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      Blog :: 04-2016

      Selling Your Home? Make Sure the Price Is Right!

      Price-It-Right-STM

      In today's market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

      There is no "later."

      Sellers sometimes think, "If the home doesn't sell for this price, I can always lower it later."However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

      John Knight, the recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered their price. His article, Listing Price, Time on Market and Ultimate Selling Price, published in Real Estate Economics revealed:

      "Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price."

      Additionally, the "I'll lower the price later" approach can paint a negative image in buyers' minds. Each time a price reduction occurs, buyers can naturally think,"Something must be wrong with that house." Then when a buyer does make an offer, they low-ball the price because they see the seller as "highly motivated." Pricing it right from the start eliminates these challenges.

      Don't build "negotiation room" into the price.

      Many sellers say that they want to price their home high in order to have "negotiation room." But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.

      Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000 but lists it at $425,000 to build in"negotiation room," any potential buyers that search in the $350k-$400k range won't even know your listing is available, let alone come see it!

      One great way to see this is by using the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.

      Selling Your Home? Make Sure the Price Is Right! | Simplifying The Market

      A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the "right" to purchase your house.

      Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

      The Price is Right

      Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Let's get together to discuss what is happening in the housing market and how it applies to your home.

       

      Thinking of Selling? The Market Needs Your Listing!

      The housing market is really heating up and buyer demand is dramatically increasing as we enter the spring season. However, one challenge to the current market is a major shortage of inventory. Below are a few comments made in the last month by industry experts.

      Lawrence Yun, Chief Economist of NAR

      "Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau."

      Jonathan Smoke, Chief Economist of Realtor.com

      "Low inventories and tight credit will limit the gains we will see in 2016. However, given the level of pent-up demand evident in web activity and stated buyer intentions for 2016, we should see this spring materialize as the busiest season of sales since 2006."

      Rick Sharga, Ten-X's EVP

      "Inventory is too low to support much higher sales. There's virtually no inventory available at the entry level, and single family housing starts and permits continue to languish at levels far below where they should be at this point of the recovery."

      David Crowe, Chief Economist of the National Assoc. of Home Builders

      "Many sellers may not have an absolute decision as to whether to buy an existing home or a new home. So the low inventory of existing homes is locking them in place."

      Freddie Mac

      "Challenges remain, with low housing supply and declining affordability being a key concern in many markets."

       

      If You Are Thinking About Selling...Now is the Time!

      If you thought about selling your house this year, now may be the time to do it. The inventory of homes for sale is well below historic norms and buyer demand is skyrocketing. We were still in high school when we learned the concept of supply and demand: the best time to sell something is when supply of that item is low and demand for that item is high. That defines today's real estate market.

      Jonathan Smoke, the Chief Economist of realtor.com, in a recent article revealed that:

      "Would-be buyers face a dilemma: There will be more homes on the market over each week of the next three to four months, but there will also be even more prospective buyers. We are entering the busiest season of home buying with the lowest amount of inventory in three years. To be competitive, buyers should get pre-approved for a mortgage and be ready to act quickly if they find a home that meets their needs."

      Smoke goes on to say:

      "Listings are growing as they normally do this time of the year, but because demand has been growing faster than supply, homes are selling faster. So the monthly trend is the normal seasonal pattern, but the year-over-year decline is reflective of demand being stronger than supply for more than a year, which is resulting in fewer homes available and faster-moving inventory."

      In this type of market, a seller may hold a major negotiating advantage when it comes to price and other aspects of the real estate transaction including the inspection, appraisal and financing contingencies.

      Bottom Line

      As a potential seller, you are in the driver's seat right now. It might be time to hit the gas.

      Real Estate: 2016 Will Be the Best Year in a Decade

      A few weeks ago, Jonathan Smoke, the Chief Economist at realtor.com, exclaimed"All indicators point to this spring being the busiest since 2006."

      Now, Freddie Mac has doubled down on that claim and is saying that 2016 will be the best year that the real estate industry has seen in a decade. In their March Housing Outlook ReportFreddie Mac explained:

      "Despite the challenges facing the housing market, we expect this to be the best year for housing in a decade. Home sales, housing starts, and house prices will reach their highest level since 2006 according to our latest forecast...Challenges remain, with low housing supply and declining affordability being a key concern in many markets, but on balance, the housing markets in the U.S. are poised for the best year since 2006."

      The key indicators that have given Freddie Mac such a positive outlook are:

      • Low interest rates
      • A resilient labor market
      • An increase in household formations
      • A projected increase in newly constructed homes

      Bottom Line

       

      2016 looks to be shaping up as a great year for residential real estate. Whether you are thinking of buying or selling, we should meet up to discuss the new opportunities that are arising in your market.

       

       

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