, you'll want to disclose this and it will have to get addressed, but it's not going to impact what buyers will offer. However, when there's something that's just clearly out of place and distracting people's visual experience, it gets them into a place where they're thinking to themselves, “how much will it cost to fix this?” Plus, it starts to get worse from there because of course, they start to wonder what else in the house doesn't work. What else hasn't been taken care of. Ultimately ends up costing you a lot more,...

Should you turn your current property into an investment while buying your next home?

A lot of homeowners are facing that decision, "Do I hang onto my current property, and turn it into an investment while buying my next home?"

Here's what you need to think about when you're making that decision. You have a home that has appreciated and you are purchasing a new home. You might be in a position where you can purchase without having to sell. That’s an awesome spot to be in, but is it the right thing? A lot of people will tend to want to do that because if they do that, they feel like, "Hey, I'm building a real estate portfolio."

The thing is, you also have to think about how long you're going to be committed to that home that you're holding onto, because you currently have a tax-free gain (or at least the first $500,000 if you're married, $250,000 if you're single) of appreciated value that is tax-free. If you were to move it from your current property that you've lived in for at least two out of the last five years to the new home that you're now purchasing, you now have this tax-free gain you can move over.

That down payment that has already been taxed, that you would have been purchasing the new home with had you held onto this one, well, those are dollars that have already been taxed. You can go ahead and purchase an investment property with those dollars instead. Again, think about if you're going to purchase a home and you own a home now, that's your primary residence, you're moving up to a different property and are you going to hold onto your current property as an investment?

What you're doing is effectively turning this tax-free gain into a taxable event in the future versus moving that tax-free...

Inventory is low... but nobody is talking about why?

Everybody knows that inventory right now is extremely low, but nobody is answering the question “why?” 

I think it's extremely important that we take the time to answer why inventory is low, not just tell people that it is. The reason for that is that by understanding the workings behind it and what's driving it also helps us understand when things might change and what might be coming down the road so that we can look for those changes. First of all, there are thousands of homeowners that are really unmotivated to sell their property because they don't have to pay their mortgage. Remember that the forbearance programs are still in place. 

Also, it looks like more stimulus is actually coming down the pike here so it's hard to say exactly when that's going to change, but make no mistake about it… when we finally see those mortgages come due and people have to step up and pay, motivation will naturally change. Until then we could expect to see suppressed inventory. Secondly, the home is now so much more than a home. We are all experiencing this, whether the home is now also the office or whether it's also now a school or it's entertainment, the home is doing so much more for us. Because of that, two things happen. One, is demand is driven way up so everything that does come to market tends to get absorbed. This also makes it harder to show your property.

There's people that don't want to necessarily get their home on the market, except for, it's hard to do. So if it's also literally where your children are studying and you know, doing their schoolwork and if it's also your gym and if it's also your, your only refuge then it makes it hard to have the public come in and take a look at your property. Now, of course,...