On a break this weekend; reposting an oldie but goodie from September 2007. Picture credit to an unknown user at Stock.Exchange
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, tell you how truly lovely your wall-to-wall orange shag carpeting is and assure you that you really can ask $15,000 more than the competition because you’ve got built-in cabinets in the garage.
Some gutsy Realtor might tell you that while your home has many thoughtful & useful upgrades, the market isn't great just now. She'll continue by suggesting that if you really must sell 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 said was “price below sold comps.” What you’ll hear is “your home is worth less than your neighbors' homes are.”
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.
You'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 get all 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.