Well of course they are, but a salutary effect of new houses coming on that are priced intelligently is that they’re forcing owners of old, stale listings to do a reality check. Some owners are stubborn, of course and sit in their unsold homes scowling, “nobody’s gonna steal my house!”
Other owners are getting the drift. Just to cite two examples, 11 Mountain Wood, priced at $6.250 million three brokers and three years ago, is currently asking $3.3 million. It still hasn’t sold, but an agent won’t feel like a complete fool showing the place now.
34 Sheffield Way
The sellers of 34 Sheffield Way, off Round Hill, paid $3,475,750 for the place in 2004, paid Hobbs what must have been a fortune to renovate it and put it back up for sale in 2005 for $5.395 million, where it didn’t sell. Five years later it’s down to what they paid for it: $3.495, so all of that renovation is tossed in free. The house may or may not be to your liking, but the price is certainly reasonable.
And so it goes. If this keeps up, we’ll have a vibrant market again, I hope.
The Wall Street journal reviews “Priceless”, today, a book about, natch, pricing and the tricks used to befuddle consumers. Or, put more nicely, why “psychology counts as much as logic in many simple economic decisions.” Lots of interesting examples (Skippy Peanut Butter, for instance, put an indentation in its jar, cutting volume 9% to avoid a price increase that would scare off shoppers) and I recommend the entire review or heck, order the book itself.
For the purpose of this column, however, I found this paragraph illuminating, if not exactly unexpected:
Whatever the pain of an irrationally expensive breakfast, it pales in comparison with buying an over-priced house. To avoid that mistake, however, a buyer may need to cover up the price tag and appraise the house without being influenced by the seller’s number. In one experiment, a group of licensed real estate agents were shown a house and told that it had been listed for $119,900. When asked to estimate a reasonable purchase price, their average was $111,454. When a different group of agents was told that the listing price for exactly the same house was $149,900, their average estimate was $127,318. The agents had subconsciously used the listing price as a reference point for their appraisals—even though they knew it was irrelevant.
That’s kind of what I try to do here: take away the price tag and try to give readers a chance to make a logical, sound decision. Not that I’m infallible, but those asking prices are almost always wrong.
I know a very nice young couple who are thinking of listing their house in another town and have received conflicting advice. Their agent wants them to shave 10% off what they paid for it four years ago, while others tell them to list it at at least what they paid for it. I’m with their agent on this and in fact I’d recommend taking another 5% off from that. Here’s a sad tale showing why:
52 Fairfield Road, a good house on a somewhat tricky curve, sold for $2.4 million in March 2006. In March, 2007, the buyers tried reselling it for $2.9 and, having lost momentum with that kind of overpricing, rode it down through a couple of price drops until it expired, unsold. It’s back on today, this time at $2.150 million. That’s a good price and I hope they get it, but I suspect they’d have sold their house for more and moved on sooner had they priced it more realistically to begin with.
In this market, the only buyers are bargain hunters. Pricing your house for what you paid for it says, in effect, that you are determined not to take a hit , and that scares bargain hunters off – they wantyou to take a hit – that’s how they know they’re getting a bargain. Harsh, but don’t forget, you’ll be doing exactly the same thing to whoever is selling the next house you want.
The owners of this house on Sundance Rd listed it for $1.895 million in April, 2005, kept it on the market for a year with a couple of price reductions and then let it expire, no doubt hoping that they’d get their price in a few years when the market had climbed higher. Well it’s back on today, asking $1.399. And frankly, that seems high.
My pal in Tucson. John Schneider, has some advice for his sellers that you can apply here in Greenwich:
If you want to sell it, the only thing that matters is what buyers are willing to pay for it.
Click on the link for a graphic example.
127 Sound beach
This 1920 house was bought for $1.220 million in 2002. I liked it then and haven’t seen it since but it’s back on today asking $2.1 million after the owners have added a new kitchen, central air, new baths, etc. That doesn’t strike me as a bad price at all. The house’s driveway is on Wesskum Wood, so you avoid the hassle of entering Sound Beach Avenue, and nice as the house was eight years ago (and it really was), a new kitchen and baths would have been welcome. But will buyers go for this price? I hope so, because I think it’s a good one, and if it doesn’t fetch close to its asking price, we’re really dropping down there. But maybe we are, so who knows?
And here’s another poser:
31 N. Porchuck Rd
This house on North Porchuck was built and sold in August 2007 for $7,850,000. The new owners added a pool and then had to place it back up for sale this year. Being no fools, they listed it for $6.995 million, as close to a million dollar write-down as makes no never mind (especially if you add in the price of the new pool). It’s a beautiful house, with great views of a pond, terrific lawns, a wonderful layout and even a walk-out basement that’s twice the size and twice as comfortable as my own house. It would be absolutely perfect for clients of mine but I know that they’re waiting for the right bargain and, these days, $1 million off isn’t considered a bargain. I don’t blame my clients or fault them for being unreasonable – we are turning up bargains, and if they settle for something not quite as perfect but $4 million less well, that’s a large bulk of dollars to offer comfort and consolation for not getting exactly what they want.
And like so many buyers today, mine are in no hurry – they don’t have to buy a house. It’s a tad frustrating though, because it wasn’t long ago I could have told them with assurance that they wouldn’t find a house as good as this one at its price, ever. Now I can’t say that.
But it is a great house and if you do have to buy, or are willing to pay to get exactly what you want, this one is worth seeing.
From Minnesota Peg comes this cheery link: Southern California home prices fall to 2002 levels. Gee, things must be improving out there.
As an aside, I recently got a call from an appraiser who is redoing a 2007 appraisal on land in one of our less popular areas. How much did I think prices had fallen there from 2007? I said, “20%, minimum.” “Oh,” said the appraiser, “I was thinking 45%”. “Go for it,” said I.
My first estimate was me being kind. My affirmation of 45% was me being realistic. Someone’s in for bad news and he can blame me. But I don’t want to hear from LA homeowners – their problems are their own.