Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Monday, June 27, 2011
A house can sit on the market for months, or even years, without selling or even having an offer. Then, the list price is reduced by a negligible amount, and an offer quickly comes in, or sometimes multiple offers. What is it that makes all of the buyers sit on the sidelines at $249,900 but makes several of them jump into the fray when the house is lowered to $239,900?
One of my Realtor colleagues made an excellent observation this week when he pointed out that despite the rather slow real estate market of late, buyers will indeed act, once there is equity on the table. That is to say that if you expect a house to sell for $250K and it has listed as such, the opportunity isn’t quite enough for a buyer. But when the list price declines to $240K (and the prospective buyer assumes she’ll buy for $230K), then the buyer is willing to act. She thinks the house is worth $250K, you see, but now she believes she can purchase it for only $230K. The buyer has the opportunity to buy a house $20K under perceived market value, picking up $20K of equity.
Now more than ever buyers must be comfortable with the purchase price they are paying for a home. After all, while we are starting to see some positive signs in the local housing market (lower inventory levels, more contracts signed), we still aren’t out of the woods yet. Without being able to assume that home values will increase 2% to 3% per year (as they have for many, many decades) many buyers want to make sure they are paying a fair price, or getting a deal on a property.
This pricing phenomenon introduces some challenges for you if you are hoping to sell your home. In a stable and growing real estate market, if homes like yours were selling around $250K, you might list your home for $259,900 and hope to also sell your home for $250K. Now, however, if houses similar to your home have been selling for around $250K, you likely need to list it for either $240K or $250K. If you list it at $250K, buyers will see it as an appropriate price, but not a great price and you may soon be reducing the price to $240K.
As a seller, bear in mind that roughly one-third of homes that are selling these days sell (close) within three months of hitting the market. Many other homes stay on the market for ages, so the key is to price your home appropriately from Day 1, not from Day 90 or 180. As a buyer, you need to be ready to act quickly if you see a house that is being offered at a price where equity will be left on the table. There are many buyers waiting on the sidelines these days, watching and looking for attractive, well priced properties.
One of my Realtor colleagues made an excellent observation this week when he pointed out that despite the rather slow real estate market of late, buyers will indeed act, once there is equity on the table. That is to say that if you expect a house to sell for $250K and it has listed as such, the opportunity isn’t quite enough for a buyer. But when the list price declines to $240K (and the prospective buyer assumes she’ll buy for $230K), then the buyer is willing to act. She thinks the house is worth $250K, you see, but now she believes she can purchase it for only $230K. The buyer has the opportunity to buy a house $20K under perceived market value, picking up $20K of equity.
Now more than ever buyers must be comfortable with the purchase price they are paying for a home. After all, while we are starting to see some positive signs in the local housing market (lower inventory levels, more contracts signed), we still aren’t out of the woods yet. Without being able to assume that home values will increase 2% to 3% per year (as they have for many, many decades) many buyers want to make sure they are paying a fair price, or getting a deal on a property.
This pricing phenomenon introduces some challenges for you if you are hoping to sell your home. In a stable and growing real estate market, if homes like yours were selling around $250K, you might list your home for $259,900 and hope to also sell your home for $250K. Now, however, if houses similar to your home have been selling for around $250K, you likely need to list it for either $240K or $250K. If you list it at $250K, buyers will see it as an appropriate price, but not a great price and you may soon be reducing the price to $240K.
As a seller, bear in mind that roughly one-third of homes that are selling these days sell (close) within three months of hitting the market. Many other homes stay on the market for ages, so the key is to price your home appropriately from Day 1, not from Day 90 or 180. As a buyer, you need to be ready to act quickly if you see a house that is being offered at a price where equity will be left on the table. There are many buyers waiting on the sidelines these days, watching and looking for attractive, well priced properties.
