It’s a tough time to be a homeowner trying to sell. The national statistics show inventories and prices holding steady through the first half of 2010. While this is a relief from the grim free fall that home sellers faced after the real estate bubble burst, there still isn’t the upward momentum that owners prefer when they’re looking for home sales.
According to a Wall Street Journal report, only 47 percent of houses listed for sale in major U.S. markets had actually sold by August 2010. Several of the remaining listings were taken off the market. Moreover, the national averages belie the differences that realtors and other experts are seeing from one region to another, and even one neighborhood to the next.
“There’s no longer a national housing market,” says Armando Montelongo, the real estate maven who was featured on A&E’s “Flip This House,” a housing-bubble-era reality show. “You can drive 200 miles and see a totally different real estate climate.”
You might not have to drive that far. Realtors report homes getting offers after a few days on the market in some neighborhoods and languishing for six months or more the next town over. So how do you figure home value and set the right price?
“We have a lot of pockets of activity,” says Debbie Cobb, RE/MAX realtor in the Research Triangle area of North Carolina. “Out in the country we had foreclosures and that area is still sluggish, but we also have an area closer in, called North Hills. That market is still steady, although it’s not as quick a sale as it use to be.”
In short, home sellers who want a quick home sale, say to move for a job or transition to a more affordable place, need to be very price sensitive, especially if they live in average or underperforming areas (like those hit hard by foreclosures). “You can’t price a home too low today, but you can price it too high and not have it sell,” Montelongo cautions.
The best thing, real estate agents say, is to price a home appropriately to begin with. Try to resist the urge to overestimate your home’s value; you want to avoid having your house sit for several months while you lower the price again and again. The more you do this, the more people will wonder what’s wrong with your place, says Chad Goldwasser, a realtor with his own shop in Austin, Texas.
Here’s how to figure out a fair home value:
1. Don’t make it personal
The second you decide to put a house on the market, stop referring to it as “my home,” Montelongo says. “It’s a property,” or at the very least, “the house.” This will help you to get some emotional distance as a home seller. You can view the place with the objectivity that potential buyers have and think about pricing, and the home’s value, in a realistic way.
2. Tour the neighborhood
Cobb suggests asking your Realtor to take you around to open houses in the neighborhood, or grabbing the local listings and going yourself to research home values. Focus on homes within a mile of your own that are a similar size with similar property, adds Montelongo, who has been buying and selling properties around the country for 10 years.
Pay attention to “how they show.” That is, does the outside property look tended to? Are the kitchen and bathrooms up to date? The windows and siding in good shape? The floors and carpets clean and the walls freshly painted? Would the buyer have to make any immediate, obvious repairs or correct any extreme style choices (like a macho black-marble bathroom or way-too-green kitchen)? Is the temperature comfortable? Consider the price and see how long the house stays on the market. In the meantime, come back to your house and approach it the same way you did the others, the way a buyer would. How does your house “show” in comparison? Be ready to make some improvements or adjust your price.
“The homes selling quickly are in the best condition they can be in. They’re cleaned up, staged well and priced correctly,” says Goldwasser.
3. Follow the comps
“Comps” are the price tags on homes, comparable to a seller’s, that have sold or gone into contract. While open houses will tell what home sellers are asking, comps tell you what they’re actually getting, and therefore what the true home values are in your neighborhood. The comparison of those two numbers can itself be instructive. Your Realtor can give you local comps, as can websites like AOL Real Estate.
Since many Realtors won’t list a price until the deal has closed, comps can lag a little bit. Follow them for as long as you have a property on the market to know which way local prices are trending.
Montelongo adds that you also want to know how long comparable houses sit on the market. If local properties are moving in less than a month, you’re in a robust market and can price more aggressively. Thirty to 60 days means a good but not great market; more than 90 days means you’re in a slow market and you’ve got your work cut out for you.
4. Do a test run
Watch what happens during the first three weeks that your property is on the market. If people look but don’t make offers, you probably priced it a little too high. If no one even comes to look, you aren’t in the right ballpark. In either case, “Get the price down as quickly as you can,” says Goldwasser.
How much do you cut? Look at the latest comps and set a price that sits on the low end of them, or lower.
5. Reset the clock
If you’ve already made too many price cuts or the house has sat for too long and is getting stale, you might consider taking it off the market for a while. But before you do, Cobb advises, find out how long you’ll have to wait before it shows up as a new listing (it could be one or a few months) and if the listing will tell how many cumulative days the house has been on the market; then decide whether it’s worthwhile to do so.
6. Make your house a good deal
If he knows homes in a certain market are selling for about $300,000, Montelongo won’t hesitate to put his on the market for $275,000. He figures that making it look like a really good deal will make people curious enough to come out and look. “You want to generate interest,” he says. He’s OK with selling for less than he could if it means getting out from under a house quickly. But it’s not unusual, he says, for homebuyers who think they’ve spotted a good deal to bid the house up a little, bringing it closer to what the seller who lists at $300,000 might wind up having to come down to.
In a few select markets, trying to sell your home for too much might mean sitting on it for a lot longer than you prefer, but in most markets, it might mean not selling at all, experts say. As long as it’s a buyers’ market, getting the price right, and correcting pricing mistakes quickly, is one of the most important things that a home seller can do to attract a buyer and get to that closing date fast.