Pricing in a Flat Market

Discussions regarding pricing with prospective sellers are very interesting right now.  The market has clearly undergone significant changes since last year at this time.  Inventory is substantially higher and close rates are substantially lower.  Prices are, at the very least, flat.  Unlike last year at this time, we're seeing lots of price reductions as all of us: buyers, sellers and agents, adjust to the new realities of the market.

Now the tricky part of this is that sellers typically decide they're going to sell their home months ahead of when they actually put that house on the market.  But they're already looking at what things are selling for in the neighborhood.  So a year ago there were people planning on selling this year saying to themselves "Wow!  The neighor's house just sold for $X! The market is appreciating at 25-30% annually. And our house is much nicer than theirs!"  And, so they have a number in their head as to what their house will sell for next year.  And, once that number is in their heads they begin to mentally spend the money they'll take away from closing. Once that happens, it's very, very difficult to get a seller to change that number in his head!

But the buyers out there shopping and watching the market know very well that things have changed!  They're watching those listings daily and watching prices come down.  They're in the mood to be choosy and to negotiate hard.  And, they know time is on their side right now.

And, yet, when confronted with all the data on current market conditions, what recent homes have sold for, how long things have been on the market, many sellers will still want to try for the big number in their heads.  And, believe me, I understand that temptation!  Who doesn't want several thousand extra dollars in their pocket?!

But if you look at the situation as you would if you were car shopping sometimes it's easier to push past this dilemna. If you were in the market for a 2001 Ford Explorer right now and had been watching the ads for a few months and looked online at prices you now have a good idea what they sell for.  Let's say that number is between $10K and $12K depending on condition and exact model.  If you see one that's advertised in the paper for $18K, you don't say to yourself "let's go see what's so special about that one and if it's worth the extra money!"  No, you just laugh at the crazy price and go see the ones that are priced appropriately.

Same thing with your house!  And you never get back those critical first few of weeks when your house is new to the market and everyone should be coming to look.

My advice is to price conservatively.  It's a lot easier to say no to a low offer than it is to negotiate up on an offer you never get!