Legacy Escrow
Raquel Bauer
cell: 951-522-3049
949-200-9305
fax- 949-861-6834
LegacyEscrowService.com
In a super-heated market, almost any price will do —
competing buyers will do what they need to do to land the
property. In a downturn, however, nailing the price is
absolutely critical. While the timing of the recent market shift varied from region to region across the US, it arrived in Northern California the
first week of May 2022. While some sellers understood that a
day of reckoning would be coming at some point, its sudden
appearance caught most off guard resulting in confusion,
frustration, anger, and disbelief. On the positive side, due to easy access to extensive online real estate market data, we live with the most educated sellers of all time. Consequently, a decent percentage of sellers saw the
shift occur and were aware they would have to deal with the
new reality. Others, however, have refused to acknowledge the changing market and insist their home be priced at pre-shift
levels. Coupled with this are a group of real estate agents who either
do not understand the new market or are unwilling/unable to
educate their sellers in setting effective prices. We also have a
large group who have had their licenses less than 10 years and
have never been through a significant shift before. The result is properties placed on the market with prices that stretch the boundaries of reality which, unfortunately, languish for extended periods of time. The net result is properties being
categorized as “stale” and typically selling for less than they
would have had they been priced correctly at the beginning.
When the market is heading in a downward direction, buyer
behaviors change dramatically. Whereas a few short months
ago almost any home sold in a few days, homes that are in
“iffy” condition, a poor location, or that do not show well are
being overlooked as buyers, who finally have a modicum of
choice is going after the premium homes first.
At the end of the day, in a declining market, price is the only
the thing that will get some properties sold.
Here are our 6 critical rules for effective pricing in the midst of
a shift:
1. Explain the new reality
Like it or not, the market that existed prior to May 1, 2022, no
longer exists. This is extremely bad news for sellers who made
plans based on the price they hoped they would achieve had
the market continued upwards.
A friend of mine came up with a great analogy for explaining
why pricing from just a few months ago no longer applies?
“Think of those previous sales as lottery winners,” she explains.
“In every lottery, only a handful of people end up winners.
Since there was almost no inventory,” she continues, “Only a
handful of sellers actually cashed in at the peak of the market.
Like all lotteries, once the draw has been made, it is over no
matter how many tickets you are left holding.”
The second consideration is the evolution from an emotionally-
driven market to a data-driven market. As prices continued to
spike upwards at the beginning of 2022 and interest rates
started their upward trek, some buyers.
Once the interest rates rose beyond many buyers’ expectations,
cooler heads emerged and the market tipped. As a result,
buyers are no longer buying with emotions; they are using
emerging data and logic. Using online market data, they are
able to extrapolate current values and make offers accordingly. Those homes that are visibly overpriced are being ignored en
masse, as are properties that are less than ideal. Now more
than ever, sellers need to understand that property condition
matters and effective preparation will help a home move while
others nearby remain stagnant. The third consideration is for those buyers who think they can lob in lowball offers. If you look at the Absorption Rates or Months of Inventory numbers, we are still in a seller’s market.
As an example, in California’s Alameda County, there were only
1.8 months of inventory at the end of July 2022. In fact, many
believe that once buyers come to terms with the new higher
interest rates, we will see a resurgence in sales. Even with the recent increases in inventory, we are still dramatically under the numbers that indicate that we have shifted to a buyer’s market. With this in mind, buyers trying to score with ridiculously low offers will be left out in the cold.
2. Prepare an effective comparative market analysis (CMA)
The general rule of thumb we use in preparing a CMA is to stay
in the same neighborhood as the subject home and go back
three months. We then set the search parameters at 100 sq. ft.
above and below the home we are trying to value.
Since we have gone through a period of time with relatively few
sales, we use as few parameters as possible to pull up
comparable homes.
By: Alta Realty Group CA
Title: ARG Webinar Replay | Pricing Tips for a Dynamic Market
Sourced From: www.youtube.com/watch?v=1O6Piop-kHM
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