Here is a letter from our President letting us know of the Quickly changing Market conditions. Mahesh Mike Patel
To: Prudential California Realty Clients
Date: July 22, 2010
Re: Quickly shifting market conditions
I am writing you to alert you to some market conditions that we are seeing that do not bode well for getting homes sold in the next quarter or two without our homeowners being very involved in the details and process of getting their own homes sold.
Attached to this letter or email you will find a graph showing three trends over the past 15 months. The graph shows homes for sale on the market, homes sold and closed and homes pended for sale. (Pended is homes sold but not yet closed escrow.) While this graph is for the combined communities of Orange, Anaheim Hills, Yorba Linda, Placentia, Brea and Fullerton, the entire Orange County graph looks pretty similar with just much larger numbers.
The graph quickly shows you that in just a six month period the available inventory (houses available for sale) have grown from 989 to 1,610. This is about a 66% increase in the number of homes on the market even while we have record low interest rates. This should not be happening. In our experience, with interest rates in an unprecedented 4% range, houses should be selling within hours. They are not and if you want your home to sell this year, I am going to recommend some strategies to help you and your Prudential sales professional to accomplish that goal.
The facts are simple. We have a very troubled economy and potential buyers are in a state of fear about their jobs and their overall economic well being. This fear is not likely to go away anytime soon. Homes are selling, as you can see on the graph, but they are not selling anywhere near the pace they should be.
The question becomes this for you, our client: If you want to get YOUR HOME sold THIS YEAR, what must you do? Here are my recommendations based on over 35 years of real estate experience in hot markets, cold markets, stymied markets and every other kind of market you can think of.
1. Price: Any real estate agent can tell you to reduce your price and certainly at some point, any home will sell if priced low enough. While price is very important, what is more important is how your price relates to the other homes in the overall market area. With a higher inventory of homes on the market, you are not just competing with other homes in your neighborhood. You are competing with others similarly priced in your city and perhaps neighboring cities as well. If you want your home to sell this year your home must be very well priced and be in the very best condition of the homes you are competing with.
2. Condition: This is so critical. If your home does not show well, change that now or significantly drop the price. In the North Orange County market area there are about 400 homes that are closing escrow each month. With 1,610 homes on the market and more coming on the market every day, (far more than are selling) you must get your home sold before the inventory becomes overwhelming. Therefore, unless you are willing to make a dramatic price cut (unnecessary) you must have your home in the best condition possible. If there are 40 homes you are competing with in your price range for example, and only 10 of those will sell this month, you need to cause your home to be one of the ten that sell. You have to be priced well of course but as important, your house must be presented in its best possible light. Your agent can give you the best guidance on this but you must have your home looking sharp in comparison to the other properties on the market. A few thousand dollars in painting and simple repairs just might make your home the one that sells as opposed to just sitting on the market. In a market where the homes for sale are increasing, this is a bad position for a homeowner to be in. Your house is not selling and every day more homes are coming on the market to compete with it. You simply must get in front of this cycle or just decide you do not want or need to sell. Consider asking your agent to show you 5 or 6 homes in your price range to see what you are competing with. He or she can get you a list of all the homes for sale you are competing with and then you drive by those properties. Compare your home with the others for sale for how they look from the curb. While first impressions are not always right, they are the lasting impression. More importantly, ask your agent to give you the list of homes in your price range that have sold in the past month and drive by them as well. These homes sold and yours did not. What is different?
3. Availability: When houses are selling in hours, buyers and agents will make plenty of allowances for homes that are difficult to show. NOT in this market. You need to make your home extremely easy to show. That means having a lockbox. There are certain situations where this might not be the best choice, but in most cases it is the ideal choice. You want an agent or potential buyer to be able see your home on a moments notice. If they can't reach your agent or cannot reach you, your home gets eliminated from the list they are showing....as there are plenty of other homes they can show.
4. Sign: If you do not have a Prudential for sale sign in front of your house showing it is for sale, get one today! The facts are simple. People drive the neighborhoods they want to live in. If it is a big "secret" that your house is for sale, you make it harder on yourself to get your home sold. The very people who are the MOST LIKELY buyers for your neighborhood, don't see the home as a choice and you hurt yourself.
5. Commission: If you do not have a minimum of a 6% commission you are paying to sell the property, then change that at once. When houses are selling in hours, our firm and our agents can be more flexible on the commission issue. This is not the time to be trying to save a percent or so. Virtually all real estate agents are paid on a commission basis. You put yourself at a big disadvantage if there are excellent homes to show that are paying more in commission. If you want an excellent strategy to make your property stand out, pay more in commission. By paying a 7% commission we would permit our agents to offer the selling firm and their agent a 4% commission for example instead of splitting the commission at 50/50. When everything else is equal, your home is going to get more showings and will sell faster. Many times an increase to the selling side of the commission is far more effective than dropping the price more and more. With more homes on the market than we have seen in a few years, the Prudential agent who has your home on the market will need a full commission in order to be willing to spend the marketing dollars necessary to get your home to stand out. While this no doubt sounds self- serving, please understand. We do a higher volume of business in the North Orange County market area than the next three firms combined. We are going to be able to sell our share of homes, the question is, will YOUR home be one of them? You can help us help you with flexibility on the commission issue.
6. Get your next house in escrow now: If you are moving and staying in the area, chances are you are wisely taking advantage of some of the best interest rates since World War II. Go out and negotiate on your next dream home. While no agents and no homeowners like to take contingent sales (the home you buy is contingent upon your home selling) in a quickly growing inventory market, they will consider things they never would have considered when homes were selling in hours or days. For example, you might go find your dream home that is priced at $1,200,000. It might be easier to sell your $800,000 home than that home. A strategy that often works well for both buyer and seller in this transaction is this: You agree to reduce your listing price on your home by $75,000 if the seller of the home you are purchasing will reduce his price to you by $100,000. The reduction in price of your property will likely assure both sales of happening. You both took less than you wanted but you have both achieved the objective of making your homes the ones to sell in a much more challenging and competitive market. You have the added advantage of a very low30 year interest rate on your purchase that is not likely to be duplicated in the years ahead.
The real estate market is going to be challenging for those people wanting to sell their homes in the next six months. While your Prudential sales professional can give you much more detailed and specific info than I can in an open letter to our clients, I have attempted to share strategies with you that will CAUSE your home to sell. If you sit back and wait, then you find yourself competing with more and more properties each week and month that go buy. Take action. Work with your agent closely to make your property stand out from the crowd and CAUSE it to be the next home to sell!
Thanks for choosing our firm. I highly value the relationship we have with the real estate professional in our firm representing you and I highly value the relationship we have with you. I think if we all work together NOW, before the inventory grows much further, we will all have a better outcome! Thanks for working with Prudential California Realty.
Sincerely,
Richard D. Cosner
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