I have some buyer clients coming to the Lake Norman area this weekend. They’ve already visited once and become somewhat familiar with our market, our communities, and some of our neighborhoods. In planning the next trip, they asked about a property in one of the neighborhoods in which they have an interest. According to the property’s statistics, it’s been on the market a LONG time. They asked me to look into it to see if I can figure out why. That I did, using our MLS history and tax records. After scanning all of the info, it became somewhat clear why the house has not yet sold, at least as far as can be told without a conversation with the sellers.
The house was bought brand new in 2006 for a bit under $310,000. For some reason, the sellers put it on the market around a year later for almost $350,000. Why would anyone try to sell so soon, and for such a substantial increase over what they paid? That information we can’t know, but it would be a good guess to say that the sellers had a change in circumstances that forced them to put the property on the market. At that time the market was about 6 months before hitting the pricing peak (see graph), so it was understandable that the sellers could be optimistic about getting more than they paid, but that was a big jump for one year. As we know, in early 2008, the housing market, along with the general economy, started to decline. Nobody knew how far things would drop, but the direction was definitely down. The problem with moving markets, particularly down ones, is that to price things right, one has to guess where the price will be in the coming months and adjust accordingly. The sellers stood pat for quite awhile, then eventually made a small reduction, and rode that for a long time. The property didn’t sell. They took it off the market for an extended time, and then re-entered the market with a $50,000 reduction. Following this, they further reduced it to $260,000 where it is now. That price is now somewhat competitive with the neighborhood comps. So, they started at $350,000, and now it’s at $260,000. From what I can see of the property on the MLS, it looks to be a very nice house with some good upgrades, so there’s no apparent issue with the condition or location. Quite often, this scenario ends up as a short sale and possibly eventually a foreclosure. Whatever caused the sellers to price the way they did when they started out, obviously, it was a plan that was doomed to failure.The lesson here is that when you are pricing a house using a Realtor, demand that the Realtor be brutally honest about the pricing, with an eye toward the direction of the local market. Don’t adopt the “I’m not going to give it away” attitude if you really want to sell. If you price the property too high, you won’t be giving it away because you won’t be selling it. Your Realtor will do just as an appraiser will do- check out recent sales of comparable properties, and take a look at the local competition. You’ve got to look at your property the way a buyer will see it along with all the other available properties. When a buyer is ready to negotiate, they’ll have their Realtor provide local recent sales for comparison because no one wants to pay more for a property than others have recently paid. Recent sellers establish “market value.” Also, if you’re getting a mortgage, the lender will have their appraiser do the same thing to establish local market value. The buyer may agree to too high a price, but their lender won’t- no mortgage, no sale! In this case, the high price will have just wasted more time on the market.
Always remember that one way or the other, time is money, whether it be in carrying two mortgages, or just paying interest and taxes on a property too long. The sooner you sell, the better. So, the more reasonably priced the property relative to the current and future market, the faster your property will sell.
We’re starting to finally see some price appreciation in our local market, so hopefully this situation won’t happen as often. Nevertheless, sellers still must price their properties within a range that will appeal to buyers in the market.