7 Factors of the ‘Just-Right’ List Price

A famous little blonde girl of fairy-tale lore made it look like child’s play to master the art of finding the ‘just-right’ solution to her various lifestyle challenges (e.g., finding a bowl of porridge, a chair and a bed that suited her fancy).

In the real-life world of real estate, though, it is much more difficult to find the ‘just-right’ price at which to list your home. There are loads of moving pieces, competing priorities and voices to be sorted through, internal and external. Sellers, if you work from a definition of the ‘just-right’ price for your home as the one at which it will sell without lagging, then it is possible – necessary, actually – to stop the chaos and start sorting and selecting the inputs that will get you there.  

Here’s a short(ish) list of those factors:

1. The Comps. If pricing a home was about putting your heart’s deepest desire on some universal wish list, the world would be a very different place, my friends. But it’s not. And the first step to buying your ticket out of fantasy-land and into the realm of the price that will get your home sold is to narrow down the range of realistic pricing by looking at ‘the comps.’  ‘Comps’ is just industry shorthand for sales data on similar homes near yours which were recently listed and/or sold (“comparable” listings and sales).  

Ask your agent to provide you with your home’s comps; also, check them out by searching your address and general area for homes similar to yours, here on Trulia.  While you should view the actual sales prices (vs. list prices) of comps that have recently closed escrow as very informative and influential for your pricing decision, the list prices of homes that are lagging on the market can also help educate you about what price points buyers in your area see as too high.

2. DOM [Days on Market].  The MLS data your agent will provide with the comps and the listings you find here online should also contain information about how long the various listings in your market have been on the market. You can use this information – or your agent do the math for you – to get a gauge on what the average DOM, or Days on Market, is in your neighborhood.  

This empowers you to look at the comps with more nuance and to use them more strategically to influence your own pricing decision; you will ideally want to price your home in line with properties that went pending and/or sold in a time frame at or shorter than the average time homes in your area stay on the market. The homes that have lingered on much longer than that may be overpriced and may even require a list price reduction to sell; and that’s a club you don’t want to join.

3. List price vs. sale price. Here, LP stands for ‘list price’ and ‘SP’ stands for ‘sale price or ‘sold price.’  This comparison – sometimes expressed in a ratio, other times in terms of how many percentage points the sale price was over or under the asking price – gets at the difference, if any, between what sellers are asking for homes in your area vs. what buyers in your area are willing and able to pay.  When homes are selling for more than the asking price as a pattern or average, this usually suggests that your market is more of a seller’s market or that multiple offers are commonplace.  And the opposite is true – when homes typically sell for less than the list price, it indicates that buyers may have superior negotiating power.  

Work with your agent to do the math and to understand its implications for your own pricing decisions, as they are not always completely obvious. For example, your agent might be able to point out patterns you don’t automatically see, like the increasingly common one in which well-staged, vacant homes that are listed at a slight discount are the ones that typically sell for significantly over asking.

4.  Competition Level.  How many homes are competing with yours for the hearts, minds and wallets of qualified buyers? How has the number of competing homes on the market trended over time, recently? Many areas are reporting a massive decline in competition – less supply is good for sellers, but you need to know what’s going on in your area; don’t try to apply national headlines to your local, personal real estate decisions.

As you work to understand competition levels and their impact on your pricing, here’s what not to do:

  • Don’t just look up and down the street, or in your subdivision – also look at similar homes in nearby neighborhoods or even nearby towns that a buyer who likes what your home might also target.  
  • And don’t just look at quantity – look at the quality, or nature of the competing listings. Is the competition mostly comprised of ‘regular’ equity sales, short sales or foreclosures/REOs? If you’re a regular sale in a sea of foreclosures, your price competition might be steep, but there may be other advantages of your listing that can offset that, to a degree.

So, what should you do? Get your agent to help you understand the competition level and the trends in number of listings on the market in recent months. Then, crash some of the competing listings’ Open Houses to scope out their condition and collect the rest of the intel listed here, before factoring it into your pricing decisions.

5.  Timing.  If your neighborhood’s award-winning school district or abundant colleges drive much of the buyer demand, you might be able to ask or get more for your home in June than in October, once the school year is in full swing.  If you live where it snows, listing it while it’s easy for buyers to get around might pay off, literally. There are a number of area-specific timing considerations that you may need to calculate into setting your just-right list price. Chances are good that you know what they are where you live, but your agent may have some novel insight on the matter, as well.

