gmhTODAY 22 gmhToday Oct Nov 2018 - Page 12

The Price Sells the House T Top Producing Team Gilroy Offi ce, 2015, 2016, 2017 Sean Dinsmore, Realtor Intero Real Estate Services 408.710.2855 DRE #01966405 Marta Dinsmore, Realtor GRI Intero Real Estate Services 408.710.0571 DRE #01352339 12 here is a general rule of thumb in the real estate business that wise professionals keep on reminding themselves about when pricing a new listing. It suggests that if a property is as little as 5% over what is perceived to be the market value, the seller loses half of the potential buyers! Not a good idea. Worse: if the property is listed at 10% over market value, 70% of the would-be buyers are eliminated. This is especially true at the high-end of the housing market. Hence question #1 to the home seller: Do you want to just list or do you want to sell? If listing is the deal, be my guest, put any price you want on the contract. If, however, the idea is to sell, then put a price on the house which is likely to attract as many buyers as possible, as soon as possible, and produce a sale at the best possible price. Now, question #2, this one also for the seller: Do you want to sell the house or do you want to hire an agent who “buys the listing”? This is the term Realtors use when an agent, who is being interviewed for the job of listing a house, knowingly tells the homeowner a price that is higher than market value, and consequently higher than the accurate price ethical Realtors will provide. They do this so that they can get the listing contract signed, secretly knowing they will have to go through a price drop at some point. Aside from a host of ethical issues, I personally don’t understand why agents do this, unless the agent is starving and will do anything to secure the business. In the end, both the agent and the sellers are frustrated and disappointed, and nobody wins. There are three pricing strategies: you can price at what you perceive to be market value based on pertinent comps; you can underprice a bit or a lot in hope of creating a bidding war (if and when the local market is ripe for this scenario); or you can overprice and play Russian roulette (and perspire heavily for a long while). Some homeowners make the calculation that, in order to eventually land at their agent’s suggested price, they should add 10% or so and wait for the winning offer. Sorry, it does not work that way! That much over can almost guaranty that the house is going to collect dust, sitting in unsold inventory, for a long time. At least until such time when the price is seriously reduced. I don’t have to remind anyone that a price cut, no matter the extent and no matter the moment, is an emotionally charged event. So much so that, when it finally occurs, it is often too little too late. The principle of a price reduction is to give new momentum to the marketing and resurrect Realtors’ as well as prospective buyers’ interest in a property. We need to create or recreate drama. The timing and the extent of the reduction are keys to the success of the operation. Typically, in a hot market, a price cut might be pertinent after a week or two of exposure and little if any action. In a relatively good market, a month is usually enough time to test the market before adjusting the price. Now, the thing to keep in mind is that a price cut must be substantial enough to restart the marketing engine. We are not talking about a symbolic price drop here. In the case where an agent and a seller disagree on market value, a calendar of possible price reductions should always be part of the listing negotiation, so as to avoid bad surprises. If the market is just lukewarm, merely following the trend with a reduction every month or so is essentially useless, as other newly-listed homes already integrate the new valuation and, on top of that, have the huge marketing advantage of being fresh inventory. Any price reduction will have to anticipate market moves and beat the most recent comps to stay ahead of the pack. The moral of the story is that, even though everything about pricing is largely hypothetical, experience often teaches that the more conservative and reasonable the initial list price, the better the end result. GILROY • MORGAN HILL • SAN MARTIN OCTOBER/NOVEMBER 2018