Tuesday, January 20, 2009

Writing Sample: Repositioning is key to faster home sales (Chicago Sun Times, January 16, 2009)

Dr. Roger Kula had to temper his expectations. He had no other choice.


A Chicago native now living in New York, Kula and his younger sister, also a New York resident, welcomed their aging mother to the Big Apple in 2005. A permanent move, the siblings debated what they would do with their mother's Downers Grove home, a residence that held fond childhood memories for both. Initially, they elected to keep the property, using it as a Chicago area retreat and gradually clearing the space for a future sale.

In May 2008, against the threat of capital gains taxes, Kula listed the home with Downers Grove-based agent Jill Luckett of Coldwell Banker. While aware of the real estate market's downward trend, Kula and his sister still anticipated a $300,000-plus sale for the 3-bedroom, 1-bathroom brick ranch in one of the suburb's stable residential communities.


"Jill told us off the bat that we were probably too high given the area's inventory levels, but we gave it a shot at $289,000 to start," Kula said. "In retrospect we probably hit on the worst of the wave because the market has only gone further south."

With few lookers and even fewer offers, Luckett and Kula sat down to re-examine their price as summer approached, a challenging feat given that the area held few comparable sales. In a scene repeated throughout the Chicagoland real estate market, Kula was forced to face a sobering, unkind reality: he wasn't going to get the dollar figure he desired. To sell his boyhood home, Kula would have to confront the most recent data, measure his motivation to sell, and "reposition" the home.


A term once used sparingly by real estate insiders, repositioning has increasingly entered the American lexicon as the housing market captures headlines. No longer can Chicagoland sellers ignore the market's tumult. To secure a deal, today's home sellers must be realistic, responsive and open to repositioning.

"When a seller puts their home on the market on day one, they very well could be the best priced home in the best condition," said Tricia McEneaney of Coldwell Banker's Gold Coast office. "But if over the next 30 days 10 more competitively priced homes come on the market, then the seller's home may no longer be in a position to sell."


Today's real estate market is more fluid than in any recent era and tough love -- a k a repositioning -- awaits many sellers.

"The market doesn't come to you any more; it's going the other way right now and that's a reality throughout Chicagoland," said David Hanna, president of the Chicago Association of Realtors and owner of Prudential SourceOne Realty in Chicago and Hinsdale.


What is it? How's it done?
In its simplest form, repositioning consists of accessing current data, noting the market's movement, and reassessing a given home's price, condition and promotion. Some Realtors sit with sellers and interpret the latest info as often as every two to three weeks, specifically with the most motivated sellers; others, particularly in a community frigid on sales numbers, might analyze the info every 60-90 days. Either way, such conversations have emerged a common slice of the Realtor-seller relationship.

"We're repositioning now more than ever before," said Dean Rouso, owner of Prime Property Partners in La Grange. "We're meeting with sellers, gauging their motivation, and providing the most recent data to help hit the right price point."


Repositioning shines a consistent light on a specific area's real estate market. Rouso, who spoke about pricing at November's National Association of Realtors convention in Orlando, advises his staff to look at contracts generated in the last 90 days -- first in the neighborhood, then in the greater community. Such data shows the demand surrounding a community, even if the deals never closed.

"If we have a home that's been successful and similar to ours, then we need to take a strong look at that sale as well as the homes priced lower," Rouso said, adding that the Realtor's task is to interpret the information for sellers rather than simply handing them printouts.


For repositioning to be most effective, data must be collected in as narrow and near a time frame as possible. The real estate market's longtime adversary has been its inability to foresee the future; Realtors have access only to historical data. Packing that data into the latest window soothes the market's evolving wrath and provides a more insightful portrait of housing trends. It's a reactive treatment, the industry pros admit, but it remains the best tool available.

With timely data in hand, sellers encounter their options, frequently choosing between a lower price or patience. Some sellers might also decide to offer incentives, make repairs or even pull the home off the market. Most Realtors agree that the current housing market is not a dangle-your-toes-in-the-water time. Today's housing world is only for the most motivated, reasonable sellers and repositioning forces many sellers to reconsider.


"If you're not motivated to sell, then it's best to wait; you'll only frustrate yourself," Rouso said. "There are enough 'have-to-sell folks' out there that they'll keep dropping their prices to the detriment of your bottom line."

We've repositioned. Now what?
After the initial repositioning and its most frequent outcome -- a price drop -- sellers do the one thing they're learning to do best in these challenging real estate times: wait. In some instances, a Realtor will lower the price incrementally over a period of time (say, $1,000 a day for five days) to get the property on hot sheets, a list of homes that have entered the market or changed price in a given day.


"The idea is to maximize the presentation of that price reduction," Hanna said. "It's about getting the maximum amount of exposure to the maximum amount of people."

Then, return the home to the prospective buyers' attention. Have a new open house. Record the number of showings and hits on the Web site to assess if interest in the property has surged. If progress doesn't arrive in 30 days, it could be time for more tough love. Sadly but realistically over the last year, the market likely took another dive in that time.


"Property values are declining, yet too many sellers think their property is the exception," Hanna said. "Hope is not a business plan. When we see prices move in either direction, we need to adjust."

But sellers and their Realtors should also re-examine other parts of the home's public face because price isn't always the culprit. A home sells thanks to the convergence of three points -- price, condition, and promotion. If the home isn't marketed well with expanded information, vibrant photos, and accurate information, then change must occur. Sellers should also take a close look at the home's condition, making sure that cleanliness and clutter-free characterize the space. Such tasks are as much a part of repositioning as slashing prices.


"In today's market we're in a price war and a beauty contest. The home must win both to sell," said Coldwell Banker's McEneaney.

A happy ending?
Pre-AIG, government bailouts, and daily foreclosure reports, Kula might have hoped for a $300,000 sales price on his boyhood home. As autumn unraveled, however, he understood that the market had him cornered. Realities had shifted and he needed to counter the momentum.
He sat with Luckett and discovered the grim truth. If he wanted to move the house, he would need to lower the price.


"The year was closing and it was a rush to the finish line," he said.

He joined Coldwell Banker's nationwide October promotion. For 10 days, he lowered his price 10 percent to $252,000. Multiple offers arrived, including an as-is purchase for $235,000, which he and his sister accepted.


"We could see what was going on," Kula said. "You think you should be getting more, but you also know it could be worse. At some point, we had to face the realization that this was the going rate."