The Best Way to Sell Your House with Jonathan Miller, Miller Samuel, December 27, 2023
Is it a seller’s market? That seems to be the consensus, but there are still tips and tricks to getting the biggest return for your home. On today’s episode, we discuss what to do, and NOT do, when selling a house.
Full transcript below.
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About this week’s guest:
Jonathan Miller is founder and President of Miller Samuel. His weekly Housing Notes is read widely throughout the Real Estate industry. For more info, see:
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TRANSCRIPT: The Best Way to Sell Your House
It’s a seller’s market in real estate, for sure. Still, there are plenty of big mistakes that you can make as a seller that cost you a ton of money. Some people price their houses too high. They see their neighbor’s home selling for a lot more last year than this year. There are many ways to mess up a sale of a house.
What’s a potential seller to do?
As it turns out, there are some steps you can take to make the sale go smoothly as possible and still get top dollar. For the sale of your home. I’m Barry Ritholtz and on today’s edition of at the money We’re gonna discuss how to sell a home in today’s market
To help us unpack all of this and what it means for your home sale, let’s bring in Jonathan Miller of the real estate appraisal and data firm Miller Samuel. For the past 37 years, Jonathan’s monthly and quarterly housing sales and rental reports have been must read within the real estate industry. They’ve made him the most quoted man in all of real estate.
Barry Ritholtz: So Jonathan, good to have you back.
Jonathan Miller: Great to be here.
Barry Ritholtz: Last time we talked about how to buy a house, now we’re going to discuss how to sell a house. And before we get into the details, I just have to point out, 2020, 21, 22, the real estate market was on fire . . . Then rates spiked up. It seems to have slowed a bit, but not all that much. Tell us, what’s the state of the housing market today?
Jonathan Miller: The challenge is that inventory is missing from the market, so rates have gone up so quickly that many homebuyers that would be sellers are waiting.
What do consumers do when they’re uncertain? Many pause. They wait until the coast is clear, and that’s what we’re going through right now.
Barry Ritholtz: So not a lot of inventory, but if you are a seller, perhaps you’re retiring or downsizing. There are some things you need to do to create the best sale.
Jonathan Miller: I would be remiss if I didn’t mention that mortgage rates are significantly higher. So the seller that’s locked in on a 3 percent 30 year fixed is reluctant to become a buyer at 7. 5%, right? So as time passes, there’s going to be pressures on, you know, their, their lives, you know, they just had triplets or they are being relocated or some reason to move and become a buyer and pay the higher rates.
Barry Ritholtz: Last time we spoke, we mentioned the psychology of buying, what people needed to think about before they went out and bought a home. Let’s flip that. What’s the psychology that sellers need to get into their heads before they list their homes?
Jonathan Miller: Well, one of the biggest things is it’s not 2021, meaning that over the last couple of years, prices stopped rising or not stopped completely, but it’s not a rocket ship anymore. [Things seem to have moderated and plateaued]. Moderated, maybe a little bit of upward price growth on the margin, but this is not the rocket ship it was a couple of years ago. And sellers are usually the last one to get the memo because they want to get the most for their home, understandably. But buyers are facing a lot of headwinds with higher mortgage rates, lack of supply, and, you’re sort of threading the needle of trying to get the most for your house, but you have to recognize that the market is not what it was a couple of years ago.
Barry Ritholtz: And you have brought this up to me in the past. We’ve talked about sellers tend to be a couple of months behind the market. How far behind?
Jonathan Miller: Longer than that. Uh, 12 to 24 months. [Wow]. Where they, they don’t feel, after that period, they don’t feel like they left money on the table. It takes, there’s this sort of process that they have to go, it’s almost a mourning or grieving process. Where they have to go through it to feel they’re not giving something away, that they’re actually, priced within reason.
Barry Ritholtz: I have a vivid recollection of people in 2009 and 2010. [Yes] in my neighborhood, putting homes up for sale at prices that were like, Hey, it’s not 05 or 06 anymore. That era is long gone.
