Thursday, June 21, 2007

Delayed Response

Pricing right at the beginning will usually MAKE you money in the end. I am telling you this because I have seen sellers lose money, yes, by not listening to me. Here is the "why" and "how". Let's just say, for example purposes (I am protecting identities, but this is close to a recent scenario), that we have a house that by all reason and statistics, should be priced at $579,000. I have done a market analysis for the seller. I have taken into account the competing properties, what has gone "under deposit", and what has recently closed. I have to, of course, look at the market trend. Is it a down, stable or increasing market, in terms of value? We are looking at today's market, which is down, that is, prices are less than they would have been a year or six months ago. Thus, the information I give the seller has enough basis to be predictable, barring a greater rate of decline. The sellers, however, want to list the property at $599,900-- $20,000 higher than my recommendation. We proceed with the listing and do get a number of showings. Many showings. No offers, however. Why? When many buyers look at a property, and don't make an offer, then they are "picking" other properties. Ones that are more desirable in the price range. So, our subject house is really helping to sell the other properties. (Pretend you are the buyer. You walk into this house that really is not as good a value as others in the 599,900 price range. The next house you go into is far nicer, and it is the same price. You are sold! The incorrectly priced house helped you buy the other one.)

After a couple of months, the seller agrees to lower the price. By $10,000. That's really not going to make a dent in the perception of this property by the market place, but that is what the seller wants to do. At this point, other properties have sold, and the market has dropped a bit more. The seller really should have reduced to $579,900, if not the $569,900 at this stage. But he is stubborn. Again, many buyers look at the home. There are no offers. Other houses sell first. The seller squeaks down another $10,000. Now he is at the $579,900-- but this is four months later! Ineffective. He lost his window, and his price should really now be $559,000 to sell. This story continues with the incremental reductions until the home finally sells for $540,000. Guess what? If the seller had originally priced at $579,900-- he would have been sold, probably between $560,000 and $570,000. So, in the end he lost over $30,000. By not being responsive. This market is very competitive. You have to price "ahead" of the curve to sell first. If you don't-- the market will tell you. If you do, you'll make money.

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