In this piece we are going to examine feedback and its integral role in helping both sellers and their listing broker find out where they are in the market. Feedback is information given from the various buyers’ agents who show a seller’s home. Any good listing broker will reach out to the agents who have shown their listing to find out what they or more importantly what their buyer thought of their seller’s property. The main reason the broker and buyer’s opinion are so important is that they have not only looked at a seller’s home but most likely have looked at properties that are in direct competition with the seller’s home. Whether the feedback be positive or negative, it gives both the listing broker and seller a picture of how their home compares to others in their market. Because positive feedback is easy to interpret, we are going to focus on negative feedback and its various forms. When evaluating negative feedback there are basically 4 types:
In this new digital age with so much of technology shaping the way we show and sell homes, it can be argued that feedback is just a relic of the past. I would make a case that today more than ever it is very much needed. Major retail companies spend millions on trying to find out what consumers want and will modify and innovate in order to do so. By listening to the buying public, they create products at competitive prices in hopes that they outsell all the others. As a home seller, many of the same rules apply. When you put your home on the market, you are now in the business of selling a product, your home. Just as important as marketing and advertising is, finding out what buyers like or more often what they dislike is also essential. If a seller is getting traffic but no offers and negative feedback, the next step is to take action. Albert Einstein was once quoted “The definition of insanity is doing the same thing over and over and expecting a different result.” We find this to be true so often in real estate as well. If a seller keeps hearing about their home not being updated or needs repairs, that is a direct call to do one of two things: Update/Repair or reduce the price. All home sales are conditional upon two factors, price and condition. Both items are completely controlled by the seller and the seller only. It comes down to the homeowner either improving the condition of the property or reducing the price so that the home compares with others in their market, it’s that simple. By reaching out and obtaining constructive feedback, listing brokers and their sellers can correctly price and market their homes in order to either sell faster or for more money.
When talking with buyers and sellers many times I get the question of what the price per square foot of homes are in a particular area. My answer to that is as always, “That completely depends on the home.” There is a common misconception when gauging the value of a home in that the local average price per square foot is a good guide. Granted larger homes tend to be viewed as “bigger is better”, they can also be harder to sell. Take for example a 2900 sq. ft home priced at $300K compared to a 1750 sq. ft home at the same price. If you do the simple math you get $300K /2900 = $103.44 per sq. ft and $300K/1750 = $171.42. The immediate impression is that the smaller home is over priced compared to the much lower price per square foot of its larger competitor. Now is where we need to move away from the math and consider a more important aspect, condition. The two main factors that sell homes are price and condition. Just because a home has more square footage does not mean it holds more value than a smaller home in the same market. Almost all buyers are going to consider a home’s space but more importantly is “What is the condition of all that space.” A larger home may have more bedrooms and baths but if all or most of it needs updating or is in poor condition, that can be a huge turn off. When buyers consider post closing repairs and updates, the bigger the dwelling typically equates to the bigger the cost.
Another consideration that needs to be made is where square footage information is coming from. Most of the homes listed by real estate firms get their information like year build and square footage from county tax records. This information can be from years back and provided by county inspectors who did not input such data themselves but simply passed it on. There are also properties with additions and basement buildouts that were not permitted so county records will not indicate actual size. That is why it is always important for buyers to read a seller’s property disclosure and if additions were made, find out if permits were pulled and how much actual space was added. If additions were done by previous owners to the current sellers, you can go to the county to investigate further. There is a good reason why real estate companies rarely advertise square feet in Georgia. Too much inaccurate data that can lead to potential litigation due to misrepresentation of a home’s size.
I’ll give an example on how the listing of square footage can be misleading to prospective buyers. I was helping a buyer who was looking for a home priced under $400K, in a particular school district. One of this buyers’ big hang-ups was he always looked at a home’s square footage before getting in the car to look. If the home did not have enough square feet listed, he would pass. In doing some research, I found a new listing that came up and met almost all of his criteria. The home was quite attractive priced at $375K with 3 bedroom and 2.5 baths, 1762 sq. ft. I asked if he would like to see the home and the response I received was “Only 1762 sq. ft and they are asking $375K, that’s not going to sell for even close to that, not interested.” By simply looking at the square feet and price he missed what was way more important, the description and photos. The home had been completely renovated with all new floors, cabinets, paint, appliances and more. The seller had also removed a wall and a few doors on the main level to make the home seem much larger and open. It went under contract in 72 hours and closed less than 17 days later for $368K. Based on the sale price and size, the price per square feet was $208.85. His assumption that the home was overpriced simply due to its size made him miss an opportunity to visit and possibly purchase what seemed to be a really great home. Conversely, I looked at another property that had sold in the same community just 5 months earlier. It was priced at $335K with 4 bedrooms and 2.5 baths at 2526 sq. ft. The home sold for $338K with the seller paying $6K of the buyer’s closing cost. The price per square foot on this home was $131.77. These homes were built in the same year and located in the same community, yet they had a $102.92 difference in price per square foot. The point being that until you actually look at a home in person, you cannot judge it by a number that may or may not represent its actual size.
With so many dynamics factoring into a home’s value, where does square footage and its price per foot fit it? Actual square footage is always going to play a role in pricing and is a helpful indicator of how much living space there is. I do however feel that it is also never a good idea to solely rely on price per square foot when trying to ascertain a property’s value. At the end of the day location, condition and current inventory are far more important to finding out what the true market value of any home is.