Jonathan Miller: And the problem with that kind of thinking is that when you overprice or wildly overprice your home, in many ways, you end up damaging the Value of the home in the perception of the marketplace, because [it becomes stale] it becomes stale because it’ll sit for a longer period of time. Also, the, you know, would be buyers or, you know, brokers that are servicing the market, the local market look at that seller and say, Hey, they’re not realistic at all. This is a waste of time. And, so you’ll see houses on the market for several years. Another way to look at it is they’re chasing the market, the market’s falling and they’re dropping their prices, but they’re always like six months behind the market and it doesn’t sell.
It’s so hard to disconnect yourself from the home itself when it’s on the market because it’s you, it’s personal.
Barry Ritholtz: Your family, all your memories, plus the endowment effect. of course your house is worth more than all these other houses.
Let’s talk a little bit about the high end of houses and what, the term that you created, I wasn’t sure if it was Manhattan or the Hamptons, but Aspirational pricing. Tell us a little bit about that.
Jonathan Miller: So let’s say you, buy a home for a million dollars and then, you put a three, four hundred thousand into it and you put it on the market for five million. And that’s really not uncommon. And then your neighbors do the same thing and then pretty soon your neighborhood or the region all has a bunch of five-million-dollar listings that are worth two million.
And everybody gets this confirmation that it’s the right price because my neighbor and this person and that cross the street, everybody’s got that same number, yet none of them sell and none of them sell for a long period of time until they ultimately get removed from the market. That’s what aspirational pricing is where you’re throwing the number out that’s so high that, but you have everybody around you doing the same thing. There’s sort of safety in numbers, yet you don’t ever sell your home.
Barry Ritholtz: My favorite thing to do on Zillow is to pick a neighborhood and sort by newest and then scroll down to the bottom. You see this stuff on sale for Listed for seven years for five years, [Right!] Like if your house is listed for 3, 000 days in the hottest real estate market in history…
Jonathan Miller: You have a pricing problem and and and the way to think of it is What we do is we look at things like days on market as an appraisal firm a market analyst from the moment It’s priced correctly to the moment it sells or goes to contract, let’s just say the market average is 90 days. It takes three months for a property that comes on Zillow or whatever, realtor website, and then it sells. You look at that and, and go and exposure nine days. Now you have a listing that’s been on the market for a year, right? And properly priced houses sell in 90 days.
There’s no stronger tell that you’re significantly overpriced because the average is 90 days and we run into when markets slow down, days on market rises because it’s harder for sellers, as we said earlier, to sort of get in sync with the market.
Barry Ritholtz: So let’s talk about the upper end of aspirational pricing.
I’ve seen some condos in New York, billionaires row or some really crazy waterfront places out in the Hamptons. Maybe these are 10, 15, 20 million homes. They’re priced for 92 million. And then a year later, they sell for 27 million. It looks like it’s an effective technique for some of these to anchor people in an absurd amount and squeeze an extra 5 or 10 million out of the buyer.
Is that realistic? Or was that just during the red hot part of the market?
Jonathan Miller: So there were certainly examples of that working, but The reality is that that technique was used by everybody. I mean, it was such a popular thing, sort of wildly overpricing and because then what it does is it gets headlines, it gets ink, [Page 6], it’s boldface names, right?
It almost becomes your asset. It’s like a 90 million asset when it’s really only worth 25 million. And then when the sales are reported, there’s shame. Because, because the buyer at 25 million just bought something for a 70 percent discount or whatever the number is. But it was never worth that to begin with. It’s not the basis for value.
This was a marketing technique that really sprung up during the pandemic, which I call the biggest housing boom of the modern era. And it no longer applies.
Barry Ritholtz: So let’s talk about the opposite. Forget the 100 million houses. $750,000, million, or a millon5, : Some people recommend pricing your home moderately in hopes of generating a bidding war.
Tell us about that.
Jonathan Miller: I believe that is something right now that would be very effective. The idea is that you price it. at or just below what you truly understand the property to be worth like you vetted it out. It’s not what you wish it is worth, but what it’s actually worth based on data based on all kinds of things. That’s the logical conclusion.
What that ends up doing is ramping the transaction up to a bidding war — because that’s [Attracts a lot of attention, a lot of agency. There’s very affordable. Let’s go look at it].
