In this type of market we often find sellers who have
unrealistic expectations. I mean why
not? They have put in a new kitchen,
painted it from top to bottom, and in some cases have finished off that “man
cave” in the basement. They’re expecting
to get this back and in the past that was the case. Unfortunately, we are in a very unique market,
and if not educated by an experienced realtor, you can find yourself “Chasing
the Market”.
Recently I met with a FSBO in my community and sitting there
at his kitchen table I said, “Lou, where did you come up with your price?” His answer to me was, and it didn’t surprise
me at all, “well I thought I would try it there for a while and we can always
drop it down if I don’t get any offers. I
want to build in some negotiating room.”
This might have worked in the past but all a seller is doing is driving
buyers away rather than attracting them.
This is a typical case in Chasing the Market and several things can
happen. First, the buyers who are out
there now are educated. There is so much
information available on the net that they know what homes are selling for in
that neighborhood and in their mind have established fair market value. You lose all credibility with buyers and send
a message that you are not serious about selling. Secondly, when a home sits on the market for
an extended period of time you could be sending two different messages to the
buyer. Some might feel that you are not negotiable
and others could interpret it that you are desperate and come in with a low
ball offer. In this type of market I
tell my sellers to have thick skin because there are those buyers who are going
to present insulting offers. Properties
priced to market sell. Over priced
properties sit and appear to be stale and don’t sell. Lastly and most importantly, data is clear
that the longer a home sits on the market the final selling price is lower than
it would have been if it had been priced correctly out of the gate.
Below is a chart that shows a typical seller “Chasing the
Market”.
When you price your home over market value you do nothing
but send a message to the buyers that you are not serious about selling. Current sales in the area have determined your
Market Value. What this charts shows you
is a Market Value line, your home Value on the left and Time line at the bottom. When you start out listing your home above
the Market Value you are in the beginning stages of Chasing the Market and
nothing good happens from here on in. Here’s what happens..Say your home has
market value of $250,000. In the past you could list your home for $275,000 or
$280,000 leaving room for some “negotiation”.
Unfortunately that traditional pricing worked in the past and leaving
that room for reduction was a wise pricing strategy but not now. It sits on the market for sixty days with no
lookers and then you agree to reduce the price to $265,000. Unfortunately, now with current market trends
your home has dropped another $10,000 to $250,000. This goes on again for
another sixty days and, you decide to another price reduction but the market
has adjusted and your home is worth less.
This is Chasing the Market. In
the past, if a home was priced too high the market would eventually catch up
and the home would sell. In today’s real
estate environment if a home is not priced at market or below market value you
will become very frustrated at the results and the home will not sell.
Here is my suggestion to you, and I do it all the time. I ask my seller to have an appraisal done
before their home is listed. It’s a
small investment in the big scheme of things to get to a successful
conclusion. Like I tell my sellers, put
a set of trained eyes on the home. I can
do my best to provide comps and sales in the neighborhood but nothing is as
good as a full appraisal. This can
really benefit both seller and realtor. An experienced appraiser can also be
very helpful to a seller and prior to contract point out things that might need
to be done to help his final number. He
can make suggestions on minor repairs that might help yield a significant
return. Nothing is worse than going to
contract and then being faced with the home not appraising after having spent
all that time in getting it listed, marketed and so on. Just a suggestion, see how it works…
If you are
thinking about investing in a home in Birmingham Alabama, either buying or
selling or both, please don’t hesitate to call @ 205-453-5345. Remember it’s not the sign in the yard but
the name on the sign. Vinnie Alonzo and
RE/Max Advantage South “Two Names You Can Count On”
You have many choices in Real Estate but only
one right one!