Marketing

What’s up with those value ranges?

I received an e-mail from a reader yesterday in which I was once again asked to unlock the mysteries of Value Range Pricing. Seller will entertain offers between $535,000 and $595,000. Why would anyone ever offer anything more than the bottom of the range? It’s a good question, and today, people rarely do.

We have talked about value ranges in the past. (”Haven’t we talked about everything in the past?” she asks rhetorically.) And, while I have generally been known to trumpet the virtues of range pricing, changing market dynamics have caused us to reevaluate our position.

The best explanation of value range pricing I have ever seen is still this post written by Broker Bryant. Back in March of last year, I said:

There is not a single market value for any given home, but a range of value, as each would-be buyer is going to perceive value to a varying degree. One person may be willing to pay a premium for your Koi pond or proximity to the neighborhood park while another may consider little personal value in these things. Our responsibility as agents is to find the guy who actually covets most those features which your home has to offer.

This range of value concept is why Value Range (VR) pricing can be such a powerful tool for maximizing a seller’s chance of success…

• VR pricing establishes a range within the seller is willing to negotiate.
• A proper range will include a low number lower than the market’s perception of value and a high number higher, thus giving both parties an opportunity to negotiate their way to a palatable price.
• VR pricing benefits the seller by providing a wide berth within which to maneuver. The home will be exposed to a larger potential buyer pool, and the likelihood of finding the one buyer who values the home most is increased.
• VR pricing benefits the buyer by exposing them to a property they might not have otherwise seen and by giving them the confidence to submit an offer anywhere within the range knowing that they won’t be thrown to the curb. This is because the seller is obligated to “respond” to any offer written in the range; that response can be an acceptance or a counter offer, but it can not be an outright rejection.

Fast forward to last August where I spoke of how I was rethinking my position in favor of value range pricing:

We used to say, where value range pricing is concerned, sellers see the top, buyers see the bottom and agents see the middle. What I was really interested in this morning was whether or not this tired mantra still holds true in a market of deal-seeking, emboldened, buyers, buyers who are all at once fearful of the market yet fearless when it comes to submitting an offer.

Of the 25 value range-priced sales in the past 30 days, just over 40% of these sold below the low end of the range. Three others sold at the bottom. As an agent who uses value range pricing more often than not, my only surprise was that sold-below-bottom cases were not greater in number, yet I think this is a trend that will continue until our market stabilizes… It seems that now, sellers see the middle, agents see the bottom, and buyers see the bottom as “full price”.

Today, I find that last entry somewhat prophetic. We still find ourselves in situations where value range pricing makes sense, but these situations are far fewer. Sometimes, a truly unique home will beg the use of a value range price. Maybe the home is in fact significantly superior to recently sold homes in the neighborhood. The higher end of the range may, in these cases, be closer to true market value, but you must first be able to get the buyer inside so that you can prove it. Thus, a lower number at the bottom. Now, we often find ourselves using range pricing as a way to settle a bet. If the seller’s perception of market value is dramatically different from our own, a value range helps everyone sleep nights, with the high end appeasing the seller and low end helping to ensure that the home is at least shown.

Ultimately, regardless of pricing structure, the buyers are the market, and they are going to determine value. The primary goal with any pricing structure is to get them in the door.

When it is time to list your home for sale, do you list with the agent who personally knows every expansion joint in your neighborhood sidewalks? They are the neighborhood expert, after all. Or, do you list with the agent you personally know, but one who needs a compass and a thirty-minute head start to find your home?

We have been on both sides of this decision lately, and I will tell you that the answer is unequivocally this: The best agent to list your home is the best agent.

The Out of Area Agent

Your first cousin’s friend from the office knows a guy in the church group. He comes highly recommended. Through either a sense of kinship or obligation, you give him the business. What’s the big deal? If he is the best agent in town, you have made the right decision. But, what if he isn’t the swiftest ship in the fleet?

Yesterday, an agent from our team was holding a home open for us in our neighborhood. During the traditional 4:00 sign removal ritual, he ran into an out of area “friend” who was holding her own open house one block away. “Do you know this neighborhood?” she asked? It seems that during the previous three hours, she had been bombarded with questions about mysterious listings on streets with mysterious names, with inquiries about schools she knew nothing about and local fees, a topic on which she was a little fuzzy. Meanwhile, a brochure box at yet another home was trumpeting the name of the subdivision, only it wasn’t quite the right name nor was it spelled properly.