There’s very few listings on the market. Here’s one that seems to be priced a little low and then all of a sudden there’s 15 people bidding on it and it ends up going for 10, 20 percent more than the ask.
You get a premium. That’s one of the more, probably one of the more effective techniques in a market devoid of supply.
Barry Ritholtz: So I mentioned agents. What is the advice, best advice for working with a real estate agent when you’re a seller?
Jonathan Miller: So the number one thing is to listen to the agent. You know, a lot of people, they, they live in the home. They know the home better than anybody I know in my gut, or I need this number, you know, and I always say the market doesn’t care what you need. And so you really need an objective third party to make a presentation on what, why they think it is worth what it’s worth and not necessarily what you think it’s worth.
And they’re measured based on, you know, whether it’s their success is based on whether it sells or not. A lot of times, what I find is that, sellers will listen to the agent and they’ll say, well, let’s just try wildly overpricing it for a short period of time. And that’s always, always a mistake, in my view, because ultimately, it’s not successful, it kind of damages the brand in the market, and you start wondering, well, if they cut the price from this wildly high price, say they cut it 20%, does that mean this is still very much overpriced?
Like it, it just adds more flags to the, to the property. And, it’s because largely because as a seller, you didn’t listen to somebody providing external or outside advice.
Barry Ritholtz: What, what about FSBO? What about for sale by owners?
Jonathan Miller: Yeah, for sale by owner. So that’s without a broker. And the theory behind that is that you’re not paying a broker commission, right?
The challenge with that is that it probably will end up getting a lot less exposure in the market because now you have an agent negotiating directly with a seller and usually the seller is not necessarily a pro at negotiating.
So I’m very skeptical of the FSBO approach. It certainly happens. It’s probably four or 5 percent of transactions. It’s a small number. Certain markets, you’ll see it rise a little bit and fall a little bit, but it hasn’t been widely accepted because the buyers traipsing through your house aren’t being vetted and you don’t have that buffer. between, you know, the broker and yourself, you know, you’re dealing with professional negotiators.`
So it works for some people, but I’d say it’s not as effective.
Barry Ritholtz: Let’s talk about timing. Is there a better or worse time of year to list a home for sale?
Jonathan Miller: It’s really hard to time a market. You have seasonal ebbs and flows. So you know, the winter it’s quiet. So there’s not a lot of maybe competition, but there’s also a lot less inventory and usually the best product isn’t put out till the spring or the fall. I always see housing markets as a two-hump camel – bigger hump in the spring, meaning a higher activity and the lesser in the fall. You can try to time it. I don’t recommend it.
Barry Ritholtz: What about timing of vacation property? You cover the Hamptons for a long time. Do you want to list that in the dead of winter, or do you wait for March or April when people want to buy a house and spend the summer out there?
Jonathan Miller: Probably just a little bit before spring really kicks in. [Post Superbowl]. Post Superbowl, so that you’re in place, uh, and you’re one of the first looks in the market, is probably a good, good methodology. Beyond that. I don’t think it matters that much.
Barry Ritholtz: So HGTV and those sort of channels have been showing homes for sale forever and they’re always talking about curb appeal and staging and all that.
How important is that stuff decluttering A home for sale?
Jonathan Miller: I think it’s really, a lot of it’s really important, probably even better, the most important principle when you’re listing your home is you have to enable the buyer to envision themselves moving in. And so if you have a lot of clutter, a lot of personal.
All your photos of you and your kids, they can’t really picture themselves. It’s harder to picture and also remove half the furniture. [Oh, really?] Yeah, because, because they’re trying to imagine their furniture in the space, and it’s hard if it’s just crammed with everything that you’ve got.
Barry Ritholtz: Really fascinating stuff. So, it’s a seller’s market, but if you want to get the most amount of money for your home, have the smoothest sale, and the smoothest closing, there are a lot of things you can do to make that happen. We’ve been speaking with Jonathan Miller of Miller Samuel. I’m Barry Ritholtz, and you’re listening to At The Money.
Find it at Apple Podcasts and Bloomberg. com.
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