One of the most difficult things for home sellers to accept when pricing their Silicon Valley home is that they may need to compromise on their asking price when they list and negotiate the sale of their home.
Proper pricing, always a critical component in real estate, and one of the most critical insights a real estate agent — whether in Mountain View, Los Altos, or beyond — can provide, has become especially important today because buyers are cautious and the market is in flux.
If fact, inflexibility can lead to missed opportunities. I’ve been working with home sellers who are facing just such a situation.
After analyzing the local market and the homeowners’ goals, I thought a property in Mountain View should be listed at $1.2 million, but the owners insisted that we start at $1.35 million.
Within six weeks, we got an offer for $1,170,000. The prospective buyer was solid and I thought the offer was strong. The homeowners (lifelong Mountain View homeowners) had nearly paid off the mortgage, so they would be walking away with a respectable profit. Yet, they rejected the offer immediately. This all happened before the recent national financial crisis.
After the house sat on the market and we received no additional offers, we lowered the price to $1.3 million for six weeks. Unfortunately, this pricing strategy yielded not one offer.
We then dropped it to $1.25 million and finally received an offer for $1.15 million. The owners wouldn’t accept that price and decided to rent the house. Three applicants applied and we found one tenant that would commit to a lease. But the owners then decided to go back and try negotiating with the prospective buyer who had made the $1.15-million offer.
Eventually, both possible deals—the one with the home buyer and the prospective tenant—fell apart. The homeowners were left with no prospects for a rental and no sale.
They’re now facing a market that has gotten more difficult because of the stock market crash and the ensuing credit crunch.
Elizabeth Weintraub of About.com offers a list of pricing techniques that this owner should have heeded, but this situation also illustrates several key points to consider when you decide to sell:
1. Consult a professional REALTOR®, a real estate agent who is a member of the local association of REALTORS®, who knows the local market, for example the Silicon Valley Association of REALTORS®. Follow the person’s advice. He or she is best prepared to properly price a property.
2. Do your own due diligence. You can find insight on pricing, how the local market is performing, and how long it typically takes to sell a property in your neighborhood by going online.
3. Be realistic when you get an offer. The emotional response is to reject a disappointing offer from the get-go. But you can negotiate and work toward a more favorable price. It’s important not to get too emotionally involved in the deal.
4. Know that in a declining market the offers may not get better. You have to really weigh your financial situation and how long you’re willing to wait for that perfect price to come in. After all, you’re likely still making money, just not as much as you once thought you would. Can you afford to put your plans on hold? If you reject an offer in hand, are you willing to risk getting an even lower offer next time?
5. You hired your REALTOR® because you had confidence in his or her abilities and the market analysis that the person presented to you. Remember that the market decides what price a house is worth, not the REALTOR®. If the listing agreement expires and you and the REALTOR® part ways, you’ll have to start from ground zero with a new REALTOR®. And that new person, after weighing current conditions, may suggest an even lower starting price than the offers you’ve already received.
6. By making impulsive decisions, you could lose valuable time and miss out on solid offers.
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