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Monday, June 01, 2009
Discover how to sell your home in a difficult property market
in a difficult property market.
Recently I was invited to a prospective seller’s home to discuss why their house had not sold in almost six months. Prior to meeting with the couple I decided to do some research, and found some disturbing results that would prove to be devastating news for these stressed out home owners. I needed to present them with the hard truths of a difficult property market.
This is an age where multi-media has blossomed, instant communication is demanded, and the information highway and property sales information is now at the fingertips of most buyers. Advertising a home is now more of an art form than a process, and presenting a home to a local or overseas buyer is much easier than at any other time in marketing, advertising or media history.
So why then are we seeing many sound beautiful homes stagnating on the market, not selling and turning into 'lemons'? The fact is most of these homes should have sold in less than 60 days, for tens of thousand of dollars more than today’s prices! The answer lies not in costly makeovers, bricks or mortar, nor floating in the aroma of freshly baked scones during multiple intrusive open inspections.
The answer lays quite simply in the Asking price; importantly, a competitive Asking price.
The foothills property in question was first advertised for 'around $800,000' in April 2008. When I was asked to appraise their home it was still on the agent’s books in the high $700s. What these unsuspecting sellers were not aware of was that the market had softened by more than 10% from the over-inflated high prices of late 2007.
Why then is the public kept in the dark when it comes to the truth about the real estate market? Every day we hear reports about the demise of our stock market shares and superannuation. As consumers we can go online or listen or watch the news with monotonous regularity to find out by how much the stock market has plummeted daily. The property market, however, prefers to process and present sales information quarterly. It is hardly surprising therefore that many agents are either confused or do not have the intestinal fortitude to present the home truths to the home sellers.
I decided to go online and look at why this lovely well-constructed home was not selling. I discovered that it was a very familiar home, the same property that was advertised on the internet three or four months ago in exactly the same format with exactly the same photos. The advert should have headlined; Please help me, I am bored! and overpriced! Nobody wants me! This is how the public perceives what has become a 'lemon'. Why? It is simple, the price stayed too high and out of reach of the best buyers for too long. Even more disturbing was the tens of thousands of dollars of artefacts, paintings and silverware clearly on display to the public via open inspections and shown on the Internet. It’s no wonder that the front door was nearly broken down during an attempted break in.
As I read the Web page searching for more clues, I found a small link showing the hits or visits to that Web page. I discovered that almost 4500 people had visited this page before me. Unbelievable, but true.
So why was this home still for sale? Six months on the world wide market, nearly 5000 web site visitors, countless open inspections and not one serious offer?
Comparable sales indicated that the home would never have sold for $800,000 then, unless the market continued it’s unprecedented rise as in the second half of 2007.
It was clear what had to be done. The truth was going to hurt, but I had to help, even if it meant that I would not be appointed as their new agent. My meeting with them at their home included a well-informed tour with detailed explanations of how and why every renovation was done. Included was excellent commentary on why their home was much better than some other homes for sale in the area (which had also not sold). The Vendors obvious love of their home is known as the “endowment effect”. This is where the seller has an emotional connection for the home that no buyer could possibly share to the same level.
Finally I sat down and explained why their home was not selling. Comparable sales for the past six months revealed that their home was more than $50,000 overpriced…. “But we have already dropped our price by $30,000” exclaimed the Wife. After a long pause, I asked, "was it a buyer or an agent that informed you that your home was worth $800,000?" "The Agent did", was the reply. After a much longer pause The Penny dropped. The owners trusted the agent; they had been over-quoted by the agent and believed it. Why wouldn’t they? Maybe the Agent believed it too. This question must be asked. How many sellers give their business to the agent who quotes the highest price?
The truth is that if your home was competitively priced in the first instance, you may have received one or multiple offers and it would most probably have sold within the first 60 days for $50,000 more than what you may receive in today’s market. That is how a weak agent can cost you dearly. That's $50,000 of hard earned after tax dollars.
I showed the sellers a similar property that I had sold in less than three weeks in a July 2008 falling market. This home had three buyers, three contracts and a final sale price well over the asking price. A quick great result with no Auctions or open inspections. If the Sellers had believed one over-quoting agent, their home would still be on the market three months later for $75,000 more.
As the home in question was initially priced out of reach of buyers for too long, the market continued to slip away, leaving the gap between 'competitive' and 'unrealistic' growing week by week. The agent, (a well respected and presumably honest agent) is simply guilty of not having the courage to reduce the Asking Price regularly until the price was placed on the sliding property market escalator….Heading down. There can be only three reasons why your home is not selling:1) Your agent is incompetent 2) your home offers major objections to buyers; or 3) the price is too high. Even in a tough economy, you can still find a buyer at today’s market price. The best price in today’s market may not be the price you wanted or the price the agent may have over-quoted to win the business, but is does not change the fact that is still the best price.
There is a time and price for every property. We can sell your home this weekend if we price it accordingly or if you want $800,000 we may have to wait 12 months, perhaps years, for the market to catch up with your price.
Even now that we are seeing a stabilising in the Australian property market with a reduction of interest rates and Government incentives, we must continually ask:- Is your home on the real market yet?
James Irvine
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