With Terry Story, a 31-year veteran with Keller Williams, located in Boca Raton, FL
During this week’s Real Estate Roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about why it’s so important for real estate agents to look at the big picture to understand how the market is moving. They discussed how each realtor needs to examine their own inventory and how it’s selling in order to get a better understanding of the current state of the housing market. Doing this also helps real estate agents teach sellers how to price their homes.
Pricing Your Home To Sell Is Counterintuitive
To understand how to price a home, you really have to know what the market is doing. Agents have to look at what’s happening with their own home inventories. Are homes selling? How long are they staying on the market? If a home is sitting on the market, not selling, then you have to figure out what it will take to move it.
The economy as a whole has to be considered, of course. But, this is an important point for home sellers to keep in mind, in both good and bad markets, there is always a buyer. The thing that really makes the difference, that decides whether your home sells, is the price.
Terry talked about meeting with sellers when they want to know what price tag to put on their home. She paints them a picture. Imagine there’s a boat and three men are fishing. The first man’s line is just below the surface of the water; the second man’s line is halfway between the surface and the ocean floor; the third man’s line is near the reef at the bottom of the ocean, where the majority of the fish are. The moral of this story is that the lower line (the lower price) is going to have a better chance to catch a fish (buyer). The less a seller asks for, the more they’ll end up getting. Home pricing is counterintuitive in this way.
People who price their homes in the upper and middle tiers aren’t going to attract as many buyers because the price is just too high. The National Association of Realtors says that if your home hasn’t been shown in the past two weeks, you’ve been knocked out of the market. The only real way to combat this is to lower the price. A lower price will attract more buyers, period. And more buyers equal more competition, more bidders, and, thus, realizing a higher sale price for your home. Counterintuitive pricing!
You Have To Go Where The Buyers Are
In order to sell your home, you have to meet buyers where they are. And most of them are in the low-to-mid-range when it comes to prices. The mid-range homes are tricky. Homes priced at the lower end of that might have quite a few showings, maybe eight or ten in a week. But, going back to the fish analogy for a minute, the fishing line halfway between the top and the bottom is kind of housing market purgatory.
In fact, homes priced in the middle range sometimes help sellers in the lower range sell their homes faster and more easily. People may look at homes in the middle-price bracket, but if they can find something similar in a lower-price range, that’s what they’re going to snap up.
You can also think about it in the sense of animals in the desert. If a predator wants to get a good meal, it has to go where the water is. This is where more animals are going to gather, which offers the predator its best chance of getting a meal.
You have to price your home in a way that gives you the greatest access to the biggest pool of buyers.
Factors Real Estate Agents Should Be Looking At
There are really three prongs to pricing that real estate agents should be looking at: current market prices, the price of homes sold in the past, and the trends that are happening that predict future prices. In order to spot future trends, you have to look at “days on the market.” This is the average amount of time a house spends on the market, from the day it goes up for sale to the day that it closes. Right now, in Boca Raton, we’re seeing about 97 days on the market.
Knowing how long homes are on the market, how quickly they’re selling, helps you predict future trends. Of course, we’re talking about looking at days on the market for hundreds of thousands of homes. Then you have to break it down a little further, into price points. The lower the price of a home, the more activity there’s going to be. As the price point goes up, activity slows.
The big stressor for most sellers—and the agents they work with—is that, naturally, they want to get the most money they can for their property. It’s important to be at the market, not over and not under, unless it’s critical to get the property sold in a very short period of time.
Agents need to help sellers price their home in the sweet spot. This attracts the most buyers and, in the end, helps sellers get the most money for their home. How do you know if you’re in the sweet spot? If you’re getting eight to ten showings a week, then you’re there. If your house hasn’t been shown at all for two weeks, you’re not and you need to adjust the price.
If you’d like to learn more about buying or selling a home or to learn more about Terry, check out Keller Williams.
Disclosure: The opinions expressed are those of the interviewee and not necessarily of the radio show. Interviewee is not a representative of the radio show. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by the radio show.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time, every single week, we get together with noted real estate agent Terry Story. Terry is a 31-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: So, Terry, I understand you’ve been giving a talk to your associates at Keller Williams.
Terry Story: Yes, yes.
