Chapter 3 – Top Tips for Maui Sellers
Make Buyers Fall in Love with Your Home
Buyers keep looking until they fall in love. They are not looking for “a” home; they are looking for “the” home, their “dream” home. They are tired of seeing homes (9 out of 10) that are not ready for sale. They want a clean, fresh, move-in-ready home. Most do not want to do even minor projects.
As a seller, you must understand the mind of the buyer. Buyers do not buy homes; they buy the feeling they get when they are looking at a home. They are not using their brains to decide, they are using their hearts. And in good markets or tough markets, when a buyer finds the right home, they will fall in love, and that home will sell for the highest possible price.
We have witnessed a buyer considering two identical homes on the same street, in the same neighborhood, with identical lots, and pay $15,000 more for the one that spent $750 preparing the home for sale. WE have seen homes sit on the market for a year, then sell in 30 days (at a higher list price) after a few small adjustments to improve the buyer perception of the home.
If you want to sell your home for the highest price in the shortest amount of time, emphasize or add elements with which buyers will fall in love, and fix or remove issues that will cause them to hesitate.
There are a few investor types out there who truly decide with their brain, and whose first priority is a good deal. But we do not want anyone getting a good deal on your home, right? So we can ignore them. What we want is a buyer to come to your home, fall in love, and impulsively write an offer at (or near) your asking price. So we will concentrate on those buyers instead.
Make a Profit When You Sell with Smart Investments
By making the right investments in your home, you will not only cause buyers to fall in love, but you will also make a profit. Depending on your neighborhood, your price point, and the size of your home, the following improvements will generally produce at least $2 or more in increased sales price for every $1 you invest. And anything that increases your price will also reduce your “days-on-market.”
- Granite countertops in the kitchen. They are almost a necessity in Maui if you expect your home to sell for top dollar. You should be able to get them for $45 per square foot, installed. Go with a standard, lower-priced choice. For higher-end homes, consider granite in the master bath as well.
- Stainless steel appliances. You should be able to get a refrigerator, oven, microwave, and dishwasher for under $2500. If your current appliances are white or cream color, this is especially important. Black appliances may be okay if they are fairly new.
- Replace old carpets. If they are over five years old, they will not look new when cleaned, unless they are very good quality. New carpet also helps a home smell new.
- Remove wallpaper. Buyers today strongly dislike wallpaper, except for a very subtle pattern in the powder room.
- Refinish dull and scratched hardwood floors. Shining floors make a stunning impact on buyers.
- Paint. Go with a medium beige in the inside, darker than what was, in the past, considered “builder beige”. It makes the home look more expensive and makes white trim “pop”. Paint your front door and shutters black.
This advice is subject to modification based on the specifics of your home, and over time as buyer tastes evolve. In a few years buyers will probably love wallpaper again. We recommend getting the advice of a staging consultant who works with realtors. Most interior decorators do not specialize in preparing homes for buyers.
Fixing problems is always better than offering an allowance, because to make up for the problem you will have to reduce your price more than it would have cost you to fix it.
Do These Easy Things
Here is a list of low-cost, easy improvements which will pay for themselves many times over:
- Clean every inch of your home. Get help if you need it.
- Spread new mulch. Use dark brown “triple-shredded stained bark.” The stain keeps it looking better much longer. Pine straw is cheaper but it also looks cheaper.
- Plant many, many flowers. More than you think you need. Flowers may be the single best investment you can make to sell your home.
- Remove clutter. Remove personal pictures. Remove everything from horizontal surfaces except a few decorations.
- Remove window treatments. Leave blinds.
- Remove basketball goals, play sets, and tree houses. These will turn some people off, and no one will ever say “I would have bought that home if only it had a basketball goal.” If you have a flat driveway they can install one after the sale. Especially remove trampolines. They make many mothers nervous.
Use Temporary Storage Containers
Our sellers have had very good experiences using temporary storage containers (such as PODS ) to store clutter while preparing their home for sale. Some sellers end up using them for the entire move, often in combination with hired labor. The other alternative is hauling material to and from a storage location, which is less expensive, but more work for you.
Get Your Improvements Permitted and Inspected
If you have made any structural changes to your property that were not permitted and inspected, you will have to tell the buyer on the required Residential Property Disclosure Statement. That will make most buyers nervous, and even if they are not concerned, they will use it as a negotiating lever. As a result, it is almost always better to get the space inspected and make any necessary repairs. If you did it right in the first place, it is usually not a big deal. The inspections are inexpensive and fairly quick. If you have questions, call the city or town (or the county if you are not in an incorporated area) and ask them anonymously.
