Sunday, September 9, 2007

You Want to List My House at What?!?!

Shocked Face of WomanFor folks trying to sell their home in the Metro Phoenix market, it's been a confusing year. Sometimes you hear prices are down. Sometimes the local media says the median price is up. Staging is vital. Staging is superfluous. Get a pre-listing home inspection. Don't get a home inspection. Get an appraisal before you list. Appraisals are worthless. Who knows anymore?

Real estate & media types who talk about the importance of "being priced right” are (sometimes inadvertently) contributing to the confusion.

People who tell you “you have to price it right” could be avoiding the truth. These days in the Metro Phoenix area the truth often is, "if you really want to sell you have to be priced 2% to 5% less than the last sold comparable property.” 

Let’s say you’re a homeowner who needs to sell and you’ve invited several Realtors over to interview them. Many will Oooh and Aaaah and assure you that you really can ask $10,000 more than the competition because you’ve got shelves in the garage.

Some gutsy Realtors might tell you that while your home is truly lovely with many thoughtful & useful upgrades, it’s important to price below the asking price of homes currently for sale, and also below the last sold comparable property.

What that Realtor will say is “price below sold comps.” What you’ll hear is “your home is worth less than your neighbor’s.”  When you hear that, you’re going to experience an unpleasant mix of emotions. It'll feel like someone just spat all over your hopes and dreams, told you that your home and your entire lifestlye isn't worth as much as a tin shack on the beach in Guadalajara, called your children ugly and kicked the family dog while she did it.

Looking Down Gun BarrelYou're going to hate that Realtor. Instantly and irrationally, you're going to wish bodily harm on that Realtor and imagine kicking her out your front door, action-movie style. How dare she imply that my house is worth less than the neighbor's?!

If you are that home seller, I implore you to fight the urge to go Dirty Harry on the Realtor who's just told you the most truthful thing she can. Take a deep breath and remember the dynamics of a declining market.

In a declining market, housing prices fall. As a seller, time is not your friend. Homes that sell six months from now will sell for less than homes that sell this month. This has nothing whatsoever to do with your house, your lifestyle, your children, your intrinsic self-worth, your financial situation, or your need to net a certain amount on this sale so you can move on.

All things being equal, in a declining market houses priced below the most recent sold comps will sell quicker than those priced above the last sold comp. And because homes priced below the competition and the sold comps sell quicker, the sellers will net more money than sellers who overprice and sit on the market for months and months, taking incremental price drops while they chase their competition to the bottom.

Sellers, do yourselves a favor. As long as your gut tells you everything else about that Realtor is OK, hire the one who gathers up her courage and tells you to price beneath the last sold comps.