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Paul@iLoveSeaisle.com (online since 1999)
Long & Foster Real Estate - Avalon, NJ Office
The Truth About Real Estate
These are excerpts from The Truth About Real Estate by Joseph J. Murphy and Allan D. Dalton.
I. The Truth About Advertising Real Estate
Why advertising does not sell your home!
THE TRUTH IS...Advertising homes is the single largest expense for most real estate companies and will continue to be.
Yet, it has been decisively determined over the years, that this medium does not sell homes.
THE TRUTH IS...If advertising alone did in fact sell homes, then more homeowners would advertise their own homes and save the marketing fee.
THE TRUTH IS...Hundreds of millions of dollars are spent in classified advertising each year by the real estate industry
to attract home buyers. According to the National Association of Realtors' research, the vast majority of buyers first learn
about a property they ultimately purchase from sources other than classified advertising.
THE TRUTH IS...Even a "for sale sign" causes more buyers to first learn about a particular home they ultimately purchase
than classified advertising.
THE TRUTH IS...The overwhelming majority of home buyers are brought to a particular property as a result of the individual
and collective efforts of real estate salespeople and real estate companies. This majority of buyers has been termed as the
"real estate community buyer pool".
THE TRUTH IS...Many buyers call on a particular ad as a way to "kick off" their home search in order to look at properties
THE TRUTH IS...When real estate companies advertise a particular property, other properties on the market frequently benefit
because the overwhelming percentage of the time, buyers view more than one property before reaching a final decision.
When a company avoids the use of the Multiple Listing Service (M.L.S.), with few exceptions, this can only be
viewed as unjustifiably opportunistic.
THE TRUTH IS...When a person calls on an advertisement for a specific home, only previews that one home and ultimately
purchases it, this phenomenon can only be viewed as ironic, coincidental and mathematical aberration.
THE TRUTH IS...Any property advertised in a specific price range by any real estate company, can additionally serve as
an advertisement for another home in that price range.
THE TRUTH IS...The most valuable marketing method used by any real estate company, as basic as it may sound, is the
significant activity of advertising property to other real estate salespeople. The overwhelming majority of potential
buyers are counseled and guided to properties in their price range by real estate salespeople.
THE TRUTH IS...The Multiple Listing Service (M.L.S.) advertises properties 24 hours a day, seven days a week to
Realtors, who in turn present these properties to prospective buyers.
THE TRUTH IS...When a real estate company or salesperson attempts to market a property and avoids or delays the
submission of the listing to the M.L.S., with few if any exceptions, this act of omission can only be viewed as
self-serving, avaricious, unjustifiably opportunistic and reprehensible. This action is condemnable and should
THE TRUTH IS...Real Estate companies and salespeople represent the seller. The best way to accomplish
this is to maximize the Realtor cooperation through the M.L.S. on behalf of the seller.
THE TRUTH IS...A home must be marketed before it is sold!
II. The Truth About Marketing Real Estate
Don't let a real estate company sell your home before it is properly marketed.
THE TRUTH IS...In order for a home to be properly sold, it must be properly marketed.
THE TRUTH IS...There is a significant difference between just selling a home vs. marketing a home.
THE TRUTH IS...When a home is properly marketed, this results in finding the best possible buyer, not just a buyer.
THE TRUTH IS...The marketing process should begin with the introduction of the property to the "real estate community
buyer pool". This process provides the ultimate exposure by creating competition, thereby leveraging the laws of
supply and demand.
THE TRUTH IS...Even though some Brokers and real estate companies try to create the illusion of possessing the majority
percentage of the "buyer pool", few Brokers and salespeople have more than just a very small percentage of the total buyers.
THE TRUTH IS...In most cases, prospective buyers view numerous properties before reaching a decision on which home to
buy. This is why real estate companies need to make sure the properties they are marketing stand out above the rest, by
using distinctive and personalized marketing techniques.
THE TRUTH IS...The real estate industry has re-defined the role of a real estate salesperson who represents a seller as a
Some standardized form letters pretend to hold sensitive information...which cannot be supported.
THE TRUTH IS...It absolutely should not matter to any real estate salesperson or homeowner, which real estate company
in the marketplace ultimately brings the best buyer in the sale of any property.
