How to Price a Home in the Current Market
The current housing market is downright murky. Every day brings new pundits wielding new statistics and new predictions. Some insist that the housing market has bottomed, while others argue that it could fall further. Worst of all, both sides doggedly believe that they are unassailably correct. Even worse is that this same argument appears to be unfolding on the ground level: buyers insist that their homes are fairly priced, while sellers wait patiently for prices to fall further. In this kind of climate, how is one to determine a fair price?
For the record, it is clearly a buyers’ market: “There are now so many homes for sale, and so few of them are selling that, at the current sales pace, it would take over a year to clear the existing inventory on the U.S. market. That is more than double the time required in a healthy market and up significantly just since June.” In other words, buyers can afford to be selective, and can afford to declare a target price and stick to it. As a result, buyers are finding that in order to even receive an offer, they must reduce their expectations significantly: “Almost a quarter of all listings on the market at the beginning of July had at least one price reduction. The average discount from the original listing price? Ten percent, according to Trulia.com.” (quote via cnbc.com/id/38642589)
The best indication of what a home will fetch has been and will continue to be is a comparative market analysis. This kind of analysis is exactly as it seems: a real estate agent or appraiser will look at what similar homes in the same region are selling for and establish a price range. The relative size, condition, amenities, etc. of your (target) home will dictate whether it falls closer to the high end or the low end of the scale. It’s worth noting that short sales and foreclosures will usually be priced at a slight discount.
From the seller’s perspective, where you price your home depends on how eager you are to sell it. You should understand that potential buyers probably has other options, and unless you can match their patience, you might have to cut the sale price. Experts recommend that you make one big cut rather than several smaller cuts, as this will show buyers that you are sincerely interested in selling the home. If price cuts don’t work, you can also try selling the house through an auction, which will expedite the process significantly, involving a few open houses and one 30-minute auction. The offer is binding, and you can expect to have the cash in hand in a month or two. Auctions are also attractive to buyers because of the mindset that, “We don’t want to wait around or negotiate and, more important, we want to pay the price we want to pay.”
Otherwise, you might have to take the home off the market and try selling it again after the market has had more of a chance to settle. In the mean-time, you can consider refinancing any mortgage debt (to take advantage of record low mortgage rates) and renting out the home.
Auction sales were booming even at the height of the housing market, says Chris Longly, deputy executive director of NAA. He attributes some of the uptick to the popularity of sites like eBay. “Consumers today want it now,” he says. “We don’t want to wait around or negotiate and, more important, we want to pay the price we want to pay.”
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