I saw the 60 minute special regarding foreclosure and felt that this post was a must and contains so many things to discuss. I decided to comment on the "Original" condition home. Coming from a hometown where people live in their homes for 2-3 generations I am the product of an "original" home family and we are looking to sell soon. I just discussed the pros and cons with my mother today who currently resides there. We discussed the "upgrades" that we will be competing against in todays market and how it can affect market pricing. But we cannot ignore the unique features of the "original" homes. These unique features, great potential homes are going to require a unique, creative, vision directed buyer. Many older homeowners who are in these "original" homes are ready to shed the maintenance expenses.
IF YOU WATCHED 60 MINUTES LAST NIGHT ON CBS, YOU TOO CAN SEE THE WRITING ON THE WALL! Homeowners are considering walking away from "underwater" homes---and they are doing it in great numbers. These are not your "subprime" mortgage foreclosure---they are average homeowners who have been making payments and CAN AFFORD to keep paying! They choose to move on because they do not see a future in their homes!!!
FALLING HOME VALUES. This is still A REAL ISSUE TO CONSIDER......prices are still falling , and may fall further! Let's not put our heads in the sand---we need to act now! With attention on the seriously underwater middle class homeowners, walking away from their obligations, we now have another possible situation that will cut into the already lower home prices.
Falling home values have not stopped--they may have slowed somewhat in certain markets, but prices are still coming down! With foreclosures still a factor and short sales increasing each month, we need to take a long hard look at what we need to do in order to prevent further erosion in the housing market....What we DO have in our favor are BUYERS!...People are looking to buy in this market because of percieved value, Perhaps for the first time in a decade!
There is no way to say how far home values will fall; we can look at prices as closings happen or we can look back on a 3 month time period to try to catch the trend for the next 3 months. None of this information is usable, however, because the actual price where a property trades appears to be based on the homeowners situation, not on any market trend. No longer can we use 1 year or even 6 months as a criteria for pricing homes
So, given the fact that we are not able to price properties based on a trend, it is now essential to know the motivation of the seller in more detail than in the past---How do we measure home values NOW? How do we determine the real price of a property in a market where the homeowner, desperate perhaps, needs to sell fast?
Measuring home values in this market is like measuring a moving target....we can be very wrong very easily and the homeowner who is more vulnerable then ever before, can easily become the victim of a distorted sense of home values if we use our former ways of pricing.
LET'S NOT PUT OUR HEADS IN THE SAND ABOUT VALUES AND LOSE PRECIOUS TIME IN THE PROCESS!
One thing that I have noticed here in the Hamptons is that the "new builds" are selling quite quickly and they are selling at prices that were "set" before the downturn--in other words, at the highs of the market in '07-'08! Builders are more optimistic than I have seen them in a very long time; they are able to buy up properties in ideal locations for 1/2 the price they would have paid in '07-'08 and they are tearing down and building new homes that appeal to a "new" buyer. This new buyer has money and has been waiting to buy a new home in a great location....and the builders are making hay while the sun shines!
MEASURING VALUES IN A VERY DIFFERENT HOUSING MARKET: The challenges that we face going forward in measuring the true value of a home is going to cripple the housing market unless we fully understand the motivation of both the buyer and the seller. I have the sense that if we go about doing the same things we did in the past with prices, we will find ourselves in a very bad, longer term crisis than is now projected.
PROPER PRICING MAY BE THE ONE THING THAT IS PROPPING UP THE HOUSING MARKET!!
IN my opinion, there are 4 definitive categories that we need to focus on when pricing properly in this very precarious time. I have broken them down with pricing strategies by category so you can see the importance of giving each property the best chance to sell quickly:
1."Original" condition homes: those homes that may be coming on the market for the first time in it's history. These homes are usually 25 years old or older and need major work to bring them up to date.
- Because the pluming and electric is old, the appliances and fixtures are out of date, this property needs to be priced to allow for replacement of these things---save time and money by pricing this house to motivate buyers to want to buy it...maybe even list the approximate costs of replacement.
- These homes need to be priced at the lowest level possible, based upon mostc recent sales and in-contracts of similar homes in a given area. Emotion is a major factor in additon to price when a buyer is looking at this category.
2."Good" condition homes: those homes that have been well maintained and may have been recently renovated but are 10 years or older.
- Here, the home has much to offer in terms of less work to do but again, offering the approximate costs of anything that needs to be re-placed will help to motivate the buyer who wants the charm of an "older home".
- Proper Pricing is critical in this situation because a buyer knows that he/she will have to do work to make it like their own and is looking to have a good reason to buy it. The price will make the difference here; emotion willl be less of a factor.
3."Prime" condition homes: these are the houses that we may have considered "like new" or "mint" condition and are no more than 10 years old, have been very well maintained and are up brought up to date on appliances and baths.
- This category of home is surprisingly easy to sell to the buyer who wants to move in and not have to do any work what-so-ever. Emotion will be a major factor and a good price will be the cherry on the top of a great "buy"
4."New build": is new and has never been lived in....generally no more than a year old.
- This is a category that took a big "hit" during the downturn; prices could not go low enough for the buyers of those houses! Motivation to sell became a sheer need to sell; builders were making deals that were hard to say "no" to.
- Because the "new builds" of yesterday ('07-'09) were going up in less than prime locations, they sat! What is that old saying: "LOCATION, LOCATION, LOCATION"....well it is still the key to selling a brand new home! Top dollar can be the result when a new home is in a desirable location.
With the additional factor of "walk aways" on top of the lost value through forelosure, we have an obligation to be at the top of our game when it comes to pricing homes in this market.
LET'S NOT MAKE THE SAME OLD MISTAKES WITH PRICES THAT WE HAVE IN THE PAST!!! LET'S NOT PUT OUR HEADS IN THE SAND WHEN IT COMES TO THIS ISSUE--OUR LIVELY-HOODS DEPEND ON IT!
Paula I. Hathaway, LBA, Prudential Douglas Elliman
Top Producer, Diamond , Gold and Chairman's Circle Awards