In these cases, the sellers have made a sacrifice in the name of friendship. True, the buyers do not care if the listing agent flew in from Detroit this morning; they simply want information. But, if your agent is ill-prepared to discuss in depth and at length the topic du jour, your home, then your checkbook toting opportunity for a sale may be moving on.

The Neighborhood Specialist

Your personal trainer’s brother is licensed, and he even sold a home last year. He happens to live in the neighborhood, so you give him the business. Or maybe you hire that woman whose sign you have seen so many times. Each of these agents knows your community. Going with one of them is a no-brainer, no? Unless their level of care and expertise is superior, and unless their marketing plan and willingness to commit resources to your success are superior, then no.

Many, many elements are involved in selling a home, and the first of these involves exposing the home in the broadest and most compelling way to the potential buyer. Marketing is no longer local. It is global, and the fact that we share a trash day is not enough. Have you considered your agent’s marketing strategy, the quality of their ads, and the quality and extent of their web presence? Have you considered their knowledge of market trends and dynamics or their grasp of buyer attitudes and expectations? A good agent can become an expert on neighborhood sales and schools and fees and other particulars in one solid morning of diligent research. A great agent will have spent years developing skills and systems and marketing plans to help you succeed. These things are both essential and transferable.

So, which is it? Should you select the Neighborhood Specialist or the more familiar agent from across town? It’s simple, really. The best agent for the job is always the best agent.

You can see the ocean from Scripps Ranch. Well, sort of.

It has been an agonizingly long week trying to get photos taken for one of our new listings. The weather hasn’t been cooperating. The addresses on my latest onslaught of bills and Pottery Barn catalogues tell me I still live in San Diego, but the gray skies would suggest otherwise.

This new offering is a view home. As such, it becomes particularly important that the photos tell the story. You may call them clouds, but we call them a marine layer and, by any name, they wreak havoc on our otherwise good intentions. “It has an ocean view - I promise!” is not the compelling ad campaign we are after.

So, beating the rain (yes, rain!) by one day, we bit the bullet and went forward with the shoot. Had we done so midday, the exterior shots would have been disastrous. By twilight, however, we were able to capture at least some of the glory of a magnificent San Diego sunset. Clouds, in fact, make it better.

Cloudy days are also better for interior photography. Absent natural outdoor back lighting, the result is a two-for-one deal of sorts, with warm views of the inside set against of backdrop of glowing outside spaces.

Very pretty-ful! Now I’m ready for some sun.

Video. It’s a tough dragon to slay. My most recent attempts have done little more than wound the poor beast.

We know people like pictures, and we know that pictures sell homes. Over the years, our stills first morphed into the 360 degree fish-eye lens tour. Then, when it became clear that the consumer found these cumbersome, the photo slide show came along. Finally, the photo-rich visual tour of the pan and zoom variety set to music was born. It’s where we go from here that has me in a bit of a conundrum.

Our current visual tours are “sort of” video in the sense that there is movement and sound. It could be argued that this format gives a more complete picture of the home being showcased than could any traditional video footage complete with my chipper voice-over. So what’s missing? Entertainment value.

The perfect video home presentation, I believe, is going to include the following:

• First and foremost, it must give a complete picture. The buyer needs to feel as if they know the floor plan, the flow, and feel, not to mention the details, of the home once they have finished, that they have been virtually delivered to the space. Our current tours do well in this sense.
• There needs to be a hook. Online shoppers are speed browsers, their remote is their mouse, and you only have seconds to capture and hold their attention before they click through. We are currently missing the hook.
• Both the agent-as-host video and the voice over video counterpart need to provide something of value to the buyer which the traditional visual tour does not. This is a tougher one to get your arms around, particularly if you are dealing (as we most often are) with tract homes distinguishable only by their unique upgrades and appointments. Why do you think we are able to provide a link to Scripps Ranch floor plans on our website? Because housing in our community is fairly predictable. Look! They put the TV on the other wall!
• From the agent’s perspective, video is an opportunity to showcase the agent. While this may mean little to the seller of the home, the reality is that listing agents market themselves in large part through the homes they market. Unless you have the voice of James Earl Jones or the acting skills of Meryl Streep, true video can backfire. I fall more into the category of Alvin the Chipmunk and the Olsen twins.
• Practically speaking, unless your  agent lists one home a year on average, the video needs to be something producible on short notice and with minimal time investment. Given enough time, I am confident I could produce a compelling short that would send any serious buyer scurrying for his checkbook. The problem is what we call value-engineering. While I am out channeling Francis Ford Coppola, I’ve got six buyers, two property inspectors and one ticked-off termite guy camped out on the front lawns of various homes throughout San Diego County. Alternatively, someone needs to offer a cost effective service for not only producing the video but for ”designing” a unique and creative presentation for each home I need to feature. The trick here is keeping it fresh. As soon as a formula is developed, it is destined to be perceived as tired and canned. Click. 

