Pragmatic property pricing in Kitsap County
May 28th, 2008 by Mark FlandersAll over the county you can see real estate with for sale signs that have been languishing for months. Is it just another sign of a slow market? Or is it the more subtle sign of too aggressive pricing in what has become a Buyer’s Market? Astute real estate sellers keep emotion out of the process. They don’t look back at what used to be with longing for “the good ol’ days”. Pricing real estate based on today’s market is critical to a quick sale.
Selling your property quickly in a slow market does not mean you need to give it away at fire sale prices. It does mean you need to be pragmatic. You need to learn what the real value of a home is.
When reality and fantasy clash
Owning real estate in Kitsap County or anyplace else in a Seller’s Market is exciting. We mentally count the money we are making, as we imagine what price we can (maybe, might, if-everything-goes-right) place on our property. We mentally spend the imaginary money! That’s even more fun. Almost as good as the real thing. We gleefully congratulate ourselves on being property owners in a rising market. And then, we make a mistake. We start believing the fantasy, and resenting the reality. Fantasy feels so much better!
Don’t get me wrong, I like to daydream as well as the next guy. It’s fun. I’ve spent hours with a calculator figuring out what I could (might, maybe, if-everything-goes-right) make on investments I’ve considered. I’ve gotten all animated, talking a mile a minute, to my long-suffering wife and any friends within earshot about what I believed was the next, greatest investment. Whew, it’s fun to float that imaginary balloon! But, of course, that’s not reality, that’s fantasy. They each have a valuable place in my life. Real Estate though, is no place for the fantasy.
The difficulty (and rising angst) comes when we realize our market has changed. We are no longer in a Seller’s Market. We’re now in a Buyer’s Market. Without our noticing, and seemingly overnight, the real estate market shifted, and our imaginary “profit” begins to slip away. And, we don’t like it one little bit! Few people easily give up profit daydreams.
Let’s price it high and see what happens…
This is often the first thing sellers will try in a market that has slipped away from them. It can be a serious mistake! Pricing a property too high in a competitive real estate environment only accomplishes one thing. It gives all the realtors a property to use to illustrate why other properties (not yours) are a better value. Imagine this conversation:
Mr and Mrs Jones, we have 3 beautiful homes to look at today. They are all about the same size, in similar neighborhoods. But, as you’ll see, there is quite a bit of difference in the prices. I’ve saved the best value for last. We’ll look at the most expensive of them first.
And off Mr and Mrs Jones go, to look at your house. It’s the first one on the list!
This all-to-often scenario is still being played out around Kitsap County today, even though the Seller’s Market slipped away almost a year and a half ago! Don’t forget, for every month a house sits unsold, another mortgage payment needs to be made. Time is eating up the profit.
What happens next is perfectly natural when you think about it.
The market leaves it behind!
Everything from an apple to designer jeans will get “stale” the longer it is “on the shelf”. Real Estate is no different. When we go to the local grocery store we innately avoid the merchandise we saw there last week. We want the fresh stuff! Fresh is always better, right? It doesn’t take long for merchandise to get stale. You will pass up apples that are a week old, jeans that are last season’s, corn that is several days old and houses …. well, 3 or 4 weeks is a long time in the real estate market. Real Estate Agents also tend to look past “stale” merchandise. It’s almost instinctive. I have no doubt if I were an Agent, I would do the same.
Day after day, Realtors go to the office, grab a cup of coffee, fire up the computer and begin browsing through properties listed for sale, mentally comparing them with the needs of their clients. As they browse through the list of properties, it’s perfectly natural for them to browse right past the property they saw yesterday, as well as the properties from last week and the properties from last month are all but invisible.
Don’t let your house become invisible. While a price reduction later might get some attention, it won’t have the impact that pricing right will. The market is impersonal. It will take no notice of what you want.
Enthusiasm Sells!
Have you ever noticed how hard it is to resist a salesperson who is excited about the product they sell? Their enthusiasm is contagious. There is an irresistable feeling of excitement. Colors seem brighter and features take on new value. It doesn’t matter if the product is a mattress, a tuba or a house. Enthusiasm gets attention.
A well priced property creates enthusiasm in Real Estate Agents. They eagerly grab the phone, calling their clients to share the details of a property that is freshly listed with a fair price. Now, your house is the last one on the “Jones” list. Other properties are used to highlight what a good value your property is!
Stories from the “Glory Days” are just a distraction
While there are stories of homeowners making $50,000, $100,000 or even more in a few short years investing in real estate, it’s not normal. If it was, thousands of people here in Kitsap County would be very wealthy. But that is not the case. These stories are passed around like urban legends, gaining weight as the go. But unless you have spoken with the original seller, remember, they are stories, not fact. They can’t be relied on.
It’s important to gather information from as many sources as possible the ensure you are not over-pricing your house. Several well-known online tools are available (but I wouldn’t rely on them). The county courthouse is not too far away (a much better source, but time consuming). Tthe best source of up-to-the-minute information is the Realtor community. Realtors have access to data about recent sales in every neighborhood in Kitsap. This data is as fresh and as relevant as you could possible want.
In addition, Realtors are often aware of upcoming events that could affect property values. They know when a developer is planning a new tract of homes. 100 new homes in the $250,000 price range will affect the value of the $350,000 house you may be selling a quarter mile away. Realtors knew of the condominium auction in downtown Bremerton before it got into the local newspapers.
Don’t kill the messenger
I’ve had the good fortune to work with several exceptional Realtors in the last 5 years. It is uncanny how accurate a good Agent’s opinion of value is. Even though the Agent has never spoken to the Appraiser, the Agents original estimation of what a home is worth, is consistently within a few thousand dollars of the final Appraisal. By that I mean within $2,000 to $5,000. Not within $10,000 to $20,000.
Unfortunately, many sellers are still trapped in stories of the Glory Days. When the best source of information (real estate agents) doesn’t tell them what they want to hear, the Agent becomes the bad guy.
Everybody loses when this happens. The seller loses time. The Realtor loses heart.
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Washington is ranked 5th in the nation for the highest increase in appreciation in the last year and is still one of the most active markets. Due to the shift in the market there is now more inventory for a buyer to look at and the days-on-market has increased from a county average of approximately 35 days to 85 days. Sellers now have to really look closely at how their homes show and most importantly, how it is priced to position the house to sell. In the last few years, with the inventory down and more buyers than homes, a home would sell quickly no matter how it showed. My recent experience with showing homes to potential buyers has motivated me to write this article.
Pricing your home
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