Cindy's Blog

I read an article the other day that really struck a chord with me, and that I'd like to talk about just a bit. It wasn't that it was anything particularly new, or for that matter anything I didn't know. I suppose it was more that it articulated something in a way a bit differently, or more clearly than I am able sometimes.

While I still wouldn't say that the Richmond market has "tanked" or that the "bubble has burst" there is no doubt that there are areas where there has been little or no appreciation, and admittedly, areas where homes clearly could have sold for more a year ago than they could now. Having said that, this has certainly been a learning process for those entering the market on either the buying or selling side.

It's funny- sellers sometimes seem so concerned about leaving money on the table that they end up doing that out of fear. Sometimes I feel like a broken record- homes that are priced right will sell (yes, even in this market) and even if it takes a little longer for them to sell. However, in a market like this, it's sometimes hard for us to determine (even those of us who do this for a living!) what that "right price" is. It's like a moving target at times.

Going back to the idea of leaving money on the table- What often happens when we're in a slow or declining market is that people hear so many stories of people who got a "great deal" or "stole" a house, that they draw a line in the sand, and try to stand firm that they're not going to "give the house away" and they end up pricing it too high to start with. Once it becomes very clear that they are priced too high, they end up having to drop it lower than they would have started had they begun at a reasonable level-- this is the part where it always seems to get confusing for people, or where I have my difficulty making myself clear.

This is largely because the first 2-3 weeks (even in a market where things are declining or staying flat) are something of a honeymoon period- that is the time when the buyers who are out there, and have been looking for a home like that, would have bought it had it been the right price. After the first few weeks, the home loses the newness and gets put back on "the shelf" to wait for a willing buyer.

What the article said was this- using the example of a declining market (at 5% decline). Homes on the market today need to be priced at tomorrow's prices. A home that is priced at $500k today will be worth $498k in a month and $495k by the time it closes. To get that house sold, it needs to be priced at $495k today. If there have been alot of showings, and no offers within those first 2 or 3 weeks, it may be 5% higher than the market. Many buyers and agents are more than willing to offer 5% less than the listed price, but when a home is 10% off, buyers and their agents will likely not come, and most people will not offer that much lower, period. (Even in the world where people are getting "steals" on homes.

Something to think about.