It’s no secret that home sales are sluggish and buyers are hard to come by. But the fact is, some houses ARE selling. Which ones? That’s the question I posed over the weekend to L.A. real estate agent and former journalist Christopher Hain, who then posted his answer on his blog, TerraFirmaLA.com. His take: It’s all about price.
“There are so many properties and so few buyers, that to sell QUICKLY your home must stand out. The No. 1 way to make it stand out is price. When there’s too many homes on the market, price trumps all. Everybody’s looking for a bargain. Right now, buyers are afraid to buy. Most feel it’s foolish to pay full price right now with everything going on with the market and economy. Many people would wait and pay more later instead of overpaying now. Nobody wants to be the sucker.”
Hain even offers a rough pricing formula:
“[I]f the market in a neighborhood is generally sliding at a rate of about 10 percent, you have to apply that 10 percent looking forward. And you have to do it twice. So, if sales in the past six months suggest that your house is worth $2 million, then your house TODAY is really worth 10% less, or $1.8 million. Those sales were in the past. Your value is now 10 percent less. But it’s worse than that, really. You aren’t selling your house today, you’re selling it in the future, so your value going forward is really 10% less than that, or $1.62 million.
“Obviously, that is a very generalized view. And again, there’s no hard and fast rule for how to look at a property. And I’m telling you this to sell your property QUICKLY. Yes, it stinks. But remember how this principle worked almost exactly in reverse when the market was rising. People who looked at recent comps knew their property was already worth more than the old comps. And then they priced it even slightly above that — and many times they got it! Now, the reverse is true.”
Hain, who works for Ramsey-Shilling Associates and sells properties from Hollywood to Santa Monica, cautions that this advice applies to Westside real estate, where distressed properties are still relatively scarce. In higher-foreclosure areas, he says, sellers need to do even more.
“In a market flooded with foreclosures, I would do two things differently. One, I would be even more aggressive in pricing than someplace like Santa Monica. But that still might not be enough. Secondly, you might have to do more improvements…. The reason is many people right now see the sky falling. They’re willing to wait for homes to fall further, so in a place where prices have come down significantly and there are plenty of foreclosures, it has to be not only well-priced, but great quality — something special that isn’t likely to come along in a few months, when more of these subprime mortgages reset.”
Solid advice — for those with price flexibility. The problem is, there are too many people who bought at the peak and now owe more than their properties are worth. Those people have four choices: hang on to the house (difficult with a rising mortgage payment); write a check to escrow (unlikely); persuade the lender to allow a short sale (possible, but complicated); or walk away (which more and more are doing).
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