My New Blog

THE VALUE OF A CUSTOMER

I just recently had an incident occur that reminded me of an experience I had when I first started in sales. I was working my first job in sales as a technical advisor. A long time customer of our firm called to get some information on a product, and in my most unpolished way, I was advising him that he was utilizing the product incorrectly.

I was unaware at the time that this conversation was being overheard by the President of our firm. A few minutes after my conversation with the customer, the pres approached me and asked me to meet him in his office. In his most polished way, he proceeded to let me know that even though I may have been right, I could be so wrong that I would cost our firm significant business, because the customer would not care how right I might be, he didn't need to be treated in a manner that might be an insult to him.

My most recent incident occurred while my wife and I were applying for a mortgage though a loan officer that I would consider my best lender. A loan processor needed additional information and called my wife to get it. During the course of her information gathering she became rude and insulting. This was quickly rectified once my wife called me, and I in turn called my bank contact.

We do our work and become complacent with our knowledge and forget the fact that without the customer or client our knowledge is useless. As business is tight and the clients' options are numerous a step back to ponder our sales technique wouldn't hurt any of us. Below I am including the note that I walked away with from that meeting (and still with my job) as I took my first professional “Hair Cut” for all to read and maybe get a thought change.

A CUSTOMER

· A customer is the most important person in any business.

· A customer is not dependent on us-- we are dependent on them.

· A customer is not an interruption of our work--- they are the purpose of it.

· A customer does us a favor by calling--- we aren’t doing them a favor by responding.

· A customer is part of our business---not an outsider.

· A customer is not just money in our pocket--- they are human beings with feelings like our own.

· A customer is a person who comes to us with needs and wants--- it is our job to fill them.

· A customer deserves the most courteous attention we can give them--- they are the lifeblood of this and every business. They pay our salary. Without them we would have to close our doors.

· This should never be forgotten or taken for granted.

There are many factors that will determine how fast and at what price a home will sell: age, condition, location and price. A significant yet often overlooked factor in a buyer’s market is also the inventory of homes, and the rate of absorption in the market.

Inventory is important because it determines the competition in the market place, which goes back to basic economic principles of “Supply and Demand”. With the current market situation, supply is definitely up, and the demand, created by both the mortgage industry’s state of transition, wherein programs are modified or dropped daily, and down payment amounts are creeping upward, make a qualified and ready buyer a rare item.

When the inventory is up, then sellers must be realistic about their selling price, because the neighbor down the street may have a more realistic and objective view of their property and be willing to take a modest gain on the home in order to get it sold and get on with their lives. With 20-30 3-bedroom homes in the market, especially in the smaller towns, pricing is key.

Likewise, for the savvy buyer, recognizing that the market is to their advantage not only allows them to focus on that house with more bonus features, but also allows them some greater flexibility with an offer, provided it’s not an insult to the sellers or their agent, and an embarrassment to their agent to present. It’s not all that unrealistic to see a buyer present an offer 10-15% below current asking. This is offered with the understanding that their agent did a real market analysis for the buyer, and possibly did some further investigating in town records to make sure that the property is not burdened with mortgage debt, which makes the “low ball” number impractical. Buyers are looking at different price ranges in neighboring towns so as to possible take advantage of that rare opportunity to get that special house from a highly motivated seller.

Inventory levels are typically expressed in months. The number of homes listed for sale are divided by the number of homes that have sold in a previous given period. This would provide an indication of the market’s ability to move the current inventory, or more commonly known as the market’s absorption rate. In a normal market, a three months inventory would be a seller’s market; three to six months of inventory is considered a neutral market, and more than six months is a classic buyers market.

Paying attention to the inventory is necessary in order to properly price a property for a given market. Looking at sales in a given neighborhood or town is important. But equally important are the number of active listings on the market, which is considered inventory.

The chart below is an indication of the current inventory of single family homes in 10 towns in the Greater Waterbury Area. The level of inventory points to a strong buyer’s market. As always, the use of a Realtor to properly assess and analyze the market is the safest way to make the home purchase a success.

	TOWN BY TOWN INVENTORY OF HOMES
		Active		Homes Sold In		Inventory
		Listings		Last 4 Months		in Months
Beacon Falls		36		12		12
Bethany		47		11		15
Bristol		267		119		9
Cheshire		201		41		20
Middlebury		146		20		29
Naugatuck		251		69		15
Prospect		76		22		14
Waterbury		665		165		16
Watertown		145		43		13
Wolcott		142		35		16

The following 10 items are a modification of an article recently offered within the RE/MAX network. Much of what is offered out is true of the mindsets of a lot of sellers in the current market, who still believe that their property should sell regardless of what the market is doing. I offer as follows:

1. Be casual, not serious, about selling.
Actions speak louder than words in this market. Discretionary sellers should wait for a less competitive environment. Sellers who MUST sell their houses need to look at the number of homes selling around them and be honest as to how realistic they may be, and their true desire to sell.

2. Price it wrong.
A home properly priced is half sold. No amount of full-color ads, glossy fliers, multiple photos, virtual tours, agent luncheons, Goodyear blimps, pom-pom girls or Saint Joseph statues will compensate for a wrong, timid retail price. In addition, just looking at the range offered by the Realtor, and believing that you can get the higher price without painting, cleaning or vacuuming is foolish.

