Real Estate Agents Respond - house "premiums" (Baltimore: wood floors, cul-de-sac)

[trying2moveup]

I'd like to hear from real estate agents on the issue of house "premiums" in today's market.

By that I mean things that cannot be changed in the home - foundational issues such as extensions on each level, the size and location of the lot, the proximity to the street and/or other homes in the development.

I'm speaking about a townhome in an HOA development. It is on a corner lot of a cul-de-sac; there is NO ONE on the one side of the home for about 500 ft. It has a brick front, it backs to a farm - i.e., no housing (single or TH) in back of it. It has a bigger lot because it is an end unit. It has extensions on each level, not full bump outs but partial as opposed to none (and because of the HOA I do not think you can convert partial to full post-construction).

I'm not talking about anything inside the home - not appliances, wood floors, fixture upgrades, granite countertops, carpet, yada yada yada. Just the things mentioned above.

Do these items mentioned above hold ANY value in any way in this market?

In other words, if you have 3 houses with the same foundational configuration but only one has the items mentioned above, should it be priced higher than the other 2 houses for sale?

Thanks for your feedback.

[TeamBenya]

Of course they are going to hold a value premium, regardless of the market. This of it like buying anything else: If you were to purchase a steak at safeway, would the 15 oz. cut cost more than the 14 oz. cut? Yes, because there is more meat there, and there is a financial premium for it. Does that mena that you're going to buy it? Well, depends on if you're looking for a bigger cut of meat or a way to save money.....

The point is that if you have 3 homes and one has these "premiums", then perhaps they are worth more to some people, And you may be able to price the home a little higher....

However, if the other 2 homes aren't selling anyways, then maybe the "premium" home needs to be priced at the same point, and the other 2 homes need to drop their price in order to be able to sell....

[AlicynD]

I absolutely agree with TeamBenya - great example.

Location and square footage are important because those are things that cannot be changed about the home (at least not square footage of a townhome) but again it's all about whether or not the Buyer sees the value in that.

[trying2moveup]

OK - I see the logic in your responses.

here's another question. As agents, when do you recommend price cuts?
Our home has been on the market for almost 2 weeks. We have had 2 showings and no offers as of yet. Our original list price was $5K higher than our agent recommended at my insistence which I know was a mistake, but I insisted because of those premium features I discussed earlier. . . but HER recommendation was 6K higher than the next listed home that was comparible. So basically we were 11K over the next highest list. I had her "slash it" by 10K when we didn't get a call within a week; then we got the 2 showings.

Basically, we can only afford equity-wise to go down another 5K. That would put us 1K lower than the highest list, but still about $10K higher than the other few in the neighborhood. . . none of the others have these features I mentioned.

Since we can really only do one more price slash . . . my question is when to time this. She wants to do an open house next weekend which I am fine with. Should we drop before then to stimulate interest but knowing that there will be no more price drops. . . or should we wait? She wants to wait, but my take is what is going to motivate anyone other than the nosey neighbors to come in if they haven't already?

I was thinking of a buyer's agent bonus if they bring in a client that writes an offer that we accept.

Anyway, I'm just trying to get other opinions because I think my agent is doing very well but I always like to hear other points of view.

Thanks

P.S. Maybe i should also mention that this isn't a HAVE TO sell. We don't have another house we're trying to buy, we don't have to move. We're just trying to move up to a SFH from a TH.

[TeamBenya]

Originally Posted by trying2moveup

OK - I see the logic in your responses.

here's another question. As agents, when do you recommend price cuts?
Our home has been on the market for almost 2 weeks. We have had 2 showings and no offers as of yet. Our original list price was $5K higher than our agent recommended at my insistence which I know was a mistake, but I insisted because of those premium features I discussed earlier. . . but HER recommendation was 6K higher than the next listed home that was comparible. So basically we were 11K over the next highest list. I had her "slash it" by 10K when we didn't get a call within a week; then we got the 2 showings.

Basically, we can only afford equity-wise to go down another 5K. That would put us 1K lower than the highest list, but still about $10K higher than the other few in the neighborhood. . . none of the others have these features I mentioned.

Since we can really only do one more price slash . . . my question is when to time this. She wants to do an open house next weekend which I am fine with. Should we drop before then to stimulate interest but knowing that there will be no more price drops. . . or should we wait? She wants to wait, but my take is what is going to motivate anyone other than the nosey neighbors to come in if they haven't already?

I was thinking of a buyer's agent bonus if they bring in a client that writes an offer that we accept.

Anyway, I'm just trying to get other opinions because I think my agent is doing very well but I always like to hear other points of view.

Thanks

P.S. Maybe i should also mention that this isn't a HAVE TO sell. We don't have another house we're trying to buy, we don't have to move. We're just trying to move up to a SFH from a TH.

You may not like my response, but think about your concern this way:

1) Do you agree we're in a falling market?
2) Do you agree that the market will continue to deflate for the next 6 months?
3) Are you in a "need to move" situation?
4) Do you think that your house will be worth less in 6 months than it is now?
5) How much less are you going to be looking at?