THE TRUTH IS...The overwhelming majority of the time, a home is sold to a buyer who was brought to the home by a real
estate salesperson or company other than the listing salesperson or company.
THE TRUTH IS...Regrettably, some real estate representatives, in an attempt to overly impress homeowners to list
property with them, arbitrarily send out standardized form letters. These national, direct mail company generated
letters, generic in nature, pretend to hold community sensitive information which may result in a seller making decisions
based on erroneous and irrelevant circumstances which cannot be supported.
(ie: We have a long list of eager buyers looking to relocate to your neighborhood. Inquiries have been overwhelming.)
Any form of exaggeration may cause a homeowner to have unrealistic expectations!
THE TRUTH IS...Homeowners need to take caution about those who might demonstrate a propensity to overstate the
significance of their percentage of the buyer pool. This hyperbolic and self serving practice may affect or prevent
properties from receiving proper exposure. This may also result in a homeowner having a sense that the other company's
buyers are not vital. Furthermore, this parochial practice might impede the supply/demand dynamics which are necessary
to bring the very best buyer.
THE TRUTH IS...Each real estate salesperson (marketing coordinator) should design a personalized marketing approach
for each particular home, because no two properties should be marketed in the same fashion.
THE TRUTH IS...The selection of the right salesperson (marketing coordinator) by homeowners, is as important, if not more
so, as the selection of the best real estate company to represent them.
THE TRUTH IS...The optimum representation for a seller should consist of the combination of the right salesperson and
the right real estate company as well as the right Marketing and Merchandising Systems properly integrated on behalf of the
THE TRUTH IS...Even though a homeowner is represented by a competent salesperson, real estate company and sound
marketing plan, the home might still be difficult to sell if not merchandised before it is marketed.
III. The Truth About Merchandising Real Estate
A home should not be marketed until it is merchandised.
THE TRUTH IS...There is significant difference between merchandising and marketing.
THE TRUTH IS...Merchandising prepares a home to be marketed.
THE TRUTH IS...Marketing prepares a home to be sold.
"Well merchandised" homes tend to be best received by buyers.
THE TRUTH IS...The real estate industry has overlooked the critical importance of proper property merchandising and is
limited to superficial videos and checklists.
THE TRUTH IS...Until the creation of the Home Merchandising System, the word "merchandising" was virtually ignored, if
not unheard of, in the real estate industry as it related to homes.
THE TRUTH IS...Real estate representatives assume many roles in order to provide customers with the highest quality,
"value added" service.
THE TRUTH IS...When real estate representatives work with buyers, they assume a sales role.
THE TRUTH IS...When real estate representatives work for sellers, they assume a marketing role.
THE TRUTH IS...When real estate representatives work to improve the appearance of properties, they are now assuming a
THE TRUTH IS...The Home Merchandising System differs from interior design. Homeowners can in fact spend
thousands of dollars on a home and the value of it could go down.
IV. The Truth About Pricing Real Estate
Proper Price Positioning is Paramount.
THE TRUTH IS...A Comparative/Competitive Market Analysis (C.M.A.) is a report prepared by a qualified real estate
representative which sets forth an analysis of facts and figures, available to the real estate community, to aid the
seller in making an intelligent decision regarding the pricing of property.
THE TRUTH IS...Regardless of the reliability of the data from which the appraised value was extracted, it is the
buyer who establishes the value. A property is only worth what a buyer is willing to pay for it.
THE TRUTH IS...The objective of both the seller and the real estate salesperson is to sell the property. Yet,
selling property is not enough. It must be sold with other specific objectives in mind such as price, time restrictions
and enjoy proper price positioning in the competitive marketplace.
THE TRUTH IS...Experimenting in the marketplace with inflated and speculative pricing, theorizing that prices can
always be reduced, seems to make sense to some at first glance. However, this practice can be counterproductive as buyers
are sophisticated and typically select a property after exhaustive comparison shopping. Since buyers are prone to shop
in one price range, they recognize value in a specific range more quickly.
THE TRUTH IS...The theory of introducing a property at a high price and then waiting for a buyer to make an offer is
seldom appropriate. In fact, this thinking explains why certain homes stay on the market for extended periods of time,
while many other competitively priced listings are sold in shorter periods of time.