3. Ignore your agent.
Attorneys believe if you represent yourself, you have a fool for a client. Doctors don't self-diagnose. Professionals use professionals. Even though many people believe they're experts on raising kids and real estate, full-time, career pros usually know what's best. Listen to them very carefully; after all, they do have access to the information, not you.

4. Micromanage the marketing.
If you sold cookware in college, carts in California, or carpeting in Cranston, it does not qualify you to second-guess your agent. If you had a real estate license years ago, save your stories about the "good old days" for your children. You can share your concerns and timelines, but leave the details to the listing pro.

5. Reject staging suggestions.
Someday shag multi-colored, sculptured carpeting will come back. Whitewashed cabinets, Navajo white walls, linoleum flooring, southwest decor, lots of personal photos, and Elvis paintings on black velvet need to go. Now.

6. Let the Dogs loose.
I recently entered a house and had two frisky, friendly black Labs run up to sniff me. Unfortunately, I had light-gray dress slacks on that day. Both wet stains lasted for hours. Until that day I didn't realize dogs enjoyed chewing the tassels on expensive loafers.

7. Talk to the buyers.
Life gets lonely at times. Why not ask the buyers where they grew up? Or how much they qualify for. Tell them about the vacant rental next door. Maybe they could baby-sit next weekend! Why not share war stories, horror movies or meatloaf recipes?

8. Sell personal items.
Wow, maybe the buyers want to buy the patio furniture, rotary lawnmower, or life-size statue of Saint Anthony. Put those prices on all of the furniture in the house. Maybe if you get enough people through the door you can sell it all and not need a mover. You have only four more boxes of Girl Scout cookies to sell. Why not ask for a donation for the March of Dimes, the Humane Society, the local PBS station? Remember the saying, "loose lips sink ships."

9. Discount that smell.
My house doesn't smell of pets, baby diapers, curry powder, garlic, fried fish, coconut incense, cigars, manure, mulch, dairy farms or low tide. The buyer must be confusing my castle with a tract home.

There’s an irony in this title that’s getting to be a sign of the times. The past couple of days have found me laboring to provide potential sellers with a market value for their homes. This has been in anticipation of the spring market, and trying to get a jump. Aside from the usual questions as relates to property amenities, bedrooms, baths, updates, it appears that the most difficult adjustment to the evaluation is for the neighbor’s house that was taken over by the bank and resold at a loss two months ago.

Within the past year, banks have not only requested their appraisers tighten the radius that they would use for comparables, but have also started to request that the appraisers find sales no older than 90 days. This is supposedly in an effort to be pro-active with the value and the tightening up of credit.

So here’s the dilemma, assuming I have a typical split level to be analyzed, in an area inundated with colonials, and one of the three viable (or so I thought) homes recently sold for $55,000 less than it should have. The next closest properties are in a different district of town, and an entirely different zip code. I remember back in the appraisal classes that I took that there were instances when it was permissible to use a value rational assuming the home prices had a reasonably similar ratio. But even this gets skewed when there are defaulted properties in the mix. This is truly a situation where the Realtor needs his best polish to try and get the homeowner to understand the problem.

It would also stand to reason that the problem must be compounded many times over when there’s a matter of refinancing involved. How does the homeowner react when they try to refinance their mortgage and suddenly find out that not only has all of their equity disappeared, but that the house is worth considerably less than when they bought it. This must be the case in California, Florida and Nevada where the rates of foreclosure are the highest in the country. Even in our state of Connecticut, which is ranked eighth in the nation for foreclosures, we have homeowners just throwing up their hands and walking away.

There is already enough of a problem in our business with lenders redefining their requirements more frequently than they have probably done in the past 10 years. Add to this the severe fluctuation in interest rates almost daily, making it a virtual roll of the dice to try and lock in a good rate when the borrower has good credit, and the fun is just beginning.

It’s not all doom and gloom in the Connecticut housing market. Although there are daily articles written about the surplus of houses, foreclosures, the sub-prime debacle and the drop in new construction starts. The Connecticut market is not the worse in the country.

In reviewing a recent survey from the National Association of Realtors the actual sales of properties in 2007 in the area was approximately 13% less than 2006, and 2006 was the 3^rd best real estate market in Ct in the last 20 years. In addition, the actual value of homes in Ct increased by 2-½% this past year.

This demonstrates that a house that is priced realistically has a good chance of being sold in a reasonable time span, which in the current market should be within 120-150 days. Buyers with established credit should have little trouble in getting a decent mortgage, and with the rates being adjusted weekly, a 6-7 % mortgage rate is not an unrealistic number. As always, the buyer with little or no money, or credit problems will find it difficult to get a mortgage, just because lenders have gone back to doing business in a more traditional manner, which protects everybody.

I have taken the time to chart the 2006 and 2007 sales of houses in several towns around the greater Waterbury area that I currently service. The figures are noted as total residential sales in each of the years.

As always, do your homework properly, use a qualified full time Realtor, and your real estate transaction will go smoothly.

Town		2006	2007
Beacon Falls		40	37
Bethany		62	54
Bristol		564	534
Cheshire		280	276
Middlebury		116	83
Naugatuck		373	296
Prospect		91	80
Waterbury		885	688
Watertown		197	177
Wolcott		146	166