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Wednesday, February 11, 2009

THE PRICE IS RIGHT?

Okay Sellers…so here’s the cold hard truth.  Most times, Realtors cannot control the market.  (I say most times because there are occasions - like project sales, where we may set the initial market).  More often, however, we serve the market.  We help our clients expose their properties to the broadest market of possible Buyers that might have specific interest in their properties.  Our expertise comes in the form of consulting our clients on things like staging, pricing, timing, process, negotiation, documentation, disclosures, access, marketing and the occasional psychiatry (selling can be a stressful process and we endeavor to mitigate that).  And while ALL these are important services, the one that is “mission critical” in selling your property is PRICING. 

I cannot stress enough the importance of accurate and aggressive pricing in this market.  Appraisers can tell you what your property is worth relative to what your neighbors have sold for in the past, but in a rapidly moving market (up or down) your Realtor will advise you on where you should price relative to the Buyer’s expectation level (this is the point at which a Buyer will get off the fence and pull the trigger).  Pricing will always be directly correlated to timing.  Time is money, so if you want to sell fast you need to get AHEAD of the market and price it to get more “eyeballs” on it immediately.  Have you heard of “chasing the market?”  This means the market is falling and you are trying to re-price, but you are doing so slower than the market’s decline.  For example, let’s say the Buyer expects to pay $1, you are priced at $1.10.  After some time you decide to reduce the price to $1, the problem is the Buyer now only wants to pay $.90.  This goes on and on until the equilibrium price is met. (Maybe, for sake of our example, at $.85).  So, in this scenario, the Seller lost 15% off the market value to try and achieve a surplus 10% on his original pricing, instead of listing it accurately at $1.  And this says nothing of the possible carrying costs of having dragged the process out over a longer period of time.  What about leaving room for negotiation on the pricing you say?  Well, even if we negotiated hard and ended up yielding some ground, we might have ended at $.95…a far better deal that $.85 of course!

So how does this translate to how we approach our clients?  The bottom line is we are always going to tell you the truth (as we see it) and sometimes you are not going to like it…and sometimes you are not even going to hire us.  In a recent example I went to meet a Seller who was referred to me.  He insisted his home was worth over $2 Million.  I showed him comparables and explained that it was worth closer to $1.4 Million.  This was obviously not what he wanted to hear but we hit it off and ended up having long friendly debates about the economy, business, real estate and the merits of his home specifically.  In the end my explanation was simple.  If I am a buyer with $2 Million in my pocket do I buy this house?  And the answer was no.  So by listing at that price, he was going to have Buyers walking into his home who had an expectation of a much different property.  The end result he hired another Realtor, one who told him they could get him his $2 Million.  The home is still for sale and the price is steadily coming down and down and will likely end up selling for less than I had originally advised.

Posted by Trevor Benn on February 11, 2009 at 11:28 AM
Real Estate News • (2) CommentsPermalink
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