THE TRUTH IS...An overpriced property is less likely to be shown. However, if it is, regrettably it is shown to make
other appropriately priced listings more saleable.
THE TRUTH IS...If a home is priced even 10% over the market value, this in some cases may seriously diminish the number
of people who will view the property. Real estate representatives will not show this property to people because of the
risk of offending their sensitivity towards value.
THE TRUTH IS...Many sellers believe that setting an aggressive price on their property is not a problem. If buyers
really like the home, they will make an offer.
THE TRUTH IS...Too high a price and actually end up costing the seller money. A property that lingers on the
market, may significantly weaken the negotiating position. In most cases buyers who observe a price reduction, or
that a property has remained on the market for an extended period of time, usually expect the price to be reduced again.
As the length of time on the market increases, so does the difference between the asking price and the selling price.
Expermenting in the marketplace with inflated and speculative pricing can be counterproductive.
THE TRUTH IS...Sellers have frequently been heard to say, "My neighbor, two doors away has a home just like mine and it
sold for "x" amount of dollars. I have an extra garage, half bath, etc., therefore, I know I should get "x" amount of
dollars." THE TRUTH IS...Comparable properties, especially in the very same neighborhood, are strong indicators of a
value range. However, over short periods of time, market conditions can change dramatically. More or less demand
for the property at any given time, can significantly alter value.
THE TRUTH IS...Sellers are usually not qualified appraisers as they understandably often misinterpret value, thereby,
having a natural tendency to view the value of a home aesthetically, rather than objectively.
THE TRUTH IS...When an overpriced home lingers on the market, it is important to objectively determine the contributing
factors as to why the home has not sold, therefore, immediately eliminating any form of frustration for owners as well as
real estate representatives.
THE TRUTH IS...No two homes are exactly alike. Adjustments must be made for differences in location, size,
condition, age, etc. Sellers should be wary of anyone who volunteers price opinions without both physically and
thoroughly inspecting the home in addition to analyzing the necessary data which will result in a C.M.A.
THE TRUTH IS...Sellers very often need to replace or repair roofs, furnaces and driveways, etc. at substantial cost to
them. Items such as these are considered routine maintenance and seldom return their costs to the seller. The
value of a home is not based on the cost of construction, in other words, the cost is not necessarily indicative of value.
V. The Truth About Financing Real Estate
Before making the right financial decision, you need to know the language of financing.
THE TRUTH IS...The selection of proper financing is an integral part of the purchase and sale of real property.
THE TRUTH IS...Mortgage interest rates and terms frequently vary from lender to lender.
THE TRUTH IS...A term is a period of time between the commencement date and termination date of a note, mortgage,
legal or other contract.
THE TRUTH IS...When the term of a mortgage is shortened, the principal is paid off more quickly and the total
compounded interest is greatly reduced.
THE TRUTH IS...The annual percentage rate (A.P.R.) provides consumers with a basis for comparing the cost of mortgage
THE TRUTH IS...In a Fixed Rate Mortgage, the monthly payment towards the principal and interest never changes.
THE TRUTH IS...A Graduated Payment Mortgage (G.P.M.) is structured so that payments start at lower levels and then rise
gradually during the initial years of the mortgage until they reach the amount due based on the stated interest rate of the
mortgage. Since payments in early years are not sufficient to cover all the interest actually owed, this interest is
added to the principal. This then creates a negative amortization or a larger principal balance during the years
while payments are graduating.
THE TRUTH IS...Federal Housing Administration (F.H.A.) is a division of the Department of Housing and Urban
Development. The F.H.A. insures a mortgage loan but does not actually provode mortgage funds. Under this
mortgage program, individuals may choose a Fixed Rate Mortgage or a Fixed Rate Mortgage with a graduated payment feature.
THE TRUTH IS...The Veterans Administration (V.A.) Home Loan Guarantee Program is designed to encourage lenders to offer a
long-term, low down payment mortgage to eligible veterans by guaranteeing the lender against loss.
When comparing ARM's always look at the index plus the margin.
THE TRUTH IS...An adjustable rate mortgage (A.R.M.) is one in which the interest rate changes based on the movements of
an index rate.
THE TRUTH IS...Most commonly, lenders base A.R.M. rates on six month, three or five year treasury securities.
