SHOULD YOU REDUCE THE PRICE OF YOUR HOME? © 2012 by Wayne D. Lewis, Sr.

Previously Posted:  www.richfitusa.com

Let’s discuss whether you should reduce the price of your home.  What should you consider?  Let’s consider the following:

 

A.    Was your home priced according to an Appraisal, CMA or any other professional opinion?

B.     Are you getting the volume of showings you expected for the price your home?

C.     Are you getting offers that are extremely low compared to your home’s price?

D.    Are you able to control incidental factors that affect your home’s value?

The above questions are brainteasers that are intended to encourage us to brainstorm around the possibility of reducing the price of your home.  I want to emphasize that this is not to get you to reduce your home, but to consider the issues that surround whether to reduce the price of your home. If your home is on the market, let me encourage you to consult with your Realtor for the best possible decision regarding selling your home.   Right now, let’s tackle each of the four issues above.

First of all, how did you price your home?  Did your Realtor help you price it?  Did you use an Appraisal’s opinion, or any other professional who determines the price of homes and properties on a regular basis?  If you used a professional, then you have a point of reference from which you used something that included other properties that were similar to your home.  By going back to what was used with a professional, you are able to look at what specific factors were included that may have benefited those properties as compared to yours.  From their professional advice, you, as a homeowner, can refer back to the range of the prices that your home was in, and consider reducing your within that range.  For example, maybe a $265,000 home can be reduced to $259,900 to $249,900, or anywhere in between, depending on the market (how other houses are selling in your area).

If you set your price on your home by how much you put into your home, then you should be careful of how you compare your home to other homes in the area.  One of the things we Realtors try to warn our clients and customers is, try not to be the very best house on the block.  For example, putting a $20,000 fountain in your front yard will add beauty to your home, but its functionality or comparable value will not necessarily translate to a sale.  If you have added marble floors, and stainless steel appliances, then there is a possibility that you can pull some value from the comps, but there is no guarantee.  Other factors may apply. 

Secondly, another factor to consider as to whether to reduce your home, is how many showings are you getting, or even better yet, how many offers are you getting.  There is no magic number of how many of either you should receive in terms of showings or offers, but there should be a quality in either or both, although still not a guarantee of a sale.  What is a quality showing or a quality offer?

A quality showing is one in which there are constructive questions from buyers regarding the age of the house, the roof, or any repairs.  Quality offers are those that are anywhere from 90-98% of the sales price, all other factors notwithstanding.  But again, there is no magic formula to the number of showings or the type of offerings.

 

A third factor in deciding whether to lower your home’s price, are low offers.  We discussed quality offerings above, but low-balled offers, as we refer to them in the industry, are not to be taken lightly either.  Low-balled offers are not prescriptive, but it is definitely clear when someone offers you $100,000-$130,000 below asking price and maybe $30,000-$50,000 below asking price, as an example.   The previous set of low-balled offers are often insulting to sellers.  So much so, many sellers will hardly respond.  And while the buyer may feel justified with such an offer, it may help to submit something substantive with the offer.  The seller still maybe offended, but it may set the stage for consideration later if the house still hasn’t sold. 

The second type of low-balled offers, while closer in range to the sales price, may still be insulting, but are more likely to bring about a response.  A rejected offer beats a no response to a potential buyer, but it’s not a gurantee that there will or won’t be a rejection if within the 90-98% range by a seller.  As a seller, low-balled offers are a given on any house that is on the market, but the number of low-balled offers should be an indication of where the market is with respect to your property.   The goal is to put aside any personal feelings, as hard as it maybe, and look at the fact that you are receiving offers, and that the amount of the offers in terms of dollars, may be an indicator of what the market is willing to bear.

Our fourth and final factor are incidentals.  Incidentals are factors that you can or can’t control.  For example, you can control curb appeal, but you can’t (necessarily) control the neighbors who have a junked car on their front lawn.  You can control whether there is a worn carpet, or a loose plank in the flooring, but you can’t (necessarily) control the water bubbling up from the sewer on the corner.  These are the type of factors that could help you decide whether to reduce your home.  If for example, you don’t want to improve the curb appeal, or repair the loose plank, or give a carpet allowance, then you may want to consider a reduction on your home.  How much influence you have over your neighbor’s junk car collection, or the bubbling water may also determine whether you should reduce the price of your home.  These are incidentals to selling your home, in which you may or may not have control.  How you see these incidentals, recognizing them as factors that could affect your home selling, (I believe) should affect your decision to reduce your home on the market.

In conclusion, it’s your home.  You want to sell your home for the most money that you can get.  There are so many factors that affect whether your home sells, from pricing, to environmental factors, many of which you may not be able to control, other factors, you maybe able to control. This was not an exhaustive list or discussion.  But there are a number factors that you do have the opportunity to control or affect in such a way that your home is able to sell not only as quickly as possible, but for the best price, and that maybe within the 90-98% range, perhaps even, the 95-99% range of the sales price.  As Realtors, we know it is a challenge to sell your home, including the idea of deciding to sell your home.  You want the most that you can get, and you deserve it.  The real estate market is a challenging one.  Understanding how that market works with respect to your home, is key to selling your home quickly and for a price that is acceptable for you.  For further information on reducing your home, consult your nearest Realtor.  Thanks and best wishes on the sale of your home.

