As indicated by the frequency of my ramblings on the topic, proper home pricing is one of my largest hurdles when meeting with hopeful home-sellers. Common sense tells me that will never change, but I feel that helping those who want to buy or sell homes in Edmond better understand the market is not only my job, but it’s my duty.

Business Week just published a pretty interesting story about the tendancy of homeowners to hold on to unrealistic expectations in regard to the value of their homes – even in this ‘declining’ market – and how that affects the overall recovery of the market. I can’t disagree with most of their points about the ‘stubbornness’ of some home sellers, and I’ve witnessed the ‘better-than-average’ effect more than a few times, but I think the blame belongs less on homeowners and more on the agents who routinely take overpriced listings. After all, if an unrealistic home seller is turned down by 2 or 3 agents in a row, and those agents are honest with that seller about why, won’t he/she eventually lower expectations and become more open to the reality of the market? Unfortunately, what happens many times is the reverse.

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You’ll hear this one debated a lot, but your opinion will usually depend on which side of the transaction you’re on. If you’ve been around here much, you’ve seen a few of my rants on overpriced listings, and I’m not the only one. Richard Mize, Real Estate Editor at the Oklahoman, published a nice piece on this topic late last week.

When analyzing whether a home for sale is priced properly or not, there are several factors to evaluate. First, and most obviously, what’s been selling in the neighborhood, and for how much? I’ll use the Seminole Pointe addition of Edmond, located at NW 164th & May as an example:

As you can see here, the overall average price per square foot in Seminole Pointe over the past 90 days has been a little over $90, with the average sales price coming in at just under $138,000.

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Yesterday I posted about the ill effects of overpricing your home for sale, and I have no doubt that I could never address this topic enough. It’s an ongoing problem that we’ll never be fully rid of, but I hope that by sharing my thoughts on it, I may be able to help a few home owners and agents understand it better.

Case in point; I posted back in May about a homeowner I visited with about his expired listing in the Lone Oak Parke addition. Now for “the rest of the story.” When I initially talked to this homeowner (Mr D), his home had already been on the market for about a year, was grossly overpriced (by about $30,000 after he had already lowered the list price by more than $25K) and he wasn’t at all willing to list it for less. He, of course, had no problem finding an inexperienced agent willing to list the home for him at HIS price again. Well, that listing expired after 150 days, and he listed with yet another agent (the 8th agent willing to take the listing at HIS price).

Now jump forward another 74 days, and Mr D’s home finally closed on 12/14/07 (589 days after he first listed it) at a sales price of $249,900, according to our MLS. Back in May when we talked, I told Mr D that his home would sell for around $244,000. So, he made an extra $5,900 by dictating his price instead of listening to me, right?

Not so fast… what about his carry costs? During the time his home was on the market (and he was living 2,000 miles away paying another mortgage and set of utility bills), Mr D was paying on his $224,000 mortgage each month. He also had the pleasure of paying his electric, gas and water bills monthly. I’ve estimated these expenses (very conservatively) in the chart above.

So, let’s break this down to a net sale, rather than a gross sale. After all, what really matters is what Mr D walks away with after expenses, right? His home sat on the market for a total of about 580 days. From the time I talked to him, to the time he closed on it with his eighth agent, about 220 days had passed. Here’s the breakdown:

In summary, if his first agent had advised Mr D to price this home correctly (and he had listened), and it sold in the then average 70 DOM, he would have netted $238,808 before repairs, closing costs and agent commissions.

Let’s assume he didn’t do that, but a year later he takes my advice and prices it properly, he’d have netted $227,683 before repairs, closing costs and agent commissions ($11,125 less than the previous scenario).

But instead, he did neither, and finally accepted an offer of $249,900, which netted him $200,983 before repairs, closing costs and agent commissions ($37,825 less than if he’d priced it right from the beginning).

Did Mr D’s persistence pay off?

** I copied this post over from my old blog, because I thought it would be useful information for you.  Hope you enjoyed it!

Meeting with home sellers in the Edmond and Oklahoma city area almost daily, I have a lot of long discussions about overpriced listings. I even have this discussion with A LOT of local agents, whether seasoned veterans, or newbies.

