Sellers: Handwriting Is On The Wall
Let's say, just for a moment, that you're the owner of a lovely single family home that's on the market for $300,000.
Let's further assume that the house has been on the market for six months and you're trying to decide if you want to renew the listing with your present agent or try somebody else. You based your current price on a CMA that your real estate agent prepared for you six months ago. The CMA made use of comparable properties that were sold, in several cases, three to six months prior to that. So, in effect, your $300,000 price is based on a CMA that made use of data that is now nine to twelve months old.
Let's also assume that during the listing period you have not adjusted your asking price downward because you feel $300,000 is the right price for your house ... or you feel you have to sell it for that amount to get the profit you want out of the house ... or because the guy down the street sold his house 18-months ago for $315,000 and it wasn't as nice as yours ... or, whatever.
Well, here's something you should know: real estate prices in the Tampa Bay area have dropped 18-percent during the twelve months ended March, 2008. That's a drop of 1-1/2 percent each month.
On the surface, you could think that the market value of your house has dropped from $300,000 to $273,000 during your six month listing period ($300,000 - 9% = $273,000).
If you think that way, you're likely to be wrong.
Your value has dropped even more. Here's why.
The information used to calculate your home's value was based on comparable sales that are now nine to twelve months old. That old data is skewing your value upward because those old sales are now out of touch with the reality of today's market. It is now nine to twelve month old pricing data! Those old sales were made when market values were higher. You should actually be making an adjustment to value based on the current value of those old comparables, and then re-applying that value to today's market when determining the value of your home.
So, instead of adjusting your home down to $273,000, you really need to get even lower to be competitive in today's marketplace.
Sellers who overprice their homes when first listed often find themselves being advised to reduce their price by their real estate agent. Some sellers make an adjustment, but often it is not enough. Prices are falling faster than many sellers want to admit, so their price adjustments are often too little because they started at much too high a price. As market values continue to fall, sellers are constantly trying to play catch-up to the market -- and that's a really hard task because sellers feel like they are leaving money on the table with each price reduction. As a consequence, once a house is priced too high it often remains priced too high. Hey, it's human nature!
Sellers need to read the handwriting on the wall. First, a CMA needs to be taken with a grain of salt. Since they are prepared using historical sales data, they probably represent values that are several months old. As a consequence, today's CMA's may actually represent the highest price you can ask for your property, not it's real market value. Remember, the latest research for Tampa Bay says that prices here have been falling at an average rate of 9-percent every six months. So, agents and sellers need to factor that in when preparing the initial CMA and opening asking price.
Second, sellers need to get ahead of the price curve. Prices are falling every month. It's hard to catch-up to the fall, so your best bet is to get realistic about your asking price when you first put the property on the market. Then, make adjustments every month until the property is sold. That's how you stay ahead of the market and get your property sold for the highest price the market will bear.
Finally, sellers need to remember this: The selling price of your home is going to be set by the market, not by you and not by your real estate agent. That's the way it has always been and probably it will always be that way. Sellers need to read the handwriting on the wall because it's being written by buyers ... and buyers control the market.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
Let's further assume that the house has been on the market for six months and you're trying to decide if you want to renew the listing with your present agent or try somebody else. You based your current price on a CMA that your real estate agent prepared for you six months ago. The CMA made use of comparable properties that were sold, in several cases, three to six months prior to that. So, in effect, your $300,000 price is based on a CMA that made use of data that is now nine to twelve months old.
Let's also assume that during the listing period you have not adjusted your asking price downward because you feel $300,000 is the right price for your house ... or you feel you have to sell it for that amount to get the profit you want out of the house ... or because the guy down the street sold his house 18-months ago for $315,000 and it wasn't as nice as yours ... or, whatever.
Well, here's something you should know: real estate prices in the Tampa Bay area have dropped 18-percent during the twelve months ended March, 2008. That's a drop of 1-1/2 percent each month.
On the surface, you could think that the market value of your house has dropped from $300,000 to $273,000 during your six month listing period ($300,000 - 9% = $273,000).
If you think that way, you're likely to be wrong.
Your value has dropped even more. Here's why.
The information used to calculate your home's value was based on comparable sales that are now nine to twelve months old. That old data is skewing your value upward because those old sales are now out of touch with the reality of today's market. It is now nine to twelve month old pricing data! Those old sales were made when market values were higher. You should actually be making an adjustment to value based on the current value of those old comparables, and then re-applying that value to today's market when determining the value of your home.
So, instead of adjusting your home down to $273,000, you really need to get even lower to be competitive in today's marketplace.
Sellers who overprice their homes when first listed often find themselves being advised to reduce their price by their real estate agent. Some sellers make an adjustment, but often it is not enough. Prices are falling faster than many sellers want to admit, so their price adjustments are often too little because they started at much too high a price. As market values continue to fall, sellers are constantly trying to play catch-up to the market -- and that's a really hard task because sellers feel like they are leaving money on the table with each price reduction. As a consequence, once a house is priced too high it often remains priced too high. Hey, it's human nature!
Sellers need to read the handwriting on the wall. First, a CMA needs to be taken with a grain of salt. Since they are prepared using historical sales data, they probably represent values that are several months old. As a consequence, today's CMA's may actually represent the highest price you can ask for your property, not it's real market value. Remember, the latest research for Tampa Bay says that prices here have been falling at an average rate of 9-percent every six months. So, agents and sellers need to factor that in when preparing the initial CMA and opening asking price.
Second, sellers need to get ahead of the price curve. Prices are falling every month. It's hard to catch-up to the fall, so your best bet is to get realistic about your asking price when you first put the property on the market. Then, make adjustments every month until the property is sold. That's how you stay ahead of the market and get your property sold for the highest price the market will bear.
Finally, sellers need to remember this: The selling price of your home is going to be set by the market, not by you and not by your real estate agent. That's the way it has always been and probably it will always be that way. Sellers need to read the handwriting on the wall because it's being written by buyers ... and buyers control the market.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 4:49 AM
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