THE TRUTH IS...An index is the measure used to determine the rate of change in an A.R.M. and the monthly payments reflect
this change accordingly.
THE TRUTH IS...Though very few lenders will set rates consistent to the index, most will offer A.R.M.'s that state a margin
added to the index to determine the rate upon which payments are based. When comparing various ARMs, it is important to
always examine the index plus the margin.
THE TRUTH IS...An A.R.M. carries interest rate caps which limit the amount an interest rate can increase or decrease.
There are two common types of caps; an overall cap, which limits the rate over the life of the loan and a periodic cap, which
limits rate increases or decreases during each adjustment period.
THE TRUTH IS...When the term of a mortgage is shortened, the principal is paid off more quickly and the total compounded
interest is greatly reduced.
THE TRUTH IS...A "buy down" is a method of lowering the interest rates on a mortgage, either temporarily or for the
entire term of the loan. A common type of buy down occurs when points are paid up front to make up the difference
between the rate actually charged on the mortgage and the rate at which the buyer pays. Virtually anyone, sellers,
buyers, home builders and employers can buy down rates.
THE TRUTH IS...Points, also referred to as discounts or placement fees, are often misunderstood. Each point is the
equivalent of one percent of the mortgage amount.
THE TRUTH IS...Points can be paid by either the seller or the buyer, or split between them.
THE TRUTH IS...Amortization is the gradual payoff of a debt through installment payments of principal and interest.
VI. The Truth In General
The pursuit of knowledge in real estate is not a destination, it is a journey... thus it is in this spirit
that we will continue to provide information to the public.
THE TRUTH IS...Condominium ownership is a form of ownership whereas the owner/s hold title to a unit and share
ownership with others in all common grounds and facilities (is: garages, storage areas and swimming pools). The term
condominium is frequently misunderstood as representing an architectural style of housing, rather than a form of ownership.
Despite tax law changes...homeowners continue to receive favorable tax treatment.
THE TRUTH IS...Cooperatives are established as corporate ownerships. Individuals buy shares in these corporations,
which entitle them to percentages of ownership in a building complex.
THE TRUTH IS...Individuals who reside in co-ops are stockholders in the corporation, to the extent of the value of the
unit in which they own.
THE TRUTH IS...To maximize buyer appreciation, sellers should make an attempt to be as inconspicuous as possible while the
home is being presented to buyers. Many homeowners make it a point to temporarily leave their homes during this
THE TRUTH IS...Individual 55 years or older, who fulfill certain requirements, can exclude all of the gain up to
$250,000, realized on the sale of a home.
THE TRUTH IS...Throughout North America, the tax and investment advantage of homeownership are the major reasons for
motivating people to purcahse homes.
THE TRUTH IS...Many real estate Brokers and agents refer to themselves as Realtors as though the titles are
synonymous. Possession of a salesperson or Broker's license does not automatically entitle a person as a Realtor or Realtor/Associate. Realtor is a designation which must be applied for separately and aside from state licensing.
THE TRUTH IS...Walls painted in light-toned hues make rooms look larger, especially when accompanied with light-colored
THE TRUTH IS...Despite numerous significant tax law changes over the past few years, homeownership continues to receive
favorable tax treatment with regard to interest deductibility and gain deferral on sale of a principal residence.
THE TRUTH IS...For investors in real estate, although the new tax laws have successfully halted many perceived abuses,
the changes have been sensitive to the economic approach to investing. Consequently, many tax advantages are still
THE TRUTH IS...Real estate property taxes and mortgage interest on a primary residence remain tax deductible under
the Tax Reform Act of 1986.
THE TRUTH IS...It is advisable that a buyer has a physical and termite home inspection completed prior to the closing.
THE TRUTH IS...When using an attorney to conduct a real estate matter or transaction, it is advisable to seek
representation from an attorney experienced in the field of real estate.
THE TRUTH IS...A real estate career can be very rewarding. To be successful, however, requires knowledge,
commitment to training, hard work, sensitivity and dedication to serving others.
THE TRUTH IS...There is no profession in the world whose membership is any more devoted, selfless and committed to the well
being of those they serve than real estate professionals.
All information on this web site is deemed to be accurate but NOT guaranteed.