1. Price it a LITTLE LOWThis may seem counterintuitive. However, let’s look at this concept for a moment. Many homeowners think that pricing their home a little OVER market value will leave them room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price it so that demand for the home is maximized. By doing this, the seller will not be fighting with a buyer over the price, but will instead have multiple buyers fighting with each other over the house.Realtor.com gives this advice:
“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”
2. Use a Real Estate ProfessionalThis, too, may seem counterintuitive. The seller may think they would make more money if they didn’t have to pay a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by a real estate professional.A new study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent.In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”The results of the study showed that the differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%. Sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.
Bottom LinePrice your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your home.
“In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today. The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”Buyer demand continues to outpace the supply of homes for sale, which has driven prices up across the country. Until the supply starts to better match demand, there will be a gap between the sentiments surrounding buying and selling.
Bottom LineIf you are considering listing your home for sale this year, now is the time!
After all, 14,904 houses sold yesterday, 14,904 will sell today, and 14,904 will sell tomorrow.
14,904!This is the average number of homes that sell each and every day in this country, according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales are at an annual rate of 5.44 million. Divide that number by 365 (days in a year) and we can see that, on average, over 14,904 homes sell every day.The report from NAR also revealed that there is currently only a 4.2-month supply of inventory available for sale. 6 months inventory is considered ‘historically normal’.This means that there are not enough homes available for sale to satisfy all of the buyers who currently are out in the market in record numbers.
Bottom LineWe realize that you want to get fair market value for your home. However, if it hasn’t sold in today’s active real estate market, perhaps you should reconsider your current asking price.
The results of their latest survey:Home values will appreciate by 5.0% over the course of 2017, 4.0% in 2018, 3.2% in 2019, 3.0% in 2020, and 3.0% in 2021. That means the average annual home price appreciation will be 3.64% over the next 5 years.The prediction for cumulative appreciation increased from 17.8% to 18.4% by 2021. The experts making up the most bearish quartile of the survey are projecting a cumulative home price appreciation of 6.7%.
Bottom LineIndividual opinions make headlines. We believe this survey is a fairer depiction of future home prices. If you are thinking of buying a home, stop thinking and start acting! Call me today.
- The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.
- In the report, home prices are compared both regionally and by state.
- Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!
- Alaska & West Virginia were the only states where home prices are lower than they were last year.
Bottom LineIf you are a homeowner looking to take advantage of your home equity by moving up to your dream home, let’s get together to discuss your options!
3 Questions to Ask Before You Buy A HomeAsk yourself the following 3 questions to help determine if now is a good time for you to buy in today’s market.
1. Why am I buying a home in the first place?This is truly the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.For example, a survey by Braun showed that over 75% of parents say, “their child’s education is an important part of the search for a new home.”This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. They are:
- A good place to raise children and for them to get a good education
- A place where you and your family feel safe
- More space for you and your family
- Control of that space
2. Where are home values headed?According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in May (the latest data available) was $252,800, which is up 5.8% from last year. This increase also marks the 63rd consecutive month with year-over-year gains.If we look at home prices year over year, CoreLogic is forecasting an increase of 5.3% over the next twelve months. In other words, a home that costs you $250,000 today will cost you an additional $13,250 if you wait until next year to buy it.
What does that mean to you?Simply put, with prices increasing each month, it might cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.
3. Where are mortgage interest rates headed?A buyer must be concerned about more than just prices. The ‘long-term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.The Mortgage Bankers Association (MBA), NAR, and Fannie Mae have all projected that mortgage interest rates will increase over the next twelve months, as you can see in the chart below:
Bottom LineOnly you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.
“National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.”Though that statement is correct, we must realize that just catching prices of a decade ago does not mean we are at bubble numbers. Here is a graph of median prices as reported by the National Association of Realtors (NAR).We can see that prices rose during the early 2000s, fell during the crash and have risen since 2013.However, let’s assume there was no housing bubble and crash and that home prices appreciated at normal historic levels (3.6% annually) over the last ten years.Here is a graph comparing actual price appreciation (tan bars) with what prices would have been with normal appreciation (blue bars).
Bottom LineAs we can see, had there not been a boom and bust, home values would essentially be where they are right now.
If your home hasn’t sold yet, it could be the price!If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prospective buyers that will even see your house. See chart below.
Bottom LineThe housing market is hot. If you are not seeing the results you want, sit down with your real estate agent and revisit the pricing conversation.
“Wishin’ and hopin’ and ‘ thinkin’ and prayin,'” the first line of a Dusty Springfield tune sung by numerous artists gives some pertinent advice on how not to find love. This simple advice is also the cornerstone of how not to sell a property.
If you want to sell your home for the most money in the least amount of time you must price it right from the beginning. Pricing a home right from the beginning, at or slightly below market, quickly produces multiple offers along with the prospect of a bidding war: Now isn’t that exactly what every seller should want?
With house prices increasing at various rates across the country, some sellers may think they can list their homes at a higher price and adjust if necessary. That would not be a good strategy. This is a post KeepingCurrentMatters ran several years ago by Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit http://realestate.fiu.edu/.
Are there any negative effects from changing the listing price of a property? This question haunts Brokers/Agents as well as sellers of property every day. At present, there does not seem to be a consensus answer to this question within the professional real estate community. Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.
In Knight’s research, the impact of changing a property’s listing price is investigated. Additionally, the types of property that are most likely to experience a price change are also estimated. The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.
Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts. Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.
Implications for Practice
Sellers as well as Brokers/Agents should therefore be aware of the critical necessity of getting the price correct from the start. Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average, according to Knight. Brokers/Agents’ desire to take a listing and get the price right later will ultimately lead to their working harder according to Knight, and they are not doing their sellers any favors. Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.
Interestingly, I have found in my own research that the direction (up or down) of the listing price change does not matter. A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices.