I'm recycling portions of post from waaaay back in February 2008. Wow! Given the current economic upheaval, February seems like a lifetime ago. Sadly, this advice from back then is still useful today. Maybe even more so.
Sellers, believe me when I tell you that there is a long list of things that do NOT impact how much you can ask for your home for sale. Here's a short list:
- How much you paid for the home
- How much your remodeling or improvements cost
- How much you "need" to get out of the sale
- How much you want to get out of the sale
- How much your next house is going to cost
- How much your neighbor sold for last year, or even three months ago
- How much more expensive housing is in the town to which you're moving
- How much your friends and co-workers think you should sell for
- How much your second cousin once removed, who is a part time Realtor, thinks you can get
- I could go on, but you get the point
Things that impact today's market value of your home:
- How much a ready, willing and able buyer is willing to pay for it
Period. It's really that simple. Buyers are savvy these days, and act very conservatively when it's their quarter- or half-million dollars being spent. If they don't see your home as a good value at the asking price, they'll pass you by.
The temptation for sellers is to think about all the items in list number 1, above, trying to justify a higher asking price. Just like today's cat cartoon, sellers want to think of ways to get around market realities. Resist that temptation.
Instead, think about whether or not you really must sell.
If you can come up with at least one really good reason not to sell, then don't. Stay where you are. Make it work.
If you decide you must move (job change, job loss, divorce, illness, death in the family, the kids really can't fit another bunk bed in their shared bedroom), then there is no way to get around the essential truth that your home is probably worth less than you'd like to think it is.
In fact, the October Case Shiller report shows metro Phoenix prices down 2.9% in just the month of August. That was before the really ugly financial news hit the airwaves.
As I said, buyers are savvy. They know real estate prices are still moving downward. They suspect (as most of us do) that prices in the near future will be lower than they are today. Buyers automatically factor in the value of time when figuring out what to offer on a home. Sellers rarely do.
Your asking price needs to factor in the value of time. You do this in two ways:
- factor in the amount of time it will take to get a offer on the home that turns into a contract, and
- factor in the expected decline in the value while the home is in escrow.
To point number 1: If your house is priced right, you'll get a contract in place in about 30 to 60 days. Many most sellers tend to resist this idea. Sellers often say to me, "Why so fast? Can't we wait to see if the right buyer comes along?"
Prices are moving down over time. Sell this month? You're netting more money than if you sell next month. Or the month after. That's just simple Econ 101.
To point number 2: Most escrows close in about 30 days. While those days pass, the market prices are still moving downward.
Sum it all up: We've got 60 to 90 days on the table here. During that time, the market won't stand still, as Case Shiller's charts and graphs so eloquently report. If prices are dropping at about 2.9% per month, and we're going to be on the market and in escrow for 2 to 3 months, your listing price should take into account that future decline in market value. The buyers will. Sellers must.
Finally, please note: These numbers are general! Not every neighborhood is moving down at exactly 2.9% per month. Prices in some parts of Buckeye and Avondale were sliding 5% per month last spring, so I can only imagine the carnage going on out there now. Parts of North Scottsdale and Cave Creek are trending down at only about half of 1% per month. In general, condos price-slide faster than detached homes. In general, close-in areas slide slower than outlying areas, and on and on.
If you must sell, you should consult a Realtor who really knows the data trends in your neighborhood for an exact accounting of how much your home should/could be listed for! You can try my Sunday Stats series for an idea of sales over time in the North Phoenix area.
Image courtesy of I Can Has Cheezeburger