Steve Pomeranz: And we were talking about this off-air, and what you’re talking about is some pretty interesting stuff. So, take us through it.
Terry Story: So, what we discussed today is pricing and really, more importantly, what’s going on in the economy, what’s happening to home prices. And what we’re seeing, Steve… As agents, we just look at our own inventory. Is it selling, or isn’t it?
Steve Pomeranz: Yeah, yeah.
Terry Story: Is it staying on the market longer than it should be?
Steve Pomeranz: So, you have a very narrow view.
Terry Story: Right, a very narrow view. And when a home is sitting on the market and it’s not selling, well, you have to say, okay, so what’s wrong with it? What do we need to do to get the home to sell? Because know that, regardless of the market, there’s always a buyer. So, when the market was down, back in 2005, six, seven, eight, nine, there’s always buyers there. You know what the difference is between a good market and a bad market?
Steve Pomeranz: What?
Terry Story: It’s just the price.
Steve Pomeranz: Okay. Yeah. Sure. Same thing in the stock market. You could have a great company and market sales, often it’s at a low price, and people now think it’s a bad company, but it’s still a great company, but it’s at a great price.
Terry Story: Exactly. So, it’s kind of the same scenario or situation.
Steve Pomeranz: Okay, but you were looking at… You were putting on a different hat than I’ve ever seen you put on.
Terry Story: My teacher hat.
Steve Pomeranz: Your teacher, your macro hat, your 30,000 foot-
Terry Story: Okay. So, I’m going to paint a picture. I’m going to give you an illustration as to when I meet with the seller, and they say, “Where should we be? Where should we be in pricing?”
So, envision a boat, a fishing boat? Okay? And there’s three guys fishing. You have three fishing lines, right, that are in the water. The first line is just a little bit below the waterline. Line number two is halfway from the surface and the ground. And then the third line is down at the reef, where the fish is, at the bottom of the ocean.
Steve Pomeranz: So, the fish are at the bottom.
Terry Story: So, where are the fish?
Steve Pomeranz: But they’re where the food is, which is-
Terry Story: Well, it depends on what kind of fish we’re talking, and I’m married to a fisherman. We’ll now go down another rabbit hole. But let’s just assume we’re bottom-fishing. We’re looking for snapper, grouper. They’re down at the reefs. That’s where the fish are at.
Steve Pomeranz: But I also think at the reef is where the food is, so that’s where the fish is.
Terry Story: That’s right.
Steve Pomeranz: Okay. Got it.
Terry Story: Okay, so you got the picture. So, pricing’s counterintuitive. And what I mean by that, Steve, is sellers like to think, well, the more we ask, the more we get, when, in reality, it’s kind of like fishing. The less you ask, the more you get.
Steve Pomeranz: Well, there’s-
Terry Story: You need to have your fishing line to where the fish are. Now, in line number one, that’s just below the surface. Let me put this into pricing understanding. According to the National Association, if you’re new on the market, and you’ve gone 14 days, no showings, that means you’re out of the market. The fish aren’t going all the way up there. They have to pass two other fishing lines to get to that one.
Steve Pomeranz: Ah, I see.
Terry Story: If you’re in the second line, which is halfway down, what you’re really at is… this is kind of like the no-man’s land. So, what happens is you’re getting all this activity, woohoo. All these fish are coming up and smelling the bait, but they’re not biting it.
Steve Pomeranz: Yeah, they’re not biting it.
Terry Story: They’re not biting it, but you feel like, “Wow, I’m getting great activity. It’s going to sell.”
Steve Pomeranz: What constitutes great activity?
Terry Story: Okay, so this is… According to National Association-
Steve Pomeranz: National Association of Realtors?
Terry Story: Of Realtors, correct. National Association of Realtors.
Steve Pomeranz: Okay.
Terry Story: So, if you have eight to 10 showings and no offers-
Steve Pomeranz: Ah, you’re in the middle.
Terry Story: You’re in the middle. You’re in that no-man’s land-
Steve Pomeranz: Purgatory.
Terry Story: … which is purgatory. You’re going to be sitting there. And actually, what you’re doing, by being in that position, you’re actually helping the sellers, line number three, sell their house because they’re going to come out and sniff yours and look at it, but they’re going to bite and eat and compete against all the other fish for line number three.
