I just received this email from our Coldwell Banker President, Joe Brown, and thought you might be interested in what he has to say about pricing your home in this market and about the state of the markets he covers.
Mark
Weekly Market Watch
August 17-23, 2008
How do you sell in a buyer’s market? The first and most important answer is probably the most painful. Price it realistically.
The fact is, buyers have a lot of houses to choose from right now. If sellers are motivated to sell, they need to be more realistic with their prices. Just because a year ago your neighbor got $700,000 for his home doesn’t mean you’re going to get that same $700,000 today.
Price reduction, price improvement, price adjustment. It doesn’t mater what you call it, but one theme I am finding in many of our markets today is a trend for sellers—who are starting to come to the realization that the market has changed—to reduce their price in order to be successful. Interestingly, often times we are finding that comps should be based on homes that have sold not in the last six months, not even in the last three months, but those that have sold in the last one to two months are the best and most applicable comps for our current market.
Understandably, it certainly has taken a while for sellers to realize the reality of this and the realities of our entire market. After years of double digit price increases, frantic bidding wars and seller control, this buyer’s market has been a tough pill to swallow for many sellers. But now that the pill has gone down, sellers seem to be understanding and are starting to make the adjustments to their listing price.
So the age old question, how do you pick the right price? Well for starters, do it from the beginning. Too many sellers try to test the waters of the market to see if they are able to generate buyer interest in the higher list price. The problem with doing so is that once sellers have to lower their price, buyers immediately begin to wonder “What is wrong with the house?” and “How much lower will they go?” Plus, if sellers are too high, they’ll need to continually reduce the price until they hit that magic number. This really puts sellers at a disadvantage.
To pick the right price, my best advice is for sellers to:
Realize that their Agent is there to help and sellers should be actively seeking their counsel and advice.
Examine their competition.
Thoroughly review pending sales and recent (very recent) history.
Examine days on market.
Review homes that have sold and of those, determine how many had price reductions. Plus, review where the list prices began and where they ultimately ended.
Remember, in this market especially, sellers are up against a lot of REOs and short sales so now more than ever it is imperative that sellers price their home right from the beginning. The resulting price may mean that they aren’t as motivated to sell right now. And that’s okay. But if they are motivated and want to sell now, they need to be realistic with their pricing, the competition and the realities of today’s market.
So with this new knowledge in tow for all of our would-be sellers, let’s take a look at this week in real estate:
East Bay—REOs continue to fly off the shelf which of course is doing nothing for the average sales price. But activity is activity and we’re glad to see us deplete the REO inventory which will position us well for a market recovery. One issue that is affecting the East Bay and several markets throughout the Bay Area is a lack of quality inventory. Yes we have the REOs. Yes we have a lot of listings that are for sale. But only a portion of those are considered just “ripe” for buyers who are looking for that move-in ready house. Buyers can be choosy right now and they are. They want that perfect combination of value, location and quality and they seem to be waiting until they find it. An interesting note out of Danville this week. REO activity has picked up. In fact, half of our August sales are REOs. The Pleasanton office is reporting that buyers are making offers but typically going 10-15% under list price.
Monterey County—Our Monterey market had a record-breaking 30 price reductions last week. Just to give you an idea, we typically have 12-14 price reduction in this market so last week was more than double. As I said earlier, sellers are getting the picture which is good news for buyers and our overall market. The region reports a good week for new escrows so going into this Labor Day holiday, our Monterey Peninsula market is moving ahead strong.
North Bay—The North Bay goes relatively unchanged this week with REOs driving much of the Sonoma County market. The entry level (under $500,000) seems to be flowing while anything under tends to sit. Our Southern Marin office is reporting increased activity, a real shocker for the end of summer—hopefully a sign of good things to come. A new condo in Shelter Bay priced at $925,000 received an offer after the first broker’s tour (before the Sunday open house) and had two back up offers. This goes back to my earlier reference that the market is in dire need of good quality inventory right now. Once buyers find the quality house at the right price, they’re going to act. It’s all about finding that magic combo.
Peninsula—Activity seems to be rule of thumb this week for the Peninsula. Our Burlingame office is reporting more sales and more offers are being written. It seems that the buyers are beginning to feel confident and are recognizing that now may be the time to buy. The Burlingame office had an REO sale this week. It was priced at $649,000 and garnered 17 offers, selling well above the asking price. For the first time in weeks our Half Moon Bay office is reporting some exciting news noting a sudden surge of buyer activity. Open homes are very busy and Agents are writing contracts with fairly aggressive offers, getting into spirited negotiations. Palo Alto remains quiet due to lack of inventory. Sellers, where art thou?
San Francisco—Our Lakeside office is reporting that things are selling though properties from the $1.2 to $1.8 million mark seem to be languishing. One bright spot in San Francisco remains the upper end with Lakeside noting that the $1.8 to $2.5 million are highly sought after. Our Noriega office is noting that it was a slower week for sales with negotiations often falling out due to pricing challenges.
Silicon Valley—Though buyer activity seems to be increasing as evidenced by increased floor calls and increased open home traffic, we haven’t yet seen that interest translate into closed or pending deals. Having said that, I anticipate that those deals will start to come to fruition in September, once the end of summer activity slows down. Buyers seem to still be waiting for the right signals to move which, going back to my intro, is why effective pricing is imperative in this market.
South County—This market continues to be driven by short sales and REOs. The good and interesting news this week is that after a hiccup in which short sales were falling apart due to lack of bank response, we are seeing short sales finally come together. This is great news for this market which has had its share of trying times.
That concludes my Weekly Market Update. I hope you enjoyed your pricing lesson for sellers. We’re heading into a long, three-day weekend which often means a slowdown for the real estate market. But the good news is that the traditionally busy fall selling season is just around the corner and we’re looking forward to seeing how this year’s fall plays out.
Enjoy your long holiday weekend!
Until next week,
JOE BROWN
President
Coldwell Banker
Residential Brokerage
Silicon Valley~Monterey Bay~East Bay
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