Competitive pricing the key to 2007 home sales

 

HONOLULU ADVERTISER   November 19, 2006

 

BY LISA SCONTRAS

 

Custom Publishing Group

 

Just like oil and pork bellies, the price of real estate fluctuates.

 

 

Although gasoline prices were well over $3 a gallon a few months ago, filling station owners wouldn't try to sell it for that today when everyone else is selling it for less. To keep up with the competition, they must keep their prices in line with the rest of the market.

 

Selling real estate today requires a similar analysis of recent sales to determine the right asking price or run the risk of not measuring up to the competition.

 

"Sellers continue to divide themselves into two distinct segments, realistic and unrealistic prices," says Scott Higashi, executive vice president of sales at Prudential Locations LLC. "As in 2006, realistically priced homes will sell quickly while those with inflated prices will continue to sit on the market."

 

Artie Wilson, partner at Prudential, calls it "wishful" pricing, and says it's quite common for some sellers to be slow to accept the fact that the market has shifted.

 

"They're still looking at the house down the street that is on the market right now (priced unrealistically) or a sold price from a year or two ago," says Wilson. "Buyers on the other hand, have gone the other way and want to see prices drop. They have access to what's sold in the last three months and know what other homes are going for."

 

Buyers, according to Higashi, have access to sales information and can track homes that are currently listed in the neighborhood, sales that are pending as well as homes which have sold, giving them the tools they need to accurately determine a property's market value. They care more about recent sales than they do the highest sale.

 

Since the very definition of market value is what a buyer is willing to pay for a particular home, the pros recommend putting yourself in their shoes.

 

"I often recommend for sellers to go out to see the other competitive listings," says Wilson. "It's critical for sellers to be educated and have the most current information available to make the most logical decision."

 

It's important for sellers to see how their home measures up to competing homes. Buyers may look at a dozen homes in a day and if yours is priced too high, it will not fare well. Additionally, inventory is sufficient in this market that buyers may never even look at overpriced listings.

 

Excessive days on the market — more than four months according to the experts — usually means you're not priced right. According to recent statistics gathered by Prudential Locations' research department, condominiums are typically on the market for approximately 61 days and single-family homes are typically on the market for 62 days before a contract is accepted.

 

Wilson educates his clients with an analysis he calls Just the Facts.

 

"I hand them one sheet of paper— it's simple and unemotional — and shows all the active listings on the market including days on the market, any pending sales, and sales in the area from the previous three to six months," he says. "I've found this is the best way to set realistic expectations."

 

Higashi warns sellers of the harm in starting out too high.

 

"Homes with inflated prices that sit on the market for extended periods of time tend to get stigmatized by the other brokers in the community as ‘not worth seeing,'" he says. "It's difficult to change that perception even after the price is lowered later."

 

Wilson has seen cases where an overpriced seller was reluctant to take the first or second offer on a property because they thought they could get more money.

 

"Several months later they were lucky to get a percentage of those first offers," he recalls.

 

During boom conditions, homes sold no matter what the price — the market was very forgiving. Not anymore.

 

With rising interest rates, Wilson reminds his buyers and sellers that price really becomes an issue of affordability.

 

"Even if prices do drop by 2%, if interest rates go up, affordability is affected," says Wilson. "I always carry around the example figures for a $500,000 and a $750,000 mortgage at 6 percent, 6.5, 7, 7.5 and 8 percent to show them that a 1- or 2-percent differential can really affect affordability. Most buyers are really more interested in their monthly payment than the price."

 

 

 

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