Price flexibility enhances marketability - sellers set the price, but buyers determine value

 

HONOLULU ADVERTISER April 16, 2006

BY LISA SCONTRAS

Custom Publishing Group

 

Curtis and Joanne put their home up for sale and sold it the very next day for full price. Their neighbors, Kevin and Leianne, put their home up for sale and sold it after seven weeks and a price reduction. Who had the better sale? The answer may surprise you.

Single-family homes on Oahu are taking an average of 44 days to sell — 30 days for a condo. And while those numbers are up significantly from this time last year, the extra time is giving sellers some flexibility to reasonably test out upper-range asking prices.

Tom Mukai, 26-year veteran real estate agent at Prudential Locations LLC, says that he researches what comparable homes sold for in the neighborhood along with statistical data and then gives his clients an asking price range — a lower end and an upper end. Depending on their timing and circumstances, he talks to them about where the market is and where they should start. Sometimes it is reasonable to start in the upper end.

“There isn’t one, magic price for a home,” says Mukai. “Because each individual buyer will determine the price to pay. Buyer decisions are based 15 percent on fact and 85 percent on feeling, intuition and emotion — gut feeling.”

Mukai reminds his sellers that even though it is the sellers who set the asking price, it is the buyers who decide the actual value.

“It’s not an exact science,” he says. “We just want to be in the window. We’ll continually evaluate the market position and if no offers or comments about an offer come in within 44 days from the list date, then a price change should be initiated by the Realtor.”

Because asking price is the number-one factor that determines which homes a buyer wants to see, it is critical that your home is not overpriced. And Mukai makes the specific distinction between listing at the upper end of the range he gives a seller as opposed to listing too high.

“Overpriced properties help to sell the competition,” says

Mukai. “It’s critical to be realistic about what the upper end is.” The biggest mistake that sellers can make when pricing their property is trying to do it themselves — without the help of a Realtor. And this is why.

Buyers tend to confuse asking prices with market values, and only look at comparable list prices in their neighborhood — not sales prices. The Realtor looks at the sold prices for these comparable listings, while analyzing other critical data such as how long it took to sell it, list-to-sales-price ratios, improvements made to the homes, and any issues affecting the property or the sellers.

 

“Days on the market is an important indicator,” says Mukai. “If, for example, the property went into escrow five days after the price was reduced, that’s important to know.” Price reductions don’t necessarily indicate that the property was initially priced too high or that values are dropping. It may just mean that values are continuing to go up, but at a slower rate.

 

Circumstances may change for a seller, such as finding a replacement property, that prompt reducing the price to accommodate a time-table change. There are many circumstances that might lead to a price reduction and there are strategies to handle each one. If you find yourself in the situation that indicates you should reduce the price on your home, ask your Realtor to give you some direction on how to make it work best for you.

In a changing market, it is especially important to rely on the research and coaching of an agent who can come up with a pricing strategy. If your home is in good shape and you have some time, it may be advisable to realistically price your house towards the upper end of the market and reduce it, than to price it too low, sell it in one day and wonder how much more you could have gotten for it later.

 

Median number of days on the Market

Single-family homes on Oahu are taking an average of 44 days to sell — 30 days for a condo — which is up significantly from this time last year.

 

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