Selling in a Softening Market
Originally appeared in Hills Publications, October 26, 2001 and ANG Newspapers, October 20, 2001
When the market dramatically downshifts from stratospheric prices, some sellers are the last to accept the new reality. Sellers sabotage themselves by failing to acknowledge current conditions.
Charmers command top dollar
In general, only ten percent of the houses on the market at any given time fit into the category we call “charmers.” These are older homes, usually from the thirties and earlier, and include a plethora of styles, such as Tudor, Mediterranean, Victorians, and Brown Shingle.
Charmers, whether they need work or not, are the most popular properties and they command the highest prices; the better the location, the higher the price
Do not make the seller faux pas of comparing your non-charmer to the charmer across the street. By definition, 90 percent of all homes do not fall into the charmer group. Many sellers place greater value on their lovingly maintained house than a smaller charmer in poor condition. Overpricing a non-charmer is usually a costlier mistake than asking a premium for a much-in-demand classic.
Pricing is tricky
Asking prices are arrived at by using past, comparable, sales in the area. This approach is most straightforward when prices are stable. It takes substantial expertise to effectively utilize comparables when the market is changing.
For example, a neighborhood sale from six months ago would not be applicable because the market is not as strong now. Looking at a sale that closed two months ago might still require caution, as that home would have gone into escrow about three months ago — again, a more robust market than today.
Despite a more drastic drop-off in the higher price ranges, many homes listed under $500,000 continue to see multiple offers. A property that may have received 10 offers last year, however, may now get only three.
It can be a challenge to convince a seller, that his house is worth less today than it was last year. Some real estate practitioners may not want to risk losing a listing by giving a disappointing, low figure. Instead, they might reinforce an unrealistic expectation with too high a price.
When interviewing Realtors, be sure to have them explain why they are suggesting a certain list price and if they feel your home will sell within two weeks at that amount. Generally, the longer on the market, the lower proceeds you can expect.
In any market, pricing attractively creates more attention and activity than overpricing. This assumes full marketing exposure.
Recently, I listed a lovely old charmer. It received 21 offers and sold for 41 percent above asking because the price was perceived by the market as appealing. A higher list price probably would have resulted in a much lower selling price.
Final Thoughts
Today’s market is a combination of a weaker economy and an inevitable cyclical swing.
In terms of dynamics, nothing is happening at present that has not occurred periodically in the past. Nevertheless, not all agents have an equal feel for the fluctuations of the market.
Make sure to choose a local Realtor who has the experience to put today’s market in perspective with past historical trends. Work with someone you can trust. Most importantly, realize that last year’s market is history and price your home accordingly.
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