Dropping Price Of Your San Diego Home For Sale Will Make More Profit

San Diego Home Seller (SELLER):  I want to maximize the profit on my house sale.

San Diego Real Estate Agent (AGENT):  Let's list the house at $699,000.

SELLER:  The exact same home, two houses away, sold for $710,000 in February, I read that San Diego home prices are up year over year.  I want to list it at $740,000 and settle for $735,000.

AGENT:  Markets are funny things.  In fact, two things will cause prices to flatten and perhaps drop this fall:

The first is a slowdown in home price growth. For the first time in five months, price growth was essentially flat in July. The second is a shift in pricing power from sellers to a more balanced market. That shift has been nearly nine months in the making from when sales began to first decline last November

Markets are very tricky; they can change on a dime.  We want to be careful not to "chase the market down" as it is softening.

SELLER:  That makes no sense-- the trend is going up.

AGENT:  Let's start here:  You're selling your home because you want to buy a million dollar home.  You'll need to net $250,000 for a down payment on the new home.  I determined that you can sell for $699,000 and net that amount.  If you sell for $725,000 you'll net $275.000.  If all other comparable homes are priced around $725,000, do you think it's more or less likely that people will look at your house this weekend, priced at $740,000?

SELLER:  Less, of course...but...

AGENT:  Okay.  Is it more or less likely this weekend, that everyone looking at those homes at $740,000, will feel compelled to check out yours listed at $699,000?  Stated differently, If there are 10 potential buyers touring this weekend, and 10 homes listed around $725,000, how many of those 10 buyers will take time to look at one priced at $699,000?

SELLER:  All of them.

AGENT:  and at $740,000?

SELLER:  None? All?  I dont know.

AGENT: More will look at the lower price and, almost everyone who offers $715,000-$720,000, for the ten homes, will likely offer you above the list price for your home.  While each of the homes, listed around $725,000, may get an offer, each of those offers will most likely offer on your home.  Negotiating price higher is easier with multiple offers while negotiating down is more likely with only one offer.

Listing at $740,000, while ten similar homes are listed at $725,000, almost assures no offers in a softening market.  We see the market is softening because there are more listings today (in this neighborhood) than there were a year ago.

SELLER:  but I want top price.

AGENT:  Almost assuredly, the top price paid this month will be for less than $740,000 and, almost assuredly, the top price will be for more than $699,000.  What if (as the Redfin article suggests), the market is indeed shifting?  Next month, you may see ten new listings around $710,000.  How far will you have to cut your price (from $740,000) then?

SELLER:  (gulp)  to $725,000? 

AGENT:  Closer to $710,000.  Now you're competing with a bunch of listings again.  The offers will likely come in below $700,000.  Then, you won't be able to net the required amount to buy the million dollar home.  At the very least, to sell your home in a timely manner, you want to be listed below half the houses offered similar to yours.  The lowest listing is surely going to get the quickest activity.

I'd rather negotiate five offers up from $699,000 then one down from $725,000.  You need to sell at $699,000 but can realistically settle somewhere between $705,000 and $720,000 this month if we price it to sell,  up front.