Today's Housing Market is Different From Tomorrow's

And by tomorrow, I literally mean Friday, today is Thursday. This was brought to my attention so clearly today while I was researching the potential value of a plot of land in Nevada for a client. The real estate agent I spoke to said, "I will call you back with a rough of estimate of what it's worth today, NOT TOMORROW." I truly understood where she was coming from.

This market is changing faster than I can blog about how much it's changing. What was a competitive price on Tuesday is increasingly much different by the weekend. It's crazy, but also a bit fun to watch all this happen daily. Before the fall of 2005, you could price a home a bit higher than the last comparative home sold and be safe and probably get multiple offers. Today, you try and price it a bit lower than the last comp. But sometimes that doesn't even work. There's where the fun lies. As Realtors our job requires much more of a pulse on the market than in the previous few years. A Realtor needs to be extremely informed and technically savvy to survive in this market. Of course . . . this could all change tomorrow.

Pricing a Home to Sell

In this current market of craziness, the proper pricing of a home has become an insurmountable challenge with Sellers. Our boom market gave home owners a mentality of what their home was worth at the height of the market in 2005 and Sellers just can't get whatever that price was out of their heads. The price of what a home would sell for is easy when looking at the facts, but convincing a Seller of that price is quite difficult.

An article in Inman news by Bernice Ross, which is directed at agents, but is also great advice for home Sellers outlines pricing strategies. See http://www.inman.com/content/story.aspx?ID=64177. The four points the article makes include the following:
1) Price a home below what recent comparable homes sold for to be competitive; no buyer wants to pay more for a home than is necessary
2) Don't try to test the market; test the market and you're just looking at wasted time and a price reduction in the near future
3) When reducing your home price, make a serious price reduction that will make a difference in the potential pool of buyers looking for a home; buyers search for homes based on price ranges, so if your home is listed for $475K and you reduce it to $470K, you haven't added a single new buyer to see your home -- however, if you lower your price to $450K, you just increased your pool of buyers for all those whose price maximum is $450K
4) What's your motivation to sell your home; do you "need" to sell or do you "want" to sell -- the longer your home sits on the market when priced improperly the more money you lose as homes values decline

Overpricing a Home for Negotiating

There is a thought among home sellers that if they price their home a little high, it will leave room to negotiate down. Now while this strategy makes sense on paper, it completely backfires in our current buyer's market. Right now, if a home is priced too high, it's impossible to even get buyers in your home to negotiate.

A properly priced home will get buyers in the door and potential offers coming in. Homes are still selling in this market, obviously. However, what is selling is priced at market or below, in excellent condition or has some other outstanding feature such as location, school district, etc.

If you look at the statistics of homes selling, once a home is properly priced and sells, they majority are selling between 95% and 100%* or more of their asking price. So a seller doesn't necessarily have to come down much from a proper list price.

*A sale price of a home may include seller concessions for closing costs, which brings the actual purchase price down, usually at 3% of the purchase price.

"So, how's the market doing?"

On a regular basis, someone will ask me, "So, how's the market doing?" And with all the negative press the housing market has gotten lately, I can see the anticipation of waiting to enjoy in the misery of how bad the market is currently. However, I refuse to wallow in the "this market is so bad" that I hear so many others doing. Instead, I'm taking the glass half full route -- regardless of what the market may look like that day, week or month. If I let myself, even for a moment, feel the full effect of a "bad market," I'm setting myself up for failure. I love my job too much to go there. So, if you ask me, "how's the market doing?" I will respond with, "Great!" And I mean it, because that's how I see it. It's always a good time to buy or sell a home, if it's the right time for you, regardless of market conditions.