If you're trying to get moved quickly, you need to price on the lower end to get the job done. Trying to price at a peak is difficult, and if you're willing to take the risk of it not selling, then price it at the top of it's value range and roll the dice.

If you're anxious to sell, I recommend pricing it lower and hard-lining the negotiations when a contract comes in. Here's a good example:

I have a house under contract right now, and got it there in less than 60 days. Not a foreclosure, just a family ready to move. Home value was between 375k-400k. Slightly dated, but in very nice shape. We priced it at 385k, and the showings averaged 2 per week.

The first offer on it was 300k, then 350k, 370k, 375k, 380k. We didn't accept the lowball offers because we new we had priced well, were able to close quickly, and were in good condition.

It was a lot of negotiation to get the price to where we liked it, but we didn't have to give closing costs, we were at more than 98% of list price, and we got the job done because we were very competitively priced. once the contracts came in the buyers learned we were tough on the price, but the buyers saw the value in the home, even if they weren't able to get a big discount on it.

Get to a point where you can see a contract, and then evaluate where you can go with it. You don't have to accept a low offer, but it's IMPOSSIBLE to sell without a ready, willing, and able buyer who's putting pen to paper.

[TeamBenya]

regarding price cuts, I evaluate the market every 30 days, but I don't like the idea of rigid time frames for reduction. I know agents who advocate that, and when I see them using their "formula", I can recognize it and just wait for the next cut I think they've got scheduled.

[7th generation]

Originally Posted by TeamBenya

1) Do you agree we're in a falling market?
2) Do you agree that the market will continue to deflate for the next 6 months?

So TeamBenya, do you think the market will pick up after 6 months?
That would be right around the next Presidential election.

[TuborgP]

Originally Posted by 7th generation

So TeamBenya, do you think the market will pick up after 6 months?
That would be right around the next Presidential election.

As one who sold a year ago and predicted the downturn let me ask you the following:

Are inventories at a major high?
Did pending sales not just fall to the lowest level ever?
Are many parts of Maryland labeled a declining market (value) by federal lending authorities?
Are Schiller/Case not calling for another 10% plus decline in the Washington/Baltimore markets?
Have mortgage lending rules tightened making it difficult for those with weak credit to get a loan?
Was much of the Maryland bubble created by those with weak credit being able to get loans.
Is Maryland seeing major foreclosures as a result of those with weak credit getting loans and now being unable to pay?
Will increased foreclosures create a greater backlog of unsold homes?
Are economists worried about credit card and auto loans as being part of the next wave of credit defaults?
Has the aura of becoming wealthy via home ownership been weakened?

If you answered five of the above yes then you didn't need to ask the question. If you didn't answer five of the above as yes then I would suggest you do some research. There will not be any election year turnaround this time. It is now April. When would one suggest it start and what will trigger it?

America cutting back on our financial exposure in Iraq?
No more investment write downs?
Everyone paying their bills on time?
Major increase in wages for the average working American?
Decrease in health cost?
Decrease in energy cost?
Decrease in food cost?
Heck a big old decrease in everything in the CPI?
A major increase in consumer confidence?
McCain, Obama or Billary inspiring confidence in the American people that the days of either Reagan or Bill C are back. Or the New America of Obama is coming?

[TeamBenya]

Originally Posted by 7th generation

So TeamBenya, do you think the market will pick up after 6 months?
That would be right around the next Presidential election.

I couldn't even begin to give a definitive answer on that. I used 6 months because it is an average time on market right now. There's two trains of thought on it, to me at least.

1) we need to cycle through the 5 year arms, which were written heavily until mid '06. this either means 2011, OR when the government provides a more comprehensive bailout plan. (not saying I like the idea of a bailout, but it's possible)

2) Financial reorganization linked to a pull-out in Iraq and a strong focus of repairing our own problems, which would be likely with a democratic leader in the white house.

Not to say that either answer is how it will go, but if a soft market is linked to high foreclosures making it soft, then how long will it take the high foreclosure rates to end?

[jelenap]

trying2moveup,

I'm not an agent, but from an actual buyer perspective the end-unit definitely has more value. But the bump-outs, extensions, etc. might have no value at all, especially if they done not in the place where I'd like them. Also it might sound strange, but for me personally an interior unit with upgraded kitchen and bath would bit the "plain vanilla" end unit. That's just because I want to move into a home where I don't have to upgrade anything immediately.

Also right now for TH there is a lot of competition from new construction. For example, today we looked at a 3-yer old TH, it has 1-car garage but priced 5K more than brand new 2-car garage one across the street. I understand that owners bought it on top of the market, but that's really not my problem... We only looked at resale because we didn't like the floor plan of the new one.

As a general side note for sellers - please make sure to price your house right in the first place. One example - a TH was priced at 370K but sold at 309K. If I saw it in the listings, I would've bought it for 330K. But I was looking in the price range at 350K or less, so it wasn't even on my radar.