Price Your Home Realistically
The price you want, or need, to get for your home does not matter to buyers. Yes, making smart investments and otherwise preparing your home for sale will definitely increase the value, but if your asking price is too much above that value, it will not sell. In fact, because the market is much more price-sensitive than most sellers realize, you may not even get any showings.
Do not make the mistake of thinking, “I’ll price it high, because the buyer will make a low offer, and We’ll meet in the middle.” That is not how it works. Buyers very rarely make low offers, at least in the first 30 to60 days a home is on the market. Buyers do not like conflict, they do not want to make sellers upset. Neither do their realtors, because they hope to work with the listing agent many times again in the future. The buyers have the data, they know what the comparable properties sold for, and if your home is overpriced they assume you will only accept offers close to your list price. Rather than argue about it, they will just ignore your home.
I am not suggesting that you underprice your home to motivate buyers to come see it. Your well-prepared home is motivation enough, and you deserve every penny you can get from the sale, right? An accurately-priced home will sell just as quickly as an underpriced home (in fact, underpriced homes look suspicious to buyers). But price cannot be an obstacle either. If your home is prepared correctly, the fair-market value for your property will be near the top of the range of the comparable homes that have sold recently. List your home at about two percent above fair-market value, and that is enough “negotiating room” for most buyers to feel like they “won.”
Understand How Buyers Find the Home They Purchase
You have prepared your home for the market and priced it realistically. Now you need to market it effectively. In order to do that, you need to know how buyers in Maui find the home they purchase. Almost every buyer searches for homes on the internet, but except for a small percentage, that is not how they find the home they actually purchase.
- The vast majority of Maui buyers become aware of the home they actually purchase through a real estate agent. That is because most buyers purchase a home different from the criteria they originally defined, and good realtors find homes buyers miss when searching on their own. So as a seller you should be marketing more to realtors than to buyers. Easier said than done, because realtors get so bombarded with emails and flyers that they just end up deleting or throwing them away. The key here is to realize that 10 percent of the realtors sell 80 percent of the property. You need to find out who these realtors are and somehow get them to pay attention to your home. The only way We know to do that is to have your realtor bring buyers to see their listings, and ask the other realtor to return the favor.
- A much smaller, but significant, number of Maui buyers become aware of the home they purchase through a friend who lives in the same neighborhood as the home being sold. The best way to make this fact work for you is to call your neighbors and invite them to come to see your home, then ask them if they know any friends or relatives that might want to live in the neighborhood. They will be especially curious to see your home if you have made significant improvements to prepare it for sale.
- Other Maui buyers find the home they buy because they saw the “for sale” sign while they were exploring the neighborhood. To maximize this traffic, have a high-quality sign, preferably one hanging from a post. A better sign is more noticeable, and it adds to the perception of quality of your home. Also, skip the brochures in front of your home. Most of them get picked by neighbors anyway, and real buyers use them more to eliminate your home than to schedule a showing. Most buyers will call the number on the sign if they are interested, and you or your realtor can sell your home more effectively than a brochure.
- Another significant segment of buyers do actually find the home they purchase through the Internet. There may not be a lot of people who find their homes this way, but do not ignore it. Ask your realtor to list it on Realtor.com and Remax.com, and see if he can arrange to get it listed on the websites of the other real estate firms in town. Re-list your home on Craigslist every three days so it does not get too far down on the page. Definitely list it on Zillow.com and Trulia.com (two of the most popular real estate Web sites), and if you search you will find at least 30 other real-estate related sites on which to place it.
These suggestions come from our experience with hundreds of buyers and sellers in Maui. You might find different statistics on home sales available from the National Association of Realtors are different, but they are national statistics. Every local market is different, and you have to market to the buyers in your market, not a market in a different part of the country.
Sell Your Home Quickly
Realtors set up searches in the Multiple Listing Service for their clients, so that when a home comes on the market that meets their buyer’s criteria, it gets sent to the buyer automatically. So when your home is activated in the MLS, it will be emailed to hundreds of potential buyers all at the same time. Some of these buyers just started looking, so even if they see and love your home, they are not ready to make a decision. They need to see more homes first, and might not have their financing figured out. Most buyers, though, have been looking for a while and are ready to buy immediately, when they find the right home. These buyers are the key to success, and you have one chance at them. They will see the listing and look at the pictures and the price, and decide whether or not to schedule a showing to see your home. If they decide “no,” they will never see your home again. If they decide to come see your home, they will decide to either buy it, or not. If they decide “no,” they will never see your home again. If you do not sell your home to one of these ready-to-buy buyers, you may be in for a long wait, because every buyer who sees your home from then on will be a “new buyer” who is not ready to buy yet.
