Welcome to 2017—a year I will dub The Year of Pricing Cautiously. I know I’ve always been a stickler about pricing right but now it’s more important than ever and here are five great reasons why:
1. Interest rates are going up. Which means a greater percentage of a buyer’s housing budget will be eaten up by the interest being paid on the loan. For every 1% of interest rate increase, a buyer’s purchasing power decreases by 11%. Don’t believe me? Read this article by Realtor.com which explains that if, for example, you “want to purchase a median priced home at $250,000, (and) if interest rates go up by just 1/4 of one percent (.25%), you will need to earn an additional three percent (3%) in income to qualify for the same $250,000 house. If you don’t expect your income to go up by 3%, then you must purchase a home priced 3% less.” Therefore, buyers are going to be looking in lower price ranges (reducing your pool of buyers) and cutting their purchase price to the bone in upcoming months. If you are priced higher than your competitors, who are offering the same value and amenities for fewer dollars, your home is going to end up on the Expireds list and no one wants that.
2. According to real estate guru Gary Keller, the market will soon shift back to a buyer’s market. In other words, there will be more houses on the market than buyers to purchase them. This added competition means that the homes offering the most value will be the ones to sell first, if at all.
3. It’s harder than ever to get a home to appraise (and qualify for a mortgage). Since the financial debacles of 2006-2008, appraisers are more careful than ever before to ensure that banks and other mortgage backers don’t end up with the piles of short sales and foreclosures that plagued them only a few years ago. Don’t assume that if your home doesn’t appraise (be valued by the bank at a price similar to comparable property sales in your area), the buyer will come up with the difference in cash to make the deal go through. Very few buyers, if any, want to purchase a home that the bank has warned them is overpriced, and even fewer purchasers have tens of thousands of dollars in cash to plunk down to make up the difference. And even if they wanted to, their real estate lawyer will probably quash the deal.
4. Buyers in the Digital Age are exceptionally knowledgeable. With tools like Zillow at their disposal, they can easily research what homes have sold for in your area, and what value competitors’ homes offer as compared to yours. In the old days, they would visit a Realtor and ask that agent to pick homes for them to visit. Now they’re coming in and telling the Realtor what they want to see. And believe me, they’re not asking to see the homes that they consider to be overpriced!
5. Competent agents will steer buyers away from overpriced homes. It’s their job to run a Competitive Market Analysis (CMA) for any homes their buyers wish to purchase. If the homes in question are priced higher than what similar homes have sold for in the recent past, the agent will advise buyers as to the more appropriate offer to make. So if your pricing approach is to “wait for that one buyer who will fall in love with my home and pay what I’m asking,” that's not a practical strategy. Whether they’re buying on their own (and using Zillow, etc. for their research) or working with an agent, no buyer is ignorant of the true value of your home.
It’s January 1st, which means it’s the first day of the Spring Market. If you’re thinking of selling your home, please call me at 845-893-0173 and let’s get your home priced right and on the market now, before the masses list their homes in March and April, and you get lost in the shuffle.