Here's part three of my thoughts on the recent U.S. News series on the slowing real estate market. Today we'll talk about how to set the right price when selling your home. Their main thoughts:
With prices flattening and inventory growing rapidly in many once hot markets, setting the ideal asking price for a house can be the most crucial decision sellers make. "Unfortunately, they've often got their heads stuck in the clouds," says June Fletcher, author of House Poor: How to Survive the Coming Housing Crisis. "People want to think their house is worth what it was when the market was peaking. But the days of looking at what the neighbors sold theirs for, then adding 10 percent, are over."
Real-estate agents typically recommend that serious sellers price their houses at or just below what comparable homes are selling for. But in a flat or declining market, some now suggest setting the price 10 percent or more below the market. "The idea is that if buyers see it's really a great deal, they'll go after it even in a down market," says Fletcher. "If enough of them do, they'll bid up the price to what you wanted to get in the first place."
Experts like Fletcher suggest doing a reality check: Visit local open houses, find what comparable homes are selling for, and ask several agents to suggest an asking price. The Internet, too, offers sites like zillow.com, which lists estimates and comparables.
Some also advise sellers to reduce their price quickly if buyers don't emerge within a few weeks. "Taking a small loss today is better than sitting on the market for a year," says John Schaub, author of Building Wealth One House at a Time.
Setting a house price is often a very difficult process for a homeowner -- they usually want to price it higher than it's realistically worth. There are a few main reasons for this (in my opinion):
1. Selling a house is an emotional process and people can't fathom that their "darling house" is worth less than they think.
2. Most people need/want to get a certain amount out of their house. There are several reasons for this including the following:
- They loaded up on debt to buy the house in the first place and need to sell it for a certain amount just to break even.
- They are upgrading to a bigger house and need a profit on the old one to put into the new one.
- They have a certain dollar figure in their head that they feel they need to get out of the house (their profit for just living there).
- They can't afford the realtor fees unless they get a specific price out of the home.
3. A house is a huge asset for most people and they are concerned that their net worth/finances will take a big hit if they sell too low.
But all these issues really do is stand in the way of selling a house. They make owners set an unrealistically high selling price, then all the house does is sit. Then they have to lower the price to what it should have been to start with.
My advice is look at the home as if you were BUYING it and decide what you would pay for it (based on what like homes are selling for). It's likely that this is a realistic selling price for your house.
Personally, we have the value of our home in Quicken at about $40,000 less than the market value (though that gap is shrinking as housing prices are starting to fall.) This gives us lots of cushion to sell at a realistic price and pay realtor's fees if and when we ever decide to sell.
This piece from U.S. News also tells the story of a couple who wanted a high price for their home, then had to settle for a much lower one. Their last quote was quite an ominous one for the falling U.S. housing market:
"We're just glad we got out when we did."
It is really amazing how many people still do not understand where the market is at. Last week alone, I must have read hunreds of MLS listings. I couldn't believe how many still "show like a model", or have had the "price reduced!"- by like $2-6K!! It's just not enough in this Phx market- because there is soooo much available right now. Lots of houses for sale by people who wanted to move into new construction homes , contingent on the sale of their current home, and many for sale by late coming investors (aka the lemmings lol) who came in and bought at the top of the market and are now stuck.
Posted by: prlinkbiz | August 07, 2006 at 11:10 AM
It's like anything you are selling or buying, do your homework. The market will dictate your price when selling a house. Unless you are very lucky and a buyer seems intent on buying your house for emotional reasons, you will learn the hard way.
Posted by: Brian | August 07, 2006 at 11:44 AM