Monday, February 16, 2009

How to Sell a House - Part Six - Pricing

You've decided on the Realtor, you've done your work on the house and your homework on the price, you've replaced the leaky toilet and given your hardwoods a shine you can skate over! Now you need to consider pricing.

There are some Realtors who will tell you the price at which your home will sell. I am not one of them, I have no crystal ball, I really don't know. I can show you what other houses closed for, but in a market like Skaneateles almost every house is unique. You absolutely cannot figure out square footage and say how much it is worth. How do you compare an immaculate turn of the century home on an acre in the village with a run-down cape with no yard? There is no way.

Appraisers like to look at the last six months of transactions. Skaneateles - the town, the village, the area - had only 66 sales all of last year. What are the chances that a home similar to yours sold during that period? And was it only one home? We all know how much the economy has changed in the past six months. How can you ever know?

"Actions speak louder than words"is one of my favorite sayings. These days give yourself a range. You can be aggressive or play the waiting game. The market will tell you - those "actions" I alluded to earlier.

If after 4 weeks there has been little or no action on your home it is time to reduce the price. This is a rule of thumb. If after 8 to 12 showings there is no offer, something has to change, and at least you have feedback (hopefully) from the agents who showed it. None of this helps at the beginning, but if you fall in love with a number and refuse to budge despite what the market tells you, you may be there a while.

A very good friend wanted to move to Skaneateles so her daughter could enter the school system young enough to feel part of the district. Her mother needed to leave her own home and move in with my friend and her family. Time was, truly, of the essence.

She found a home in Skaneateles and moved up here from around the City. The daughter entered school, the mother was safe and secure in her in-law apartment, and the husband took a job in the area. Still they owned two houses down there. My friend sold them rapidly and I was amazed. "How?"

"We priced the homes below the others to start. When they didn't sell, we reduced them, and kept reducing until we got offers." The process took about 4 months, if I remember correctly. And she tells me that 18 months later she can return to the neighborhood and see homes that were on the market then still there at a lower price than for what she sold.

Moral: The house sold and she moved on with her life. She now has one mortgage, one set of taxes, and the important people - the mother and daughter - have new lives. They aren't living in limbo.

I hear people say "But I won't give it away!" I hear it a lot. The reality these days unfortunately is that you probably won't recoup all that you put into a house - the floors, the windows, the kitchen appliances - but you have to have things in a good enough condition that the house will sell. It's a real Catch-22.

So why not "give it away?" Why not price it so aggressively that people grab it within two weeks? It's still 60 days to closing after that, so you will still pay mortgage, taxes, insurance and utilities - but rather 60 days than 6 to 10 months. My guess is that the "give-away" price will not be that bad. Move on - if you're buying somewhere else right now, you are in a buyers' market.

I also hear, "I want to try it at this price - I can always go down, but I can't go up...." The people who are looking in your price range are looking now. If you are too high, they will stop looking. They will either wait until you do come down, or move on to the one that is priced aggressively. Just as you only get one chance to make a first impression, your house only gets one chance.

The longer a house stays on the market, the lower the offers will be. People assume that it has been shown daily and after 180 days 180 people have rejected it. Why should they be the ones to stick their necks out and buy it?

"I can't sell it for less - I owe too much!" That may be true, and in that case, be prepared to wait until the market catches up to your price. That used to happen in Skaneateles - after two years a house priced 10% over what it should be looked like a bargain. But not now. The market is static, if not decreasing. If your home is worth a great deal, say a million dollars, you can afford to pay the taxes and wait. With other homes, you can't. Sometimes it's necessary to take a loss. Life is too short.

So much in the end depends on your perspective, your philosophy about money, your relationship to it. I have some friends who simply move on and are proud of their ability to do so. "We couldn't get what we would have liked for the old house so we let it go, but how about this new home - isn't it great?"

In the end you will balance the money vs. the life choices - but please, in this difficult economic time - think about pricing to sell.