What exactly are those "corrected" prices for home sales? (feedback, 3%)
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I hate to sound ignorant here, but I really don't know so I need to ask. Throughout the forums whenever real estate is discussed, one recurring theme seems to pop up: that the prices of homes on the market need to be corrected to previous prices of several years ago. There needs to be a correction in the market, etc. But exactly what are those magic numbers? I put my house for sale with comparables in my neighborhood and since my house hasn't sold, I am now below the comparables. With good showings, and favorable feedbacks, but still no offers, I am totally confused. What do buyers want and how do I "correct" my price and not have to give my house away?
I'm no expert but it seems to me that houses in places like california shot up to over 300K for very small homes when those homes should have cost around 200K or less. Everything was over-inflated and now although it looks like values are going down - they are actually going back to the correct price.
I'm so sorry it's taking so long to sell you house. If you aren't able to wait out the correction by renting or something, have you considered instead of looking at what is on the market - look at what prices houses have recently sold for. They might have sold for much less than the ones that are listed now.
I have a small house in San Antonio (BTW, the houses never got inflated there so home prices are still rising instead of lowering - they might be rising a little slower than before but they are still rising). Anyway my realtor wanted me to list my house at 105K which is slightly below the other houses for sale in that area. But then I took a look at similar houses that recently sold and they sold for around 99K.
Quote:
Originally Posted by Margel
I hate to sound ignorant here, but I really don't know so I need to ask. Throughout the forums whenever real estate is discussed, one recurring theme seems to pop up: that the prices of homes on the market need to be corrected to previous prices of several years ago. There needs to be a correction in the market, etc. But exactly what are those magic numbers? I put my house for sale with comparables in my neighborhood and since my house hasn't sold, I am now below the comparables. With good showings, and favorable feedbacks, but still no offers, I am totally confused. What do buyers want and how do I "correct" my price and not have to give my house away?
I know Margel, we are in the same boat, in an area similar to those in TExas where our values increased at an average of 2-3% year to year since about 2000. Things are moving slower here too, some pockets more than others. We studied the sold comps extensively and tried to price aggressively. We have had great feedback as well on our showings but no offer yet (only been on market 3 wks), of course one couple who hadn't even sold their home yet was talking bout our inflated price! Here's the rub, I found in my research that people were on average taking a 20-25K haircut in their sold prices... so, where do you build in that cushion? We tried to build it into our price- I feel we should cut it about 20K to be closer to the solds.. but that leaves us very little room for negotiation. Like you, this is no "fire sale" where I can't afford the payment, or am moving for a job or something... I just want a fair price.
I feel we should cut it about 20K to be closer to the solds.. but that leaves us very little room for negotiation. Like you, this is no "fire sale" where I can't afford the payment, or am moving for a job or something... I just want a fair price.
Aren't there comps in line with the sold price minus the haircut? I find that buyers don't mind paying asking price if they find value in your property.
I do not like to take a listing that the seller built a cushion into the price. The house becomes an Over Priced Turkey, and you can't change the price fast enough for the buyers in the market now. You have to wait for some new buyers to come to market, to appreciate the value.
You risk becoming the reason other houses sell. Buyers look at the competition. Where they see value, they become interested. So you have to be within 3% usually, give or take....
There is a market value and a marketing value. The market value is what a willing buyer would pay a willing seller in an arms length transaction. But the marketing value may be a little higher or lower based on the search patterns of the MLS.
For example say your house is worth $410,000 based on solds - you added a little because you rehabbed the kitchen, and subtracted a little because you have a smaller yard (in other words you adjusted your price based on the pluses and minuses of the property) - but the marketing value is stronger at $400,000 then at $425,000. Buyers and Realtors are more likely to search to $400,000 looking for a property then $410,000 or even $425,000.
My job as the seller's agent is to get as many people interested as possible. If I can get buyers willing to make bids, I might get more than asking...but if I get no one interested...they bought another house, while mine sits.
