Published: Sunday, August 15, 2010
Price it right
In this housing market, think like a buyer and be prepared to make deep cuts
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Associated Press
Since the tax credit deadline passed at the end of April, the housing market has started to falter. It's a buyers market and a home must be priced right to sell in this slow market.
NEW YORK -- The good news for sellers: Your house will sell. The bad? Only if the price is just right.
That could mean biting down hard and slashing tens of thousands from your ideal listing price if you're serious about selling. And you should be prepared to get even less than that.
The recently expired tax credits for homebuyers gave sellers a boost. Home sales surged and values edged up. The worst appeared to be behind us. But since the deadline passed at the end of April, housing has faltered. Job insecurity, tight credit and consumer confidence are undermining a sustained recovery, despite the lowest mortgage rates in decades.
In June, sales of previously occupied homes fell 5.1 percent, while new home sales posted the second-weakest month on record. And many economists expect prices to decline another 2 percent to 10 percent followed by "a long, flat bottom," said Stan Humphries, chief economist at real estate website Zillow.com.
That means sellers must set their price with precision or risk languishing on the market.
Here's the disconnect facing sellers: The vast majority of sellers believe their homes are worth more than what their real estate agent recommends, according to HomeGain.com. At the same time, most buyers think for-sale homes are overpriced.
So how do you find the sweet spot?
Analyze your market first. Determine how many houses similar to yours are up for sale. Consider neighborhood, school district, size and price point. The more homes there are, the more it becomes necessary to list at the lower end.
"I want buyers to ask why is this house priced so competitively," said Ron Phipps of Phipps Realty in Warwick, R.I. "I want the answer to be an offer."
Foreclosures and short sales, where the owner sells for less than what's owed on the property, complicate matters. Be honest. Are the foreclosures or short sales in your market a reasonable alternative a buyer would consider? Some won't be because they are in disrepair. But others, especially short sales, are often in good condition and can be priced 15 percent to 25 percent below a comparable home.
So you've got the right price, or a price low enough to attract bids. Don't be disappointed when an offer comes in below the listing price. And don't send back a token counteroffer that's only a few thousand dollars below what you want.
"Buyers are not interested in back-and-forth negotiations these days," Phipps said. "They are less emotional and more disciplined. They will walk away."
If no one shows up for an open house, if no one calls and if there are no offers, then the price is too high. That means it's time to make a meaningful price cut. You won't be alone. Almost a quarter of all listings on the market at the beginning of July had at least one price reduction. The average discount from the original listing price? Ten percent, according to Trulia.com.
And cut with a machete and not a butter knife. Too many dinky reductions become a scarlet letter on your front lawn and would-be buyers will think you're not serious.
Sellers are always chasing falling prices, said Jonathan Miller, president and chief executive of real estate appraisal and consulting firm Miller Samuel Inc.
But there's a challenge. "They want to sell for more than what they owe or they want to get the money they put into the house," he said.
"The market couldn't care less about your personal situation," added Miller.
That could mean biting down hard and slashing tens of thousands from your ideal listing price if you're serious about selling. And you should be prepared to get even less than that.
The recently expired tax credits for homebuyers gave sellers a boost. Home sales surged and values edged up. The worst appeared to be behind us. But since the deadline passed at the end of April, housing has faltered. Job insecurity, tight credit and consumer confidence are undermining a sustained recovery, despite the lowest mortgage rates in decades.
In June, sales of previously occupied homes fell 5.1 percent, while new home sales posted the second-weakest month on record. And many economists expect prices to decline another 2 percent to 10 percent followed by "a long, flat bottom," said Stan Humphries, chief economist at real estate website Zillow.com.
That means sellers must set their price with precision or risk languishing on the market.
Here's the disconnect facing sellers: The vast majority of sellers believe their homes are worth more than what their real estate agent recommends, according to HomeGain.com. At the same time, most buyers think for-sale homes are overpriced.
So how do you find the sweet spot?
Analyze your market first. Determine how many houses similar to yours are up for sale. Consider neighborhood, school district, size and price point. The more homes there are, the more it becomes necessary to list at the lower end.
"I want buyers to ask why is this house priced so competitively," said Ron Phipps of Phipps Realty in Warwick, R.I. "I want the answer to be an offer."
Foreclosures and short sales, where the owner sells for less than what's owed on the property, complicate matters. Be honest. Are the foreclosures or short sales in your market a reasonable alternative a buyer would consider? Some won't be because they are in disrepair. But others, especially short sales, are often in good condition and can be priced 15 percent to 25 percent below a comparable home.
So you've got the right price, or a price low enough to attract bids. Don't be disappointed when an offer comes in below the listing price. And don't send back a token counteroffer that's only a few thousand dollars below what you want.
"Buyers are not interested in back-and-forth negotiations these days," Phipps said. "They are less emotional and more disciplined. They will walk away."
If no one shows up for an open house, if no one calls and if there are no offers, then the price is too high. That means it's time to make a meaningful price cut. You won't be alone. Almost a quarter of all listings on the market at the beginning of July had at least one price reduction. The average discount from the original listing price? Ten percent, according to Trulia.com.
And cut with a machete and not a butter knife. Too many dinky reductions become a scarlet letter on your front lawn and would-be buyers will think you're not serious.
Sellers are always chasing falling prices, said Jonathan Miller, president and chief executive of real estate appraisal and consulting firm Miller Samuel Inc.
But there's a challenge. "They want to sell for more than what they owe or they want to get the money they put into the house," he said.
"The market couldn't care less about your personal situation," added Miller.
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