If your home is prepared right, priced right, and marketed right, you should be able to sell it quickly, in any market, to one of these “ready-to-buy” buyers. In less than 30 days. And the faster you sell your home the better price you will get. Here is why: if a buyer walks into your home and falls in love, and the home has been on the market only a few days, they will think, “If we love it, someone else will love it too. We can’t let someone else get it first. So let’s make an offer today, and let’s make it close to asking price. We are not going to let a few thousand dollars get between us and our new home.”
After your home has been on the market 30 days, this sense of urgency among buyers is gone. Buyers start saying “Hmm, if this home is so great, why hasn’t anyone else bought it yet? We wonder what’s wrong with it.” Or, “WE like it, but it’s been here this long already. It’ll be here for a while longer. Let’s keep looking in case We find something better.” Not good for you.
If you over-price your home you will get less in the end, because buyers will ignore it until you fix the price, and by then you will have missed all the “ready-to-buy” buyers. Do not have the attitude of “I’ll wait for my price”. The longer your home sits, the lower it will go. After 90 days buyers will think you are desperate, and they will start to “low-ball” you.
Selling a home is a pain. But, you have the choice of: (1) experiencing that pain, at the beginning, for the short amount of time required to get your home ready the right way, or (2) trying to avoid pain at the beginning, and experiencing pain for six months (or more) of price reductions and showings. Constantly having your home ready for showings is stressful. Especially if you have kids or pets.
You have one chance to get the best price in the shortest amount of time. Do the work, be realistic, and get it over with.
Hide the Pets
I know you love your pets. I love mine too. But buyers do not like pets. In our experience, 70 percent of buyers will not consider buying your home if they see you have a cat. Too many people are allergic, or have friends or relatives who are. Thirty percent of buyers will not consider your home if they see you have a dog. To a lesser extent, it is the same for hamsters, ferrets, rabbits, turtles, and so on. So, as much as possible, take the pets out of the home during showings, and hide the evidence left behind (pet food, bowls, litter boxes, and beds). For the average home, this effort will increase your sales price by over $5,000, and reduce the days-on-market by 50 percent. It’s worth the trouble.
Make Price Adjustments Quickly
Based on Showing Traffic
An insufficient number of showings means your home is overpriced. In our market, if you get three or fewer showings in the first two weeks, the market is telling you your home is overpriced by at least 5 percent. If you get between 4 and 12 showings, you home is 4 percent overpriced. If you get 12 or more showings in the first 30 days, but no offer, your home is about 3 percent overpriced. For higher-priced or very unique properties, you should expect slightly fewer showings, but the conclusions remain the same. Adjust your price immediately. The longer your home is on the market, the lower the eventual price will be.
Be Smart About What Offer You Accept
It is very difficult for a seller to back out of a Hawaii real estate contract, so think carefully before signing on the dotted line.
We advise not considering a contract that is contingent upon the sale of a home that does not already have a contract on it. Your buyer may not have properly prepared their home for sale, and/or may be unrealistic about asking price. Sometimes a seller will accept such an offer, while retaining the right to continue marketing their property, while giving the buyer a 48-hour notice when another offer is received to either terminate their offer or drop the contingency. In the case where the buyer’s home is already under contract, it depends upon how good the contract is. Have your realtor contact the listing agent for the buyer’s home. If everything looks solid, you should feel good about moving forward.
Make sure the buyer’s financing is in good shape. Certainly ask for a pre-approval letter, but we also recommend having your realtor ask permission to contact the buyer’s lender to see how much research the lender has really done.
For homes below $450,000 it is very common for buyers to ask for “seller paid closing costs.” Think of these as “buyer-financed closing costs,” and when considering an offer, mentally subtract this amount (found in page 12, in the Q Section of the Hawaii Offer to Purchase Real Estate) from purchase price on the first page of the offer, because that is the price the buyer is really offering you, and negotiate accordingly. The buyer often needs this money to purchase your home because they do not have enough cash to cover both the down payment and closing costs such as inspection, appraisal, loan origination, etc. The risk to the seller is that the home must appraise for the total amount, including the closing costs. If it does not, the buyer will ask you to reduce your price to the appraised value (still including closing costs), and if you refuse they might be unable to close.
