Check your competition

I spent a good portion of this weekend showing houses to two different families. There was one good house for each family -no, I won’t identify them here because they did like them and I’ll keep my mouth shut until they decide how they want to proceed. There were many more houses that were grossly overpriced and I didn’t have to tell my clients that. No buyer can see a house priced well at, say, just under $2 million and then walk into another house a few minutes later asking the same price but 1/3 smaller, much dingier, with an inferior location, without asking, “are these people out of their friggin’ minds?” Mad Monkey would have you believe that sellers who are cutting their prices are engaged in a mad dash to the bottom and will rue their haste, someday. Perhaps he’s right but if you want to sell your house in the foreseeable future, ask your agent to pull all the competing listings in your price range and neighborhood and then go see them. If you are capable of employing an objective eye and you see a better house priced lower than yours, cut your price. Right away.

16 Comments

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16 responses to “Check your competition

  1. Tassled Loafered Leech

    Listing agent 101. Don’t they bother training agents anymore?

  2. Harry

    When I sold my house a couple years ago, we did before we put it on the market. I specifically priced mine a little below the closest competitor. Got 2 offers within a week, and ended up with an overbid. (Higher than that original competitor) I kept my eye on the listings, and my competition was still on the market months later. If you are honestly trying to sell, why wouldn’t you price properly?

  3. Thomas W. Clay

    What you are talking about is a Comparative Market Analysis, or CMA. Ask your agent for one. If they don’t know what one is, get another agent.

    http://www.cmaplus.com/cmamain.htm is software to produce one, but is has some examples (note: I am closely associated with this company)

    Most regional real estate listing associations also give an agent the ability to generate one.

    • christopherfountain

      CMAs are essential, of course, but it’s my opinion that prices have continued to drop since October (let alone last spring) and some sellers are out of date on what their house is worth. They should ask for an updated CMA and, I think, go take a tour of some of the houses they’re competing with. It’s possible that certain sellers are too blind to see but when two houses are eached priced at $1.995 and one is clearly inferior to the other, I think even that seller can figure it out. But often, not.

  4. IF sellers really want to be priced right, they need to consider other homes that have actually sold. If nothing else, then use the recent sold data for the end game expectation of the final sales price.

  5. Sk

    Your advice may or may not be correct. But for 99.5% of the population it is irrelevant. You are selling houses for just under $2 million? Your niche is so small, and your area of the country so unique, you might as well be advising folks in Scotland as in the rest of the country.

    Sk

    • christopherfountain

      $2 million is a starter home here, but that doesn’t make the advice irrelevant – drop a few zeros (or add a few, if you’re in Beverly Hills) and you’re in your own market with the same issue – are you priced above or below comparable homes? If you’re above, you’re in trouble.

  6. John

    Having spent many years in the mortgage industry, I can confirm that this is how it’s done. Put yourself in your homebuyers shoes. Go online and find five or six homes in your neighborhood or vicinity that match yours in terms of # of beds, baths, age, lot size etc. Drive past each to see that they are generally in the same condition as yours.

    Now, spend an hour pretending you are a homebuyer. Which of those houses would you buy? When you have decided, price yours several thousand less than that one.

  7. In our town there is a particularly egregious example of a home that was grossly, i.e. 83% overpriced. I asked the agent where she came up with her number and she said that other 5 br, 3 bath homes were going for that in town. Which is true – except none shared a driveway with a multi family or faced I-84, all the others had 2 car garages and were on at least a .25 of an acre. The sad thing is, if the owner put it on at $300,000 a year ago they would have sold it, probably for slightly more. Today it’s on @ $349,000 and I’ll be starting for Cleveland Indians before that happens.
    No serious, professional realtor would humor the sellers by trying to sell a $300,000 house for $549,000 so the sellers are on their third realtor, all have been noobs or out of towners. Each has done the sellers a disservice by acquiescing to their ridiculous sales price.

  8. Mike vego

    Whether homes are worth 150k or 2M the principle suggested here is equally valuable. When it is time to sell, seller’s need to make an effort to distance themselves from both their reasons for selling and from their “love” of their homes. Take a few hours to see what you are competing with, I can assure you that the buyers will.

  9. Word of caution: This advice is great if your overriding goal is to be the very next house sold. But it’s not like there’s only one buyer in the world; nor is it certain that the seller who, at any given time, has offered the lowest price has done a good job of assessing the market. It may be that he’s underpriced his house — in which case yet, it’ll sell before yours does, but then it’s off the market, and yours may be the next-lowest-priced but still significantly within the realm of what a willing buyer under no compulsion to buy will pay.

    In other words, don’t let this advice lead you into undercutting a fool, because that makes you a BIGGER FOOL.

  10. Brandyjane

    We bought our house a year ago, and we thought some of the sellers were out of their minds. Take for instance, the “Dog Pee House” or the “Crazy-Ugly Wallpaper House.” Definitely find someone objective to evaluate your house. Fix the obvious problems or drop your price considerably.

  11. Video

    As I’ve told several people in the past, “love” of a home will get you screwed, whether you’re buying or selling. A house is a box to live in, nothing more. It’s worth a certain amount per square foot, no matter how precious you may think it is. “Love” has no place in a business transaction.

    There’s still a tendency among some agents to put a pie-in-the-sky valuation on a house (which gets the sellers very excited) solely to get the listing. The agent, of course, pulls half the commission regardless of the effort expended (usually none), and regardless of the final sale price. That’s parasitism, plain and simple, but it happens too often and is to be guarded against.

    I’m in the process of trying to get out of my house following a divorce, and it looks like the only prudent strategy is to suck it up and ride things out for another year in the hope that mortgage money will loosen up somewhat and improve the sales climate. (I’m a contractor, and have spent the last six years doing a premium gut-level remodel on a solid house on a great lot in the most desirable neighborhood in this area.) In preparation for exit, I called on a respected colleague who is both a realtor and a licensed appraiser, and asked him for a no-crap, realistic sale price. He gave me what he called a “90-day number,” meaning that which will sell the house during the typical 90-day exposure on the market for a properly priced house. The result was an astonishing disappointment (producing a spew of unprintable Tourette’s syndrome on my part), but it is what it is. Listing the house for what I really have in it (and assuming my skilled labor is worth nothing) and hoping for the greater fool to come along isn’t a solid business decision. A rude awakening, but it’s better to go about it with one’s eyes open.

    A couple of years ago I talked with the guy who used to be the head appraiser for FNMA, and he made a good point: Houses get “shopworn.” Too high a listing price just makes you look like a greedy fool, particularly after the house has been on the market for three years with no offers. Too much time on the market hurts the sale. He also made another good point: The value of a house is what someone will pay for it; forget theoretical scenarios and any wishful thinking.

    Great point on your post, and many wise comments. The pendulum will doubtless swing back in the other direction eventually (always has in the past), but it rather sucks to be stuck in the middle while riding out market corrections. But ride them out we must.

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  13. Peg

    This is great advice – but – not foolproof. I remember taking a couple out to look at homes in their area, in an effort to get our price to a more realistic figure. We looked at about six, and I thought to myself: “Great; now they’ll realize we need to come down at least 5%.”

    WRONG.

    “Peg; I think we ought to ask a little more for our house, after what we saw today.”

    My sellers loved their own home so much, they were blind to its flaws and valued their own home’s idiocyncracies to the more prized updates of other homes on the market. The only good news was this was at the tail end of the froth, and eventually I did find someone to bite.

    Of course, my difficult tale notwithstanding – often “the tour” is most helpful.