We are trained as Real Estate Professionals to always answer the question “So, how’s the Real Estate Market?” with something like “Well, that depends…are you buying, selling, leasing or investing?” – because truth be told, typically if it’s a GREAT market for sellers, it’s less so for Buyers. Same the other way around. Right now, LEASING is crazy!! If you own rental properties you are sittin’ pretty! If you are trying to rent, you are faced with a lot of competition and HUGE prices for a rental. So How’s the Market? That depends on whether you are…Never mind, been there!
But whether it’s a HOT market or a COLD market, if a property isn’t priced right, it will hurt the seller – and it’s no good for the buyer either because even if they liked the home – they won’t make an offer. Never in my 20+ years of Real Estate have I seen pricing be more sensitive!!
If a property is underpriced, it will bump up with Multiple Offers and adjust to Market Value. If a home is Overpriced – get ready to hear Crickets! In other words, it will be VERY quiet, no activity, no showings and no offers – until the price is adjusted down, and by then, the house may seem tainted. When consumers are led to believe by the media that everything is selling in a nanosecond with multiple offers, and the house up the street has been on the market for six weeks, everyone “knows” something is wrong.
Case in point – an absolutely lovely home, in an amazing neighborhood on an even more amazing street in Alamo came on the market several weeks ago. I saw it on Thursday’s broker’s tour, and loved it – just beautiful – quality construction, great location, great backyard. We were all commenting that this one would go quickly! But the price seemed high. I often struggle with what the difference between $2.3 or $2.1MM is – besides the $200,000 which is less than 10% in that price range, it matters – a lot!
There were a few, granted very subtle, little nuances about this house that had to be overcome. Couple that with a price slightly too high – and that house has been on the market for over a month! I’ve seen several others come on the market, get multiple offers and CLOSE before this one is even Pending. If that home had come out UNDER $2MM, say $1.9MM, it likely would have gotten multiple offers and bounced up to where it is now priced.
So what are these subtle things and how can you know how to price accordingly for them? That’s where we come in, and that’s where a local agent with micro-neighborhood knowledge can make all the difference! I know your “cousin from Sacramento” is a Realtor, but trust me, it’s not worth it. Hire a local, experienced, full time agent and ask that agent to give your cousin a Referral Fee if necessary. A local agent is going to know that this or that particular nuance is going to matter to buyers in that location, or price range, or condition.
Another home in an incredibly desirable neighborhood came on the market recently. It wasn’t staged, and looked old because of its furnishings – even though it wasn’t old, it was slightly overpriced and they were using an Out-of-Area agent. It sat, and sat, and sat. After several price reductions it finally went Pending (it STILL hasn’t closed escrow!). Had that home been priced right and been staged – it probably would have sold its first weekend out.
The last point that is so important in pricing correctly in the first place is to make sure you know who your audience, or buyer is. Again, sounds obvious – but different buyer demographics behave very differently! Know who is going to (likely) be your target market. If a home is a fixer, or needs a lot of work – it can’t be priced like a pristine property. It’s going to appeal to the buyer who wants (or needs) a deal, and is willing to sacrifice on condition, to get into the property. No one is going to pay a premium for a house that needs work.
Likewise, if a home is show perfect – buyers will pay a premium. It’s just amazing how emotional that decision is!! Remember Bobbie Drive I talked about a few weeks ago? Disneyland perfect – 32 offers, $200,000 over asking!!
So, whether you’re buying or selling, understanding how homes should be priced is crucial for you to get a good outcome. And the best way to understand the right price is by working with your local area agent who knows your town, your area and your neighborhood.
Have a great week!!