If Buying Also, Go For a Simultaneous Close
If you are both selling and buying a home, the timing is important. If you sell your home before you find the next one, you will end up moving twice, once into a temporary location, then later into your new home. If you buy your new home before you sell your current home, you will end up paying two mortgages for a while (which also requires the approval of your lender). However, with a smart strategy, you might be able to sell and buy on the same day.
The key is to work on finding your next home while preparing your current home for sale. With the right advice from a good real estate agent, and a realistic price, you should be able to get a contract on your home within 30 days. If you have done your homework on the buying side, you will already have a few top choices for your next home. If so, go ahead and get your top choice under contract, contingent on the closing of the existing contract on your home. If not, negotiate a longer closing date on your current home to give you more time, and get to work finding the right home. In either case, you should be able to arrange the same closing date for both homes.
In Hawaii, escrow companies do most of the work involved in real estate closings. These companies will hire attorneys to complete some of the paperwork, but on closing day, you will sit down with an agent from an escrow company, not an attorney, as is the case in most states. Hawaii also requires that you have all of the funds necessary for buying your home available two days before you close.
If you do not need the cash from your current home in order to purchase the next home, and your lender approves you for a loan on your next home while you still own your first home, it can be very convenient to close on your new home a week or so early to make the move easy.
If you do not have enough money to close on your new home until you sell your old one, you should arrange to use the same escrow company for both transactions so that you can close on the same day. When both transactions are handled by the same escrow company, that company is holding the funds you’ll need to buy before your home is actually sold. Because Hawaii requires adequate funds in escrow before closing, you would need to have adequate funds independent of the home you are selling if you want to complete both transactions at once using two different escrow companies.
No matter how much you prepare, keep this important fact in mind: although 95 percent of real estate closings happen on time, they can be delayed for a dozen different reasons, many of which (such as the buyer’s lender) are out of your control. The standard contract allows a buyer ten days delay without penalty, but in most cases delayed closings will take place by the end of the next business day. Try to stay calm, and prepare in advance. When choosing a moving company ask them how much it will cost you if they have to hold onto your belonging for an extra day or more (see the “Storage Container” section above for a different strategy).
Get an Experienced,
Full-Service Realtor and Listen to their advice
Not all realtors perform equally. In Maui the top 50 agents do 90% of the business. Ten percent of realtors are responsible for over 80 percent of all sales in any given market. A tough real estate market is a “professional’s market.” You need a full-service realtor to help you do everything right so your home will be the one buyers choose. “Limited service” realtors do not have time to help you get everything right, and trying to sell your home by yourself will leave you helpless. In Maui, 80 percent of buyers find their home through a realtor, and realtors do not like “For Sale by Owner” properties because they are difficult to deal with.
A busy, experienced realtor is by far the best qualified person to calculate an accurate fair-market-value for your home. He works with buyers and sellers all the time, and has his finger on the pulse of the market. Good realtors have ongoing, productive relationships with other good realtors, and can get them to bring buyers to your home.
Find a good realtor and listen to him. He might upset you in the beginning when he tells you the truth about your home and the market, but he knows that is better than upsetting you every day for six months while your home sits unsold.
A good realtor knows how to negotiate the best price for you. He will prove it to you by sticking to his commission rate when you meet him. If he does not believe in himself enough to charge his full commission, then you should not believe in him either. Just tell him to get to work and earn it. Real estate is like any other business. You get what you pay for, and paying less will cost you more in the end.
Seek an Expert if You Are Facing Foreclosure
The recent economic downturn had a negative impact on property values for many homeowners, leading some people to foreclosure, or at least to the brink of foreclosure.
Others have even abandoned homes whose values had dropped precipitously at the same time their monthly payments were increasing.
If you owe more on your home than it is currently worth, commonly known as “upside down” on your mortgage, seek out a realtor who is experienced in short sales. Two designations to look for are realtors who are Certified Distressed Property Experts (CDPE) and have earned Short Sales and Foreclosure Resource Certification (SFR). Realtors with training and experience in these areas may well be able to save your home from foreclosure.
Make sure to ask your agent how many short sales they have successfully completed. Anybody can get a designation, but you need an agent with a proven track record. You don’t want someone practicing their short sale skills on you.
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