Why is this such a frequent topic? Well, it’s simple… Overpricing a home is absolutely the biggest mistake you can make in the home selling process, yet home owners and real estate agents do it every single day. Now, if you just really like that pretty sign in your yard, then by all means, overprice your home. But if you’d like to actually get it sold, then take this to heart, PLEASE!

Any home, no matter how ugly, will sell if priced properly. Even with poor marketing and terrible curb appeal, a properly-priced home WILL sell in a reasonable amount of time. Transversely, an overpriced home, no matter how pretty or well-decorated or new or impressive, WILL NOT SELL in any reasonable amount of time. In fact, the odds are greatly against it ever getting sold when it’s overpriced.

I know, I know, many people think “I’ll just try it at this price for 30 days and then lower the price if my dream buyer doesn’t come along.” Well, here’s why that’s a bad (REALLY BAD) idea:

• About 80% of your showings will occur in the first 30 days on the market.
• The majority of those buyers are high-quality buyers (they’re approved and have probably already lost out on another home they loved because they waited to write an offer; they’re ready to act fast on the next house they love) ** Any agent who’s been in the business more than a few weeks has seen this happen
• Most of those high-quality buyers will be under contract on a house (will it be yours?) within the next two weeks, so they WON’T BE BACK after you lower your price.
• That leaves you with the other 20% of buyers, which are the lurkers. They’re sitting back looking for houses that have been on the market a while, so they can swoop in with a lowball offer.
• The longer your home sits on the market, the more it creates a stigma that something must be wrong with it. Good buyers will be scared away from it by the DOM and the “investors” will come out in droves.

So, by overpricing your home, you simply make the other houses in your area look like more of a bargain, and miss out on the majority (80%) of the potential buyers in your market. Is it really worth it to gamble with the ridiculously low odds that you might make an extra $10K? If you’re even thinking about answering “Yes,” come back tomorrow so I can show you that you’re NOT seeing the big picture!

** I copied this post over from my old blog, because I thought it would be useful information for you.  Hope you enjoyed it!

One of the keys to successfully selling your home is to have small, hard-to-explain advantages over your competition.  Many times, these advantages are one or two unique features, a bit more cleanliness, a slightly more attractive home-site, or just a tad more curb appeal.

Other times though, that advantage may be something mental, rather than physical.  It may be a psychological advantage.  Simply having more attractive photos of one property over another will drive more traffic to that home, thus giving it a much higher percentage of a successful sale.  The photos may not have been any higher quality than the other home, but just showcased a more attractive view of the home, which appeals to the psychological, emotional side of the potential buyer.

What we must keep in mind though, is that buyers (over 80% begin their search online) look at two things first; Photos, and PRICE (not necessarily in that order).  You’ll find that I write a lot about the art of pricing homes and how to get a pricing advantage:

• The home MUST be priced correctly (realistically).  Nothing will kill the possibility of a sale faster than being overpriced.
• It must be priced in the right competitive position.  Simply put, if your home is on the higher end of pricing for the neighborhood, it’s going to get shown less.  You want to be in the lower half of all homes listed.
• Last is a point that I’ve just recently become aware of.  It’s the psychology involved with the actual number of your sales price.  This is the point I want to get into with this post.

I just read a Cornell University study on precise number pricing that I found very interesting.  It hits on two things. 

• First, what 3 numbers should be at the end of your sales price?  Should you price your home at $479,000 or $479,525?
• Secondly, what are the best bracket prices to try to fit into?  Is there an advantage to being priced at $424,500 versus $425,000?

While I’ve always been a firm believer in pricing just under the top of  a price bracket, such as $424,500 to get the listing found in more searches, I’ve never come to a logical conclusion on the first point, but this study has me leaning toward it’s logic.

While it may seem kind of silly to get so caught up in something as trivial as the physical numbers, the fact is that our minds work in patterns, which this study works from.  No matter how trite, these small unexplainable advantages are exactly what may help you get a buyer before the guy down the street.