On the television show The Price Is Right, contestants giggle nervously as they try to name the actual price of a product. Many homeowners right now can feel the same sense of uncertainty as game show contestants. They are left with sweat on their brow wondering how they were drafted into a round of Bob Barker’s The Price Is Right and what they can do to win the housing game.
Understand market conditions
In a slowing real estate market called the “buyer’s market,” the buyer controls the price, not the seller. The owner will only get the price that the buyer is willing to pay for his property. Additionally, the home seller will likely run into a number of contingencies that the buyer adds to an offer that may also be well below the list price.
A general rule of thumb for seller pricing reality is that it takes about 6 months for them to reestablish their expectations. Meanwhile, many properties are trading at set prices as if the market is still experiencing double-digit gains. The reality is that prices have moderated (and in some cases there is a slight downward adjustment) and the time it takes to sell a property has increased.
Looking back is past
Many sellers still reflect on the past and are eager to get a better price than their neighbor got four months ago. It is difficult for these sellers to internalize that their home has not appreciated at the same rate as in the past. In some cases, the home may even get less than a home sold during the rush. We’ve seen many homes in the hottest markets exceed the list price by the thousands because eager buyers feared being shut out of the market. During these conditions, the price became secondary to winning.
The home sales cycle is longer now
The same home that sold four months ago above the list price sold on average in 12 days. Currently, homes take 30, 45, and more than 90 days to sell. That’s a tough pill to swallow for many marketers looking for a quick exit.
The impact of lower prices on sellers
Home price reductions are doubling every month. Numerous properties are listed above the acceptable price range in this market at the insistence of sellers.
For example, a homeowner recently requested that the real estate agent list their property at a price 10% higher than the most recent sale in their neighborhood. Within 30 days, the agent suggested a 5% reduction. Sixty days later, the property is still on the market, too expensive and outdated. Like a day’s bread, it sits there waiting for someone to grab it, while the fresher, lower-priced deals seem more attractive to home buyers.
Salesperson: Are you motivated?
Many sellers do not have a set deadline for selling their home. In terms of prices, this means that your motivation is low. If this is the case, the home should be listed at an attractive price to many buyers. The seller can count on selling their home within the average days on the market for their price range and neighborhood. Your real estate agent can provide you with this type of information.
On the other hand, a seller who is about to close an escrow on a new home is highly motivated. They have a much more urgent need to sell their home. If this is the case, the seller must list the house to make it attractive to an even wider audience than if they were not as motivated. That means prices on the lower side of the indicated range for the home. Offering incentives to potential buyers and their real estate agents in addition to an attractive price is also a great motivator. Another strategy that works is to list the house just below the market. No matter what you do, make sure the listed real estate agent implements an aggressive marketing plan to get the word out to prospective buyers and real estate agents.
Overcome puppy love by making your home more attractive
This is the real problem for sellers. Naturally, if a seller has lived in a home for a long time, it reflects their personality and preferences. Perhaps the striking pink game room or mirrored ceiling are items that they adore and think would add a premium to the home. The reality is that they are often a detriment. Check with your real estate agent to find out what impact these items will have. Better yet, hire a staging company to provide neutral feedback; it will be worth it in multiples.
Attractive exterior and more
We’ve all seen those home and garden shows that look at a home’s curb appeal or move-in condition. What they are talking about is really important in today’s market. Take an honest look at your property. It has been updated? Are all the handles still on your cabinets? Are the bathrooms cleaned regularly? (Eliminating the ‘ick’ factor is a big problem.) Should psychedelic wallpaper be removed? Can you make any improvements to the exterior of the house to improve the curb appeal?
Many homes that were sold in the recent past at a premium generally sold as is. There are too many properties on the market today to expect buyers to be willing to replace broken light switches, steam wallpaper, or repair broken door knobs. Instead of going through the hassle and maintenance, they will simply go through the house and find a spotless one at the same or better price. It’s best to replace and repair those items before you even list the property.
Contingencies: they have returned.
This is a negotiating point that for a time followed the path of the dinosaur. Now they are throwing their thunderous weight. The most common contingency added to the sale of the home is ‘at the time of sale and closing of the buyer’s home’. Another common contingency is making an offer dependent on loan approval. While financing should have been worked out before even bidding, many buyers today don’t meet these prerequisites before looking for a home.
Balancing factors
When determining price, it is a matter of balancing emotions, market factors, and valuable needs for both sellers and buyers. Sellers who understand these various factors and rely on researching their real estate agent supplies will have a distinct selling advantage. While other homes may be languishing, if you’ve done your homework, there should be no problem selling the home.
Still not sure what to do?
Talk to a quality real estate professional. They are trained and know the current market conditions. They have access to data that sellers simply won’t be able to get. This can make a difference in the sale of any home.