Steve Pomeranz: You want to go where the fish are. I used to use a similar-
Terry Story: Yes.
Steve Pomeranz: … analogy with marketing. Right? So, using the savannah in Africa as an example, you want to go to where the zebras and the elephants and all the food are hanging out.
Terry Story: Oh, that’s got to be where the water is.
Steve Pomeranz: Where the water is.
Terry Story: Right?
Steve Pomeranz: And you look at that, and you go, “Well, that’s where I want to go. That’s where I want to target my message. I don’t want to be out in the desert somewhere, which may be a lot cheaper or whatever, but it’s going to be harder. Let’s go where the animals are.” So, you want to fish where the fish are.
Terry Story: You want to fish where the fish are. And it’s price-sensitive. A good agent is paying attention to that because there’s three prongs, three things that we look at: what’s currently on the market, which is present, right; past, which are the solds; and then the third prong is the future. Where are the trends? What’s going on in the marketplace? Looking towards the future. And the way you know what’s going on there is something called days on market. So-
Steve Pomeranz: Okay. Well, hold on, hold on. I want to stop you for a second. So, we’re starting to now go to a deeper level that realtors will understand, that a layperson may not see. These are things that are going on around us, but we, as laypeople, are somewhat blind to.
Terry Story: Are not paying attention to.
Steve Pomeranz: Yeah, we don’t really know what to look for.
Terry Story: And these are leading indicators of what’s going on in the marketplace. So, as professional agents, this is what we look for and see to give us an indication of what’s going on.
Steve Pomeranz: All right, so days on market seems self-explanatory, but explain it anyway.
Terry Story: Right. So, days on market means from the time you put your home up for sale and the time that it closes.
Steve Pomeranz: Okay.
Terry Story: Now, you can also measure the time you put it on the market and the time it goes to contract. But for this illustration, we’ll just say the whole process, start to finish.
Steve Pomeranz: And you’re talking about hundreds and thousands of homes, so you can get a statistic-
Terry Story: Hundreds of thousands of homes. That’s correct.
Steve Pomeranz: Okay.
Terry Story: So, for example, in Palm Beach County, I think we’re looking at 97 days, from start to finish, of the homes that sold.
Steve Pomeranz: Okay, start to finish.
Terry Story: Correct.
Steve Pomeranz: That sounds like a lot.
Terry Story: Well-
Steve Pomeranz: Where is that [inaudible 00:06:31]?
Terry Story: Talk to the people that have been on the market for a year plus.
Steve Pomeranz: Yeah.
Terry Story: And then you break it down even a little bit further, Steve. Price points.
Steve Pomeranz: Okay.
Terry Story: Okay? So, we have something called month of inventory absorption rates. So, the lower the price of a home, there’s going to be a lot more activity. Why? Kind of like the fish, there’s more fish in that price category. As the pricing goes up— and I’m talking price points. So, a home under 500,000 is going to sell, generally, if it’s priced right on the market, faster than a home at a million because at a million, there’s fewer buyers. There’s fewer people that can afford a million-dollar home.
Steve Pomeranz: Well, there’s more fish at 500 and less.
Terry Story: There’s more fish at 500 than you have fish at a million.
Steve Pomeranz: The stress here is that you’re trying to get as much as you can for the property.
Terry Story: Right.
Steve Pomeranz: You want to be kind of at the market. You don’t really want to be under the market unless you’ve got a time issue, you want to sell quite quickly or something. And the question is, and we’re running out of time for this, but making sure you’re pricing right in the sweet spot.
Terry Story: Right, and it’s really a matter of making adjustments quickly.
Steve Pomeranz: Yeah.
Terry Story: If you miss the mark, you know how-
Steve Pomeranz: And being realistic.
Terry Story: I just gave you the formula: 14 days, no showings, eight to 10 show, no-
Steve Pomeranz: There you go. That’s a beautiful thing.
Terry Story: Just follow that model, and you know where to go.
Steve Pomeranz: Okay. That was a really good segment. I actually learned some things as well.
Terry Story: Yay!
Steve Pomeranz: So, that’s really good. My guest, as always, is Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, and she can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.