 

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Days On the Market (C) 2012 by Wayne D. Lewis, Sr.

Days on the Market (DOM) (c) 2012 by Wayne D. Lewis, Sr.

(Originally posted at www.richfitusa.com)

 

It appears to me, that one of the common misperceptions about real estate that any offer to purchase property is subject to a response from the seller. The misperception is that because it is for sale, that the owner(s) should jump at any offer that comes along, and be ready to negotiate. In a previous blog, I indicated that sellers/owners should not overlook an offer, even if it is a low-balled offer (http://richfitusa.com/profiles/blogs/the-upside-of-a-low-balled-off...). I still believe that a seller should negotiate a low-balled offer, but I also understand that even for sellers, there is a cutoff point.
Professionally speaking, I believe that a property that is on the market should be negotiated, even if the offer is low, and regardless of how long a property has been on the market. Conversely, I don’t want to give the impression that because a property has been on the market for ions or for a long period of time, that it is a sitting duck for the lowest possible price a buyer can make. Nothing can be further from the truth.
To further deter this misconception about those who believe that a property is subject to be sold for a low price based on how long it has been on the market, I did a little (un)scientific research. I call it (un) because I have taken established information from the MLS (Multi-List Service) for Gulf South Real Estate Information Network http://www.nomar.org/about-gsrein and the New Orleans Metropolitan Association of Realtors (http://www.nomar.org to assist in my conclusion(s).
I extracted information based on the following criteria, consistent with what I have seen over the years. Mostly, that properties that have been on the market for an extended amount of time, rarely sell for less than 90-95% of the listed price. It’s not a definitive fact, but it is a point of reference regarding how properties sell. This does not take into account all economic market conditions, and your results may vary.
I took a recent snapshot of not only three quarters of sales activity here in the New Orleans area for 2012, but I also took a snapshot of all of 2011 in a select area of the New Orleans housing market. Here is what I learned, using the following criteria:

Sold Properties;
New Orleans Area (East Bank): Areas 59-79;
Bedrooms: 3 -4;
Full Baths: 2 or greater;
Approx Living area: 1500-2500 sq ft living;
Condition: Excellent and Very Good;
Days On the Market or DOM: 180 days or greater

For all of 2011, 76 properties had been on the market for over 180 days, averaging 302.7 days. In the 1^st quarter of 2012 (13 properties), the average DOM of properties sold was 254.5 days; in the 2^nd quarter of 2012 (23 properties), the average DOM of properties sold was 323.6 days, and as we are going into the 3^rd quarter of 2012 (12 properties), the average DOM of properties sold is trending towards 244.3 days.

Continuing to focus only on the average DOM, it is important to understand that some of these properties may have been adjusted for in pricing, for whatever reason. That being said, the list price at the time of the sale is what we are comparing at this time. So, in looking at the snapshots above of listed verses sold price, we see a pattern of sales that indicate the properties selling more closely to the low to mid 90% range. For example:

For all of 2011 those properties that were on the market for more than 180 days, their average sales price was $195,050, (95% of list) but their average listed price was $205,165.70. As we check further into the beginning of 2012, the first quarter of sold properties that were listed for over 180 DOM, the average list price was $180,738.50, and sold for $169,452.50, or 93% of the listed price. The second quarter revealed a 94% listing to sales ratio with the average sales price being $234,887 to $250,330.40 average listed price.

Not missed in this backroom research, is the fact that property listed prices in the above stated criteria for single detached residences, appear to have had a bump in this the month of September, 2012. It is not conclusive of things to come, but deserves to be monitored for any signs of improvement. One possible indicator could be Hurricane Issac which occurred August 29, 2012. As we may recall, a number of homes that were not impacted by Hurricane Katrina in 2005, did go up in sales price in the Greater New Orleans area. But caution needs to be exercised before declaring that the same thing will happen as a result of Hurricane Issac.

With all of this said, how does one put together an offer on a property that has been on the market for more than 180 days? Well, as indicated by our title, one should make his or her best offer. Just because a property has been sitting on the market for an extended period of time, does not mean it is not of the value at which it is priced. A number of factors are constantly swirling around the Real Estate market nationally, and locally, and can affect the sale of a property once thought to have nowhere close to its sale price, and then rise to a value that is unmistakable, and well worth its sales price.

Factors that affect value, affect offering prices, obviously. But knowing why a property that has been on the market for an extended period of time is extremely important, so it requires doing some important homework.

That homework, when done sufficiently and perhaps, painstakingly well, will result in both purchaser and seller getting the best value for their money. But the offer has to be made with confidence in what the investment could potentially yield. We’ll talk next time about how properties have changed in value since Hurricane Katrina in the New Orleans area in our next report. In the meantime, consult with your Realtor on making your best offer for a property that you believe is a great investment. Make Your Best Offer.