Wednesday, July 23, 2008
Avoiding House Pricing Torture
If you currently have your house for sale, what is your pricing strategy? If you are considering putting your house on the market, what will be your pricing strategy? Unfortunately, some of the typical pricing strategies we see in the market do not correlate with the reality of today's real estate market. If you want to sell your home, you need to face some hard market facts.
Understandably, sellers are emotionally attached to their homes, and can have a tendency to be in denial that their home is not the exception to the market rule.
Step 1 is to emotionally detatch yourself from your home. The minute you decide to sell, your home is a house, a commodity, a product. It is no longer your "home". The sale of your home becomes a business transaction.
Step 2 is to determine your pricing strategy. The most common pricing strategy is to pick an inflated "Let's test the market" price, which, frankly, does not work. Home buyers are smarter and better informed that at any time in history. We even know of buyers who 'Google' home sellers to find out the sellers Bios and possible motivations to sell. By the time home sellers realize that this strategy does not work, valuable marketing time has been lost, the home becomes "market worn" and buyers theorize that the seller is unrealistic.
In today's market, if you really want to get your home sold, you will need to price your home 10% below what comparable homes have been selling for. This is a big pill to swallow, and is often too big for many sellers to handle. The unfortunate consequence is that people price their homes at above market value, and over time, reduce the price at a rate lower than the decline in the market, and never truly get their home priced in the market range. This is known as Pricing Torture. Sellers reduce the price, bit by bit, over time, and still cannot understand why the lowering in price does not result in increased showings and/ or offers.
The statistics are showing that the Ann Arbor real estate market is flat to down just under 1% per month. The moral of the story is that if you need to drop the price, make one large cut. Not baby steps.