I received an email from an acquaintance who is trying to sell her second (nicer) home, asking me if I had any suggestions.  She said their home is listed for $50,000 less than what she and her husband have invested in it, but she's thinking if it doesn't sell in during the 3-month contract she has with their Realtor (who they really like), they might try to do a short sale.

She didn't say where this home is exactly, but she gave me enough information to look up their Realtor, and thereby look up the listing.  What I discovered when looking at the listing and comparing it to other homes that had sold in that area, is that even at their listing price, it looks to be still significantly over-priced.  (Matching the highest price-per-square-foot for any similar home sold there in the last 6 months would mean dropping the price about $65k.  The lowest comparable home sold for $140k less.)  But there are some extra's that might justify at least some of the discrepancy.  So, I decided to take my research one step further before offering my suggestions... I called their Realtor.

The Realtor agreed - the house is way overpriced.  But the couple is so nice, he decided to take the listing anyway, and hope that when it expires, he'll be able to convince them to drop the price down where it really needs to be in order to sell it.  He suggested another $100,000 off the price would put it into the competitive range.

After talking with their Realtor at some length, I finally figured out what I would say - to help them help themselves, and also (hopefully) help their Realtor by providing an echo from an "out-of-town expert."

Here's what I wrote...

 You asked for suggestions... and I do have a few.  Please understand, these suggestions are given with the idea of trying to assure that a) your home sells as quickly as possible for the highest price possible and b) that it "stays sold" (that the Buyer's Lender will agree to loan money on the property and not balk at the price.)  My only interest is in telling you the truth with integrity while offering my perspective as a Mortgage Consultant who's seen too many people in long-term financial "pain."  Some of what I have to suggest will probably make a lot of sense and seem easy; most of it, I fear, will be more difficult to accept... mostly because it runs against natural inclinations.  But, again, all of it is meant to get your home sold quickly and for the highest price possible.  That said, here we go...

 I looked up your Realtor online to find the actual listing and see what you're describing.  It really does look beautiful.  You've put a lot into it, and it shows.  (I ended up calling him, and he talked about how nice you are and kept repeating how wonderfully you've maintained/staged your home.  In my experience, it's quite unusual for a Realtor to keep mentioning how beautiful a home is, when s/he is talking with a Lender who has no vested interest in buying the home.  Clearly he wasn't trying to sell me the home.  Yet he brought up how exquisite you've made it, almost as if he can't get over it's beauty himself.  It leads me to believe the pictures, as beautiful as they are, may not do it justice.)

 You say it's listed at $50,000 below what you've spent on it.  That made me ask, "Why?"  I know the market is challenging.  It's really challenging in some of the neighborhoods near us.  (In fact, in one community, a family that a bit over a year ago spent $600,000 to buy their home is struggling to find anyone to buy it now... and they've got it listed for $280,000!  Of course, their community has one extra (HUGE) challenge: the Army Corps of Engineers discovered, just after they'd bought their home, that the whole community was built on an old WWII Bombing Range, and so the Corps has spent most of the last year finding, digging up, and destroying old bomb shells and fragments.  Hopefully your community doesn't have anything close to that challenging that you're up against!)

 Anyway, I did a little more digging on my own and compiled a list of all the homes within about 3 miles of your home that have the same number of beds and baths, are within 500 square feet of the size of yours, and have sold in the last 6 months.  (6 months is what most of the Lenders I work with have historically insisted their Appraisers use as the basis for determining the appraised value based on recent sales.  Newer guidelines are holding it down to the last 3 months.)  What I discovered, leads me to believe that even at $50k below your cost, the home might very well be overpriced for that market.  Ouch!