I agree to an extend 2BinDenver... we had several realtors come through and the solds support an asking price of 25K more than we are asking and 100K less... I think infill neighborhoods make it challenging. I can support our asking price with sold comps,and most definitely with listed comps (but who cares about that, right).... If I was doing an MLS search, I feel we are right there in the bracket people will be searching with. Honestly, I'd have to drop it 75K to come into a different "bracket" so to speak. Like if I am at 475K now, and drop to 459K, wouldn't still come up in someone's search? Only to drop it before 450K would it be a different buyer? (and I'm not even sure that is the case)Now, I think pricing 500K and above would be a mistake in this case (and these are hypothetical numbers, not my real price).
Let's play a little game. You are selling at $475. Nice house, comps are in line for $455.
Buyer 1 says they want a house for $475 or ideally $450. They sign a BA agreement with me. I search MLS from $425 to $475. I see there are 64 houses available. I narrow the search to $430 to $460 - there are 22. You just got knocked off the list.
Buyer 2 says they want a house from $450 to $500. They sign a BA agreement. I search the MLS from $450 to $500. There are 52 house available. We look at everything from $450 to 475 in two days. We see your house. Your house is nice, but compared to the other houses at $475, you house really doesn't compare.
Buyer's don't know you are willing to take a cut, from the padding you've built in. They just see what they see, they pick their favorite, and then the BA does the research on the comps. Only then do the buyers know that *all* the other sellers have taken a $20,000 price cut - and then you risk being knocked off again to the competition...Buyer thinks OK, well if they are all going to take $20,000 less then the other house for $475 that's bigger, with the new kitchen, or pretty flowers or the 3 car garage will take $455 - and that's the better value for the money.
I hate to sound ignorant here, but I really don't know so I need to ask. Throughout the forums whenever real estate is discussed, one recurring theme seems to pop up: that the prices of homes on the market need to be corrected to previous prices of several years ago. There needs to be a correction in the market, etc. But exactly what are those magic numbers? I put my house for sale with comparables in my neighborhood and since my house hasn't sold, I am now below the comparables. With good showings, and favorable feedbacks, but still no offers, I am totally confused. What do buyers want and how do I "correct" my price and not have to give my house away?
The corrected home price has to do with the average home price to average income ratio. This is the ratio that deals with how "affordable" the homes are. Historically the ratio has been between 2.8-3.6 for most areas (West Coast has historically been higher).
So if the current average home price for your area was $200,000 and the average income was $50,000 that would be a ratio of 4.0. In order to "correct" it to historical averages that average home price would need to be $180,000 (at the 3.6 index).
What happens when people go over these ratios, is that they can't afford to live anymore. Incomes were not keeping pace with home prices, making homes completely unaffordable for many people. In Salem Oregon our ratio is currently at 4.13 and it was at 4.5 last year. We tend to be closer to 3.8 or so out here, so we have a little more mild correcting to do to regain affordability for homeowners.
This average ratio is different for each area. Honestly looking at the sold comps and pricing AT or BELOW them tends to make the most sense in many markets, BUT you need to have your agent help you run the data. While I dislike the overused phrase "real estate is local," it is true, and I am not clever enough to come up with anything different.
Take a good HARD look at the local data and it will tell you what you need to do.
I hate to sound ignorant here, but I really don't know so I need to ask. Throughout the forums whenever real estate is discussed, one recurring theme seems to pop up: that the prices of homes on the market need to be corrected to previous prices of several years ago. There needs to be a correction in the market, etc. But exactly what are those magic numbers? I put my house for sale with comparables in my neighborhood and since my house hasn't sold, I am now below the comparables. With good showings, and favorable feedbacks, but still no offers, I am totally confused. What do buyers want and how do I "correct" my price and not have to give my house away?
The philly area is at a housing:income factor, after the 4th quarter of 2007,of 4.7. And the historical norm for the area is 4.3. That means that property values would be expected to be about 5% less than they currently are by historical terms. But, remember that in this market with the securities mess areas that see corrections will most likely over correct. If you can hold onto your house and sell it in 5 years when we are more than out of the woods and back to normal. Oh dont let me forget my disclaimer, I do not have the ability to see the future and can only base my predictions on analyzing data available to me.
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