PRICE YOUR HOME TO SELL Part 4 of 5

PRICE YOUR HOME TO SELL Part 4 of 5
BY JOHN OCCHI, HEMET REALTOR®
Originally posted to this BLOG

Last time we looked at trends in the market and several principals that  govern the behavior of the Hemet Real Estate Market.  In this installment, we will examine what happens to a home that enters the market over priced and what affect it will have on the perception in the market.

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What Happens When a Hemet Home is Overpriced?

It is critical to price a home properly when it is first listed on the market. If a seller takes the attitude that they can put it on the market for a higher price and then reduce the price if it doesn't sell right away is much more detrimental than any other pricing strategy.

More often than not, by the time an overpriced listing is reduced to the actual market value it will have become aged. Unlike a fine wine, aging is not good when you are trying to sell your Hemet home for top dollar.

Remember, the shopper who is looking at your home is just like you, and that's a good thing. But stop for a moment and remember what it is like to shop for a home. Do you remember ever asking the question of how long a home has been on the market? Did you make your own conclusions when you were given a long time period? Maybe you thought you could do a little negotiating at that point... or...

Some sellers will take the attitude that ‘they don't have to sell right now' and that ‘they have time'. This is a disaster in the works.

In an escalating market, it may be O.K. to price a home just over the market value, knowing that the market will catch up soon and you will receive top dollar for your home (assuming it's in top condition and you don't mind keeping it in showing condition until the market does catch up. This strategy is a good one if you want to make absolutely certain that you squeezed every possible dime out of your property. Remember though, it only works in an escalating market - not the pre-holiday market of November 2006.

This strategy will never work if the home is dramatically over priced. No reasonable amount of time will generate a buyer for a home that is 25% overpriced. Even if an offer comes in from a buyer who falls in ‘love' and ‘must have' your perfect dream home, remember that there is not a lender in the world who will make that type of risky loan. Every home has to be sold twice, first to the buyer and then to his lender.

So, Why are Homes Overpriced

I am hoping that you will agree that most of what I have shared with you is very basic principals of real estate and life in general. Now that you have thought about the concept a bit, I am hoping it is as obvious to you as the nose on your face.

Let's examine some of the reasons why sellers still overprice their home...

OVER IMPROVEMENT

- This is a case of putting much more into a house than the neighborhood will ever bear. A classic example of the principal of Regression that I discussed earlier. I just sold a home that was worth around $450,000 for the house alone. However, the seller is a contractor that does custom rock work. He built am oversized rock pool and put in a plush tropical landscape complete with a wrap around deck, fire pit, BBQ, waterslide and so much more. We had an estimate of $500,000 to duplicate it from another contractor - so the house was a steal at $695,000 right? Unfortunately for my seller, it's still only a $450,000 neighborhood and the best we could do after a year on the market was $520,000

NEED

- Often an owner will have a need or desire to raise cash and the only way they can do it is through the sale of their home. Repeat after me, "So What!" As we discussed under ‘Market Value' a home is only worth what someone is willing to pay for it, not what you need. This often surfaces after a seller has stripped all of the equity out of the property through refinancing and then as the market flattens they try to bail, thinking the buyer and real estate agents should pay the closing costs and commissions.

BUYING A MORE EXPENSIVE HOME

- One of the elements that make Hemet so desirable is that our housing is so affordable compared to the rest of Southern California. However, when you move from Hemet to a more expensive area, do not allow the price you will pay for your new home influence the price you will ask for the Hemet home. Value is location specific

PAID TOO MUCH WHEN THEY BOUGHT

- This is a tough one. Chances are when you bought your home it wasn't ‘Market Value', otherwise it would have been hard to get a loan. However the market does change. Imagine you are buying you home right now, at fair market value and the next year sees the bottom fall-out of the market and it takes a 10% decline in value. If you were going to sell next year, would you be able to sell for your purchase price or the fair market value?

THEY LACK THE FACTS

- Pricing a home should never be a gut reaction but should be based on recent documented sales.

THEY NEED ROOM TO NEGOTIATE

- Being the melting pot we are in the United States, we have many cultures represented that negotiate as a way of doing business. However, please consider it is much easier to negotiate from a fair market value then it is from an over-inflated price. At least with fair market value pricing, you will have more of a chance to start the process then if you are in left field.

DON'T HAVE TO MOVE

- My least likeable seller. They often have a very blasé attitude and unless everything is perfect for them, and remains perfect throughout the entire escrow, they will often kill a transaction. Even if the move is not urgent, it is very important that your home should be priced correctly in order to preserve your options and marketing opportunities if and when the move becomes more urgent.

LET'S GIVE IT A SHOT...

Many times I have heard from a seller who has an over inflated number in their minds that "we should give it a shot for a couple of weeks, and let's see what happens".

It is very important to properly price your home for sale right from the beginning. The biggest reason is that most showing activity takes place it the first two weeks of being listed on the MLS.
The reason for this is most Realtors maintain an inventory of buyers that are cultivated over time. These re buyers who come to the real estate agent through any different channels of marketing, including the internet, open house, advertising , referrals and from the Realtors personal sphere of influence.

When a home is first listed, agents look at it the hardest. In the not so distant past, Realtors would make arrangements so see houses of interest up close and personal. This was good for the seller to see, because the seller knew that agents were coming through. Today with the internet, many times a home is reviewed online and never actually previewed until a buyer has expressed a specific interest in this home or type of home.

However, the point remains the same, most of the activity is in the first two weeks. Realtors are spending time studying the changes in the market and letting all of their interested buyers know about the property. Once the first couple of weeks of activity diminish, the only activity is typically when a new buyer enters the market.

Because of the initial influx of activity, it is critical that the home is in it's top condition and priced to sell right from the very beginning.

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In the next and final chapter of this special report we will end by examining how buyers shop using the MLS  - or any of the thousands of individual REALTOR websites that tap into this resource on their website.  We will then look at the many advantages to pricing your home right and their many advantages.  So, please come back and join us next time.

Have a Blessed Day,

John Occhi, Hemet REALTOR
www.JohnOcchi.Com