 Now, some of the things you've mentioned may offset the lower pricing of some of the homes that sold.  The information I was able to gather doesn't go into some of the important details.  For example:

• Having a lake view would probably make it a bit more valuable than one without, but not as valuable as one that was lake-front. 
• Also, being fully furnished would add a little value, although that could decrease the desirability for a family that's trying to "move up" who already have all their own furniture.  (Most of the time, because furniture is much harder to value, it's more beneficial to separate that from the purchase contract.  Because if it's included, the furniture is usually listed in an addendum that declares it has no value and is just being offered as a convenience for the Seller.  You may do better with the furniture, to offer it to some consignment shop.  Or offer it as a separate list of items available outside of the home contract.) 
• And since it's newer, it's probably more valuable than one that was built several years before... but again, it wouldn't be as valuable as one just built.  (Steve probably knows what's going on with new homes there.  And can advise you on that.)

 So, suggestion #1 would be to get an Appraiser to do a full appraisal of the value of the home.  I would expect that would cost between $325 and $375.  But it will give you confidence (and assure potential buyers) that the price is right... assuming that the appraisal comes in saying it's worth at least the price you're asking.

 If the appraisal comes in lower than that, the only way you'll be able to sell it for that price is if someone either can buy it without borrowing (they can just write out a check for the full amount), or they are willing to pay the difference between what the Lender will loan them on the appraised value and what the agreed-upon sale price is.  My guess, based on the information I gathered, is that the appraisal will more likely come in somewhere between $64k and $140k lower than what you're asking.  But that's just my guess... I'm not a Realtor, nor Appraiser, nor is it my "neck of the woods" where I'm fairly familiar with what values are.

 Suggestion #2 actually comes from a Realtor I regularly work with.  And that is to take care of some of the details that create insecurity on the part of the Buyers, but which lead to a faster sale and give the Buyers confidence in their purchase.  (Everyone buys based on emotions, but they need to find facts to logically back up their emotional decision and give them confidence that they made a good choice.)  Some of those details would include: Get a full Home Inspection done by a Home Inspector.  Get a Termite Inspection.  And finally, get a Home Warranty (paid for at closing) to assure them that if they discover any problems with the house or any appliances within a year that they won't be out even more money.  (This also makes sure that once it's sold, it's sold.  And they won't be coming after you to get you to pay for any repairs or renovations in 6-9 months.)

 Suggestion #3: offer a slightly higher Realtor commission to a) reward your Realtor for getting the home sold quickly (which will be true if he sells it within 3 months) and b) entice other Realtors to show your home before others of similar quality/price.  (Yes, I know, it's using their own need and/or greed for money to your advantage.)  I don't know what the average time on the market is for your area.  For my area, it's somewhere in the range of about 140 days.  That's just shy of 5 months for the average home to sell.  Homes that Buyers think are priced too high are pushing that average out further; homes that Buyers think are priced very competitively are shortening that average.  And with the higher percentage, both Realtors will be more inclined to keep the price higher, because the more the price drops, the more it costs them.  My suggestion would be to offer 7% split down the middle between Realtor(s) representing the Sellers (you), and the Buyers.  The extra 1% only costs at most 1% of the listed price, and could make all the difference in getting it sold quickly.  (I try to live by the verse "A worker is worthy of his wages."  What that means to me is that someone who can do a superior job is worth superior pay.  Or put in common language, "You get what you pay for.")

 Suggestion #4: Talk with your Realtor about dropping the price by some amount (maybe $5,000 to $10,000) every 2-3 weeks or every 7-10 showings (whichever is less) until an offer is generated.

Hopefully they'll take these suggestions to heart, and act on them.  Especially the first one.  (With that one, I expect they'll get a third "expert voice" assuring them that their Realtor really does know what he's doing, and they'll finally "get it" that the value of a home has little to nothing to do with how much one spends on it, and everything to do with how much Buyers in the market value it.)

And maybe some others can get good ideas from this.  Realtors - some ideas for how you might approach this kind of difficult situation.  Sellers - do a reality check on your expectations, and a few (possibly new) ideas of how to improve the sale-ability of your property.