Asking price reductions may be the wrong answer

Lowering your asking price as a first gambit often contradicts facts. When you listed your house with your realtor, there was an analysis performed to determine the market price of your property. That analysis should have included an evaluation of:

• comparable home sale prices
• comparable on-the-market/competitive prices and alternatives
• market conditions, trends and influences at the time of offering
• performed by the most qualified, licensed realtor you chose

The process for determining the market value is rational and has been proven to be accurate for hundreds of thousands of comparable home sales. So what went wrong with determining the value of YOUR home? In some cases, the market or competition changed, judgments may not have been precise enough or expectations may have been unrealistic. However, it is relatively easy to determine the next steps when your house does not sell within a reasonable time.

The market is telling you something.

How you respond to the market will determine how much you will profit from the sale. The theory behind lower the asking price is that anything will sell if priced low enough - White Elephant sales are proof of this. If enough rigor was applied to the initial sale price analysis, then MAYBE the problem is not your asking price, but something else.

To achieve the best price, we need to think about what sellers call the "value proposition" or the combination of price, condition, terms and competitiveness a listing is offering.

Real Estate Market Message Translator

The revelation here is solely reducing the price in three out of the four possible scenarios may not motivate a buyer! Half of the time, the issue seems to be condition, not price.

Location, as the old saw goes, may be the primary determinant of the value of a property. But thee is nothing you can do to change this or other variables that impact the price you can receive from the sale of real estate.

The one variable you have a substantial influence upon is what your realtor calls staging - dealing with the physical and emotional appeal of your listing upon buyers.

Most homes as-is are not optimally staged. Consider your favorite pair of shoes. To you they look good, feel good and make a style statement you wish to make. However, to a potential buyer they look like they may need a shine, may not fit as perfectly and may not make exactly the same statement they wish to express. Your house is the same way. If you want to sell your home at the optimal price, you need to think about buyer perceptions!

• Take a tip from Used Car Dealers, who routinely invest several percent of their projected sales price in "detailing and prep" of cars for resale.
  • They do it because they know how much it impacts resale prices and speed.
  • They do it because they know for every dollar they wisely invest in detailing and prep, they will get many more dollars in the final sales price

There are three broad sources one can go to research what a seller can do to influence the resale price of homes: the realtors. the realty sales TV shows, and real estate investors.

If one looks at the seller advice dispensed on the national sites of the major realtors, they are remarkable in their consistency.

• declutter your home
  • You to reveal your home, not distract your buyers
• make your decorating look as neutral and fresh as possible - there is not hung that can improve the return on investment of a fresh coat of paint.
  • The goal here is help the buyer envision their possessions in your home, not to display your decorating style
  • This is especially important for homes that have not been painted within the last twenty four months
• fix up obvious repair items
  • You want the buyer to feel confident your home is not going to become a "Money Pit"
  • Heights area Point-of-Sale inspection programs make questions/concerns about the state of some repairs inescapable

Links to resale advice from realtors

• Smythe Cramer - Resale Tips
• Realty One - Resale Tips
• Re/Max - Resale Tips
• Coldwell Banker - Resale Tips

The advice from realty oriented TV shows is similar, here are some links

• HGTVs Designed to Sell
• HGTVs Curb Appeal
• Discovery Channel - Double Agents

Advice from real estate investors come in a negative form - they look for properties where the seller has failed to stage his home completely. They actively seek homes in which:

• The seller has let the cosmetics of the property fall into disarray
• The seller has created cosmetics that are not appealing to mainstream buyers
• The seller has not fixed obvious and minor flaws in the property

Are you overpaying for inadequate staging?

One of the most common mistakes seller make is failing to properly "stage" their homes before putting them on the market. This is a costly mistake. The costs are often hidden in substantially lower sale price, but the costs are VERY REAL.

• Real estate investors who buy and sell homes (called flipping) typically make between two and five times the fix up cost on a transaction. If that were the only costs, this would suggest a between a 1200 and 2000 % return on investment. It is reasonable to infer from this, that a seller who does not prep his home appropriately has left that profit to the buyer.
  • Direct experience in doing rehab work for "flippers" has confirmed that this profit/cost is real and not uncommon
• Prolonging the time it takes to sell your home means you pay more in holding costs (interest, taxes,insurance) on the property

IF your home is not selling like similar homes, then it is very likely the reason is "staging".

"Staging" is the realty term for properly presenting the product you are trying to resell. Think of it like packaging on consumer products. Consider the importance of packaging at your local grocery store. Properly packaged products:

• catch the attention of buyers
• convey something about the product and what the buyer might expect
• leaves an impression upon the buyer that will endure long enough to make a decision - especially if it is not an impulse item
• when it all comes together will dispose the buyer to select this product over others

How is this any different than what you are trying to do with your "package"/home?

Assume: A $10,000 reduction in asking price versus modest Re-Stage & Repair

*Per $100,000 of home value