Here is an example of a video which hit on three of the five cylinders beautifully. The problem I see is two-fold. It is so good, it is destined to be a one-hit wonder. (Admittedly, Mike produced this video as part of a contest.) Secondly, while it sells the agent beautifully, does it really get the seller one step closer to that Sold sign in the front yard?

Ultimately, our marketing decisions must consider cost, time, and return on investment, and it is forever a balancing act. If any of our five readers are trolling, I would love to hear both the consumer reaction and the agent solution. And, if you are a vendor who has a cost-effective way to tame this beast, do tell!

An article ran on Sunday in the San Diego Union Tribune which occupied nearly a quarter of one page. It was an apology of sorts, and it was the important kind of piece worthy of a four-column span.

It seems that in the Easter Sunday edition, some 8,000 estimated subscribers received a paper with (get this) the previous week’s comics section! As you might imagine, this didn’t go unnoticed. Angry calls poured in. “Garfield already said that!” Sure, the other “filler” stuff that we have come to enjoy in our daily rag was somewhat contemporary, stuff about some war and a bunch of guys running for president of some country and something about a housing market crisis. I wonder what Garfield thinks about all of that? Sorry, you will have to wait until next week to find out.

Funnies are only funny, I suppose, when they are new and fresh, which brings us to the Big Announcement. It is with a heavy heart that I announce this morning the end of the San Diego Home Blog. It’s time for a change. We are approaching three years here, during which time we managed a to eke out over 660 posts, but we are tired. If we keep going at this rate, if we refuse to evolve and embrace change, we will be no better than the folks who stole Easter. I don’t want to be the one who drives the nice man in Clairemont to the therapist’s couch because he was given the same stats two weeks in a row. One more article on Zillow, and I risk throwing our readers (all six of them) into a state of despair reminiscent of the time they learned The Archies weren’t real people singing in a real band. Or the time Odie ate the cat’s lasagna - same lasgna belonging to the same cat for two consecutive weeks.

I am joining Redfin.

This makes sense because:

• I am breathing.
• I have a real estate license.
• I know how to fill out online forms.
• I am breathing.

And I am kidding, of course, being that it is April Fools Day and all. But the whole FunnyGate incident left me thinking about the idea of change. In a time when I can more than satisfy my Dilbert needs for the next geologic cycle with a simple, two-second online search, there is by all appearances a rowdy throng of agitated newspaper subscribers wanting, dare I say needing, their Sunday morning dose of cartoon hilarity. These people are fewer in number than those like myself who wouldn’t have noticed if the entire Currents Section was suddenly being written in Sanskrit, but they still exist. And these are the people that our current real estate industry still tends to model their business and their efforts around.

This is the one thing that Redfin got right.

It is also the very thing they got wrong. Niche marketing is great, and building an entire business around a single niche, assuming it is large enough to feed the corporate kitty, is also dandy. But, when we start identifying those niches with our stereotypical goggles on, we may find ourselves limiting our actual client base and alienating a larger number of potential customers.

Although I find the Sunday comics an antiquated and flawed humor delivery system, you will notice that I admitted to having read the article about the boo-boo. Call me crazy, but I still read the paper. I have a blog, I know a little html, and I am turning more geek every day, but I still bypass msn.com in favor of the local paper front page for my headlines. I am a hybrid.

If you are a real estate agent over the age of 30 and under the age of retirement, you are an agent in transition, and it is the hybrid that is going to be the cornerstone of your business for the duration. Redfin’s web site, and many others like it, provide an awesome search experience. The Sunday classifieds are going to continue to appeal to a few, but the vast majority of real estate consumers will be getting their news online. How they search and where they search, however, has very little to do with how they buy and sell and with whom. Hybrids.

I encountered two classic examples of this during the past week. The first was a couple who invited us into their home to discuss market conditions and the timing for listing their home. Both were highly educated, both had done more research on real estate current events and economic indicators in the past month than ninety-nine percent of the working agents I know have done in their lifetimes. They had a pile of spreadsheets more impressive than Mel Gibson’s rap sheet. But, now it was time to bring it home. They are hiring an agent. We were referred, and not by Google, but by a real person living in our community.

