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You are here: Home / Archives for price

price

Am I Getting a Good Deal on This House?

February 22, 2016 by khproperties Leave a Comment

Good Deal

There you sit, signing off on a contract for your dream home and the thought occurs to you, “am I getting a good deal on this house?” Your mind begins to race through all of the homes you’ve seen, your bank account, the paperwork sitting in front of you, and all of the possible what if scenarios you could ever imagine. You know you want this house, but are you getting it for the right price? Are you spending too much? What if the market slows or there’s another housing crash? Your head is swimming with all sorts of thoughts about whether this is the best deal or not that you find yourself actually hesitating to sign off on the deal. So, is this a good deal?

What is a Good Deal?

It’s not easy to define a good deal, since every person’s view of what one is will differ. Most people look at getting the house for less than it’s listed for as a good deal, but it can bit a bit more than that. A contract has many different negotiation points and each of those can be added up, along with the sales price, to get a feel for whether or not you came out with the best deal possible. Did you pay for the title policy? Is the seller helping you with closing costs? What about the survey or home warranty – are those costs being passed on to you? And it’s not just money that you need to consider. A good deal is also relative to you and your situation. Did you close on the date that best suits you? Do you need to move sooner and perhaps have to pay for storage for awhile? Did you wind up looking for so long that interest rates moved up and now your borrowing power is diminished?

Like most things in real estate, a good deal for you, may not be a good deal for someone else.

Pricing and the Good Deal

Even with all of these factors playing into whether or not you got the best deal on the home, most people will look at the price and use that as the determining factor. How much did you pay and how much is the home worth? An appraisal will help determine some of this, but remember an appraisal is not the same as fair market value. So how do you know if the home you’re about to buy is priced right? One of the most essential things your agent can do for you is to run a comparative market analysis (CMA) on the home you’re thinking about buying. Most people think of CMAs as being part of the listing process, but they are just as crucial in the buying process. By looking at the data on similar homes in your neighborhood and how much they sold for and when, a Realtor can help narrow down what the market thinks the home is worth and advise you on an offer price (when combined with all of the other factors – since asking for something like seller paid closing costs can affect the seller’s bottom line, which in turn affects the desirability of your offer for them). Remember, you can make that super low offer, but the goal is to get the offer accepted and when the market is hot, low offers often get bypassed quickly for much better offers. It’s Economics 101 – when a commodity is highly desired and there is scarcity, the price goes up. When there are many choices in the market for similarly priced homes, the price goes down. Supply and demand.

The best way to make an offer on the home is to determine what you feel the home is worth. Knowing what value it has to you and your personal situation will help guide you to making the right choices and decisions. Is this the house? Can you afford to go a little higher in price to justify getting those closing costs paid? Remember, if you’re financing the home, your cost is spread out over time (with interest), but for the seller, it is a direct hit to the wallet. What might cost you a few extra dollars a month, could take thousands off of the seller’s net proceeds in one go. It’s about finding the best solution for all parties so that you can come to an agreement.

In the end, a good deal is what works best for you.

image courtesy of cogdogblog

Filed Under: Buying a Home Tagged With: buying a home, price, sales price

Are you reducing yourself right out of a sale?

February 28, 2013 by khproperties Leave a Comment

Price Cut

Death by a thousand cuts.

Todd Waller wrote a post titled “Overpriced Listings: Death by a Thousand Cuts” that speaks volumes about pricing your home for sale. Based in part on an article from MSN Money, Todd’s post mentions one of my favorite phrases – “death by a thousand cuts.”

No, we’re not talking about some sort of evil samurai that will come to your home if you make too many price reductions, we’re talking about the psychology of real estate. We’ve spoken about this before in “Listing your home is not a game.,” but it is always worth discussing again.

They’ll lower the price again.

Buyers are looking for a deal. With all the attention on the housing market over the past couple of years because of foreclosures, underwater mortgages, depreciation of homes, and in some cases, entire neighborhoods becoming modern day ghost towns; it’s no wonder. San Antonio buyers have been barraged with the news from California to Nevada and while we’ve suffered much less than other parts of the country, we too have seen changes in our housing market.

Because of the constant influx of this housing information, buyers are not looking to pay a dime more than they have to and they have become very good at taking the “wait and see” approach when they feel a home is overpriced. In many cases, their stance has been rewarded, as sellers who were desperate to sell lowered their price, month after month, hoping that they would finally hit the magic number that would bring buyers waiving their checkbooks in the air.

Eventually, someone will bite at the reduced price and the home will sell, but at what cost? As the price reductions begin, the sellers begin to reveal their hand. One price reduction can actually lead you to a longer listing. Why? Buyers are waiting you out. They want you and your real estate agent to continue to lower the price, month after month, week after week. By the time they make an offer, the price has been reduced so low that the buyer walks away with a home for a great price and the seller walks away sore from having their home on the market so long.

A well priced home will sell faster than the others in the neighborhood – it’s simple economics. Once the buyers smell blood from the death from a thousand cuts, they will wait it out and make their move when the home is priced even lower than it should have sold for. The buyers are willing to move on to a different property if your home never meets their price needs.

There is only one solution to this game of cat and mouse: pricing the home according to the current market. Avoid overpricing your listing and you will increase your chances of selling. Let your neighbors price their house however they want, if you’re the best value on the block, your home is going to sell much faster than Mr. Jones’ home across the street.

The obvious question.

So if price reductions are so bad for sellers in today’s market, why do Realtors recommend them? In my opinion, there are two kinds of price reductions. Reactive price reductions and proactive price reductions. Although both can be employed by agents and their sellers to reduce the home’s price, one is definitely better than the other. By the way, I named these for my own use, so you won’t find them in the Realtor Handbook anywhere.

Reactive price reductions – These price reductions are based in reaction to the home not selling. The most common reason? The home was priced too high to begin with. Some sellers want to “give it a try” or insist that despite all market data and a solid comparative market analysis, their home is worth more. One of the toughest jobs as an agent is to convince a seller who won’t budge on price. I don’t blame them, everyone wants the maximum price for their home. The unfortunate thing is that there are real estate agents out there that will blindly take these listings, knowing full well they won’t sell at that price, but count on future price reductions to bring the home in line with market conditions and eventually sell. This hopeful attitude is neither good for our industry or for the seller and only does more damage to the real estate industry’s image and the seller’s bottom line. Although sometimes it is necessary to reduce the price, it is much better to work proactively than reactively.

Proactive price reductions – The housing market is ever-changing and as much as I wish I could, I can’t predict the future. Proactive price reductions take into account changes as they happen. Perhaps there’s been a news item that says your school district is failing, perhaps they just opened a toxic waste dump next to your home, perhaps the overall market is just slowing down – no matter what the cause, the effect remains the same; the pricing in your area needs to be adjusted. By keeping an eye on the market, we are able to offer clients the advice of where do we go from here as it happens, instead of waiting until the market has shifted again.

A necessary evil.

Price reductions are at times a necessary evil. No one wants to make them, but when a price reduction can be the difference between staying on the market for another few months or getting the home sold, the hard decisions have to be made. It’s never a fun conversation to have with a seller who only wants to sell the home and walk away with as much money as possible. Pricing it right from the start will alleviate some of the hard decisions and emotional and financial difficulty they bring.

Interesting in finding out what your home is worth in today’s market? Fill out the simple form below and we’ll get back to you to discuss your home’s fair market value.

image courtesy of Craig Murphy

Filed Under: Sell Your Home Tagged With: selling your home, price, price reduction

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