Spring comes but once a year. Once it is gone, wave goodbye. Even in a buyer’s market, a well priced home will get healthy demand and avoid being an October straggler where the buyer exerts leverage because they know they have no competition. This is why I advise my seller clients to understand the crucial importance of pricing correctly. The biggest mistake I see is ignoring an obvious price point that costs precious exposure and opting to pad the price by a small amount-maybe only 1-2%- to “build in a little negotiation room.” In a price-sensitive market like Westchester County, this is a fatal mistake.
As an example, consider a home that a comparative market analysis indicates as being properly priced at $500,000. Typically, we would price the place at $499,900. On occasion, a seller decides that they’d like to try it out for $509,000 to “get a little negotiation room.” The mistaken belief is that the offers will come in higher because they are asking a little more. The reality is that the offers won’t come in.
- Many would-be buyers won’t even know the house is for sale because they only looked up to $500,000 (an obvious dividing line for many), and they never saw the house. These people see other homes and buy something else.
- Lookers and online market watchers see the house, but refrain from doing anything because they will wait for the price to come down.
- Those left over (who wants leftovers?) may see the house but choose a more competitively priced home.
- In rare cases, you do get a bold buyer who makes an offer, but not only for what they think it is worth. In other words, the extra “padding” means nothing to them. They’d never offer more just because you asked for more. They might actually bid lower just to speculate.
The argument I get in favor of that extra little padding is that people can just make an offer. But as I have pointed out, by pricing incorrectly, many people either didn’t even see the place or opted to make their offer on a more reasonably priced property. It is human nature. Buyers gravitate toward what they perceive as a better value. Given the huge number of homes in competition with your home, that isn’t a stretch. You cannot manipulate outcomes. Overpricing never gets the seller more money, because buyers will always make offers based on what they want to pay, not what the seller speculatively asks. Market value is market value.
Often, by the time sellers get wise to the dynamics of pricing and buyer trends, the window of opportunity is lost. We are then “chasing the market,” as more aggressive home sellers reduce their prices to get sold. The spring rush tails off, and it becomes an all out pricing war and beauty contest where competition suppresses prices. All too often, these are the homes that go into the autumn as stale listings facing a price reduction that is lower than the seller’s original bottom line. Buyers are funny like that; if a home is on the market longer than 60 days, they wonder aloud what is wrong with it! In a market like Westchester County with a median price of over $500,000, that is very costly for the seller.
The high bidder always gets the house. In cases where that bid comes from the seller, they unfortunately keep the property. You can overprice, price fairly, or price to sell. We advise to err on the aggressive side, because that actually nets the seller more and cuts down on the wait.
My Friend is an Agent and She Says the Market is Great
And then, in a social situation, when asked how the market in Westchester is doing is by a friend or acquaintance, they step in it.
“The market is really heating up!”
“I think things are turning around!”
My personal favorite, advocated by the seminar gurus is “Unbelievable!” because it is ambiguous enough to mean anything. But there is a clear knee jerk reaction in some agents to become fountains of ebullient enthusiasm when asked about market conditions, as if their cheery outlook will snare them an easy deal. It won’t. It may snare a listing or a looker, but overpriced listings and lookers who don’t buy are not deals.
The truth is that every spring the cyclical nature of our industry kicks in. The holiday season is lower in activity for obvious reasons. The spring is busier because more people want to be moved in and settled by the summer. So springtime is, by comparison, busier than it was 90 days prior. But that is like saying we should build an ark every time it rains. When retailers evaluate a Christmas shopping season, they compare it to the previous Christmas, not the July before. If we are evaluating this March of 2012 in the Westchester real estate market, the only valid comparison is with March 2011. That’s just how it works. If you are an agent and you are busier now than you were in December, that isn’t a turnaround in the housing market, it is you showing up for work in the spring.
I could care less what people say when they chit chat. But it undermines our status as a reliable source of information when our eyes glaze over at the site of tin foil. Agents hate bad information online because it makes their job that much harder when Zillow says a $500,000 home is worth $435,00 or $620,000. Our job is challenging enough without having to overcome an agent’s bad advice given online to a consumer in another state. So why do some agents shoot themselves in the foot with syrupy market opinions when asked?
Lest you think I am being a parade rainer oner, here are some facts courtesy of the Empire Access MLS:
In the first 90 days of 2011, there were 704 single family homes closed in Westchester at a median price of $554,000.
In the first 90 days of 2012, there were, as of this writing, 717 homes closed in Westchester at a median sale price of $505,000.
Which means that volume is up an anemic 2% and median price is down 9%. Prices are now down to to about the median of the second quarter of 2002.
2002.
And in that quarter, there were over 1500 closed sales.
I have an uphill battle when a client wants to list their home at a higher price because someone told them things are looking up. Listings that start out overpriced end up chasing the market-unsold and stale.
Consumers: Don’t ask for opinions. Ask for facts. All real estate is local. And the local market is unique.
Agents: Don’t be afraid to just tell the truth. People want the truth, not spin or the party line. Life is so much easier when you just tell the truth. And it is far harder when you don’t paint an accurate picture.