My second recent hybrid encounter was a buyer. She is a Ph.D who just relocated to San Diego. We have been out looking at homes before. She brought to this meeting a steaming mound of computer printouts with school boundaries and test scores and listings. And she called the meeting as a courtesy. Given the market and her timing flexibility, she is planning on waiting until the end of the year to buy. In the meantime, however, she wants to continue looking at homes every couple of weekends to keep current on the market and the products and the prices. “Are you okay with that?” she wanted to know, saying that she didn’t want to misrepresent or waste my time. Yes, I am always “okay with that,” because that is what we do. We help people buy and sell homes within their timeframes and on their terms. The whole “buying a home thing” is a pretty big deal, after all.

There may come a day when you can entirely automate and depersonalize this business of ours. There may come a day when the vast majority of real estate consumers will be prepared to kick the agent as we know him to the curb. Yet while we are an industry and even a society in transition, I don’t expect to see this day during my career. Our clients for the foreseeable future will be hybrids; they want their Facebooks online and their Doonesbury in print. They want their real estate information on the Internet but they want their closing at the kitchen table.

When you think about it, that’s pretty funny.

This is unfortunately just a new twist on an old theme.

My word processing software comes with a spell-checker. I will go out on a limb and say that most word processing programs include this feature. I also believe that dictionaries are still in print.

EXCELLANT BANK OWNED OPPORTUNITY!! lOOK NO FURTHER THIS SPACIOUS 4 BEDROOM 2.5 BATH IN SCRIPPS RRANCH IS A FAMILY PLEASER… KITCHEN AND DINNING HAVE RECESSED LIGHTING…

I know, I know. I am fighting a battle I will never win. Why is it that agents find writing 200 characters of text to be so challenging? More importantly, why is it that their clients are okay with the results? Sure, this is an MLS excerpt for a bank-owned listing, but the bank is still a client. Okay, fine. The bank is a busy-busy, frowny faced entity right now. They are trying to move their very large inventory, and it is not practical to suggest that they are in a position to monitor the comings and goings of the agents who they have hired to represent them.

I can’t resist a footnote. This same listing shows “N/A” for almost every input field including “pool” and “spa,” even though the description tells us there is a pool and spa. And thank goodness they are “in the back.” I just hate it when my neighbors build pools in their front yards, but that is beside the point. Remember, a lot of people search by these fields, so when you say there is no laundry room yet there is, you may have just lost a buyer.

My photo editing software is not fancy. I didn’t pop for the expensive version. But it does include an intuitive little rotate icon, one which allows me to… rotate stuff.

I know, I know. We see this kind of stuff all of the time. Athol Kay in Connecticut has built an entire cottage industry around exposing laughably bad MLS photos. Why is it that any agent would think this is passable? More importantly, why would their clients accept this as a reasonable marketing effort on their behalf? Sure, this is a short-sale, but the seller is still a client. Okay, fine. They are disinvested in the process at this point. The bank is going to ultimately accept whatever they accept and forgive the balance of the debt, and the seller is not going to see a proceeds check. So, who cares?

I care. I have spoken in the past about the class system that seems to exist in marketing homes for sale. I see too many agents treat a lower priced home differently than a million dollar baby. One gets a single-page, third-generation photocopy of the MLS printout and the other a four-page glossy brochure. One gets a sign slapped in the front yard and the other gets forty professional photos and staging worthy of the Lincoln Bedroom. This is a practice Steve and I shun, of course. Just because I may make less on a lower priced home does not mean that the sale is any less important to the seller than is the sale of the higher priced home to that client. And, if our marketing plan is indeed thoughtfully designed to provide the best and broadest exposure and appeal, what is good for the one is good for the other. To suggest anything else is illogical (and quite possibly cheap and lazy).

Now I am seeing a different king of class system evolving: Traditional versus distress sales. Maybe the theory is that the bank won’t notice, that the short-selling owner won’t care, or (sadly) that in light of the lower commission an agent might be realizing on this particular sale, they just “can’t afford” to provide the same level of service. That’s just crap.

We are closing escrow today on a short-sale. The lender (in this case “lenders”) approving the sale will invariably ask the agents to take a “short” position as well, on commissions, and this was no exception. Regardless, our marketing effort and expense for this home was no less than for any other home we have represented, and our reasoning is this - The sale price still matters. It matters to the lenders, it matters to the surrounding neighborhood which will now have this new “comp” with which to contend, and it matters to us. Not only is my credibility as an agent at stake, as every ad I print or place is a reflection of our standards and our service, but I like to sleep nights knowing that I did the best I could do for every client. This even includes the clients who may be paying a little less attention or caring a little less about the outcome.

I guess that’s just me.