6.  Motivation Levels.  How motivated are you? Are you just testing out the market to see if you can hit a target number, or do you need to have escrow closed by a particular date to make your life and job plans run smoothly? What is your primary motivation?  Price, timing, closure, making sure your home passes into caring hands or just getting rid of a home or a mortgage that no longer serves you?  

And how motivated are buyers in your area?  From insights like:

  • Average number of days on market
  • Average list price vs. sale price
  • Trends in comparable sales – their number and sales prices
  • Trends in interest rates
  • Trends in competition levels
  • And insights like where you are in the seasonal changes that impact buyers in your area, If you need more data before you make the understandably scary move of cutting your list price, ask your agent to ask for feedback from the brokers and agents who have shown the property or attended Open Houses – or even to run the property past their own colleagues at their office or marketing meetings. Once you have this input – listen to it and factor it in, along with the other factors.

you can work with your listing agent to gauge whether buyers are so motivated that they will not be deterred by a premium list price, or whether you’ll need to use a discount or value-based price to churn up motivation in a market of fence-sitting buyers.

7.  Agent and Market Feedback.  So, you came up with a list price that you thought was ‘just-right,’ but you’ve had little or no Open House traffic or private showings. Or you got lots of showings, but no offers – or nothing but lowballs, anyway. It’s not too late to get to the ‘just-right’ list price for your home; in fact, time is of the essence if you want to take advantage of the swelling levels of buyer interest and activity that has sprung this Spring.

In many scenarios where a home lags on the market, the list price was set or maintained against the express advice of the listing agent, who urged the seller to list it lower. Or maybe you and your agent agreed on pricing early on, but they’ve been asking you for a price reduction for months now. If you trust your listing agent, and they have a strong background for getting homes in your area sold on today’s market, then it behooves you to at least take their pricing advice seriously, whether or not you follow it to the letter.  

Pre-Foreclosure Prices Hit New Low; Most Discounted States: RealtyTrac

For pre-foreclosure homes, which are residential properties in default or scheduled for auction, sales were at their highest quarterly level since the first quarter of 2009, according to RealtyTrac’s foreclosure sales report.

Pre-foreclosure sales, which are typically sold through the short sale process, accounted for 12 percent of all sales during the first quarter, an increase from 10 percent in the previous quarter and 9 percent a year ago.

Also, third party purchases for pre-foreclosures increased to 109,521, a 16 percent rise from the previous quarter and a 25 percent jump from a year ago.

On the other hand, third parties purchased less bank-owned homes compared to a year ago. With the number at 123,778 for REO homes purchased in the first quarter, the total is a 2 percent quarterly increase but a 15 percent decrease from a year ago.

REO sales accounted for 14 percent of all sales in the first quarter.

Pre-foreclosure homes sold for an average price of $175,461 in the first quarter, a 10 percent decrease from a year ago. The average sales price was also the lowest quarterly pre-foreclosure sales price average in the history of RealtyTrac’s foreclosure sales report, which began in the first quarter of 2005.

REOs sold for an average price of $147,995 in the first quarter, down by only 2 percent from a year ago.

Pre-foreclosures sold at an average discount of 21 percent compared to non-foreclosures while REOs were discounted at about 33 percent.

Pre-foreclosure homes in the first quarter took about 306 days to sell after starting the foreclosure process, up from an average of 256 days a year ago. REOs that sold in the first quarter took about 178 days to sell after completing the foreclosure process.

In 27 states, pre-foreclosure sales increased including Wisconsin (94 percent), Michigan (81 percent), Georgia (80 percent), Texas (46 percent), and Illinois (46 percent).

For REO sales, 21 states saw quarterly increases including Oregon (41 percent), North Carolina (23 percent), Ohio (21 percent), Florida (13 percent) and Wisconsin (13 percent).

The states that had the highest share of foreclosure sales out of all residential sales were Nevada (56 percent), California (47 percent) and Arizona (40 percent).

Among the 20 largest metro areas, the biggest annual increases in pre-foreclosure sales were in Atlanta (78 percent), Detroit (75 percent), San Antonio (74 percent), Sacramento (70 percent), and Dallas (69 percent).

Metro areas that experienced the largest gains annually in REO sales were Minneapolis (33 percent), Boston (30 percent), Philadelphia (22 percent), Atlanta (15 percent), and Chicago (13 percent).

States with the Highest Ave. Foreclosure Discount

1. Massachusetts (45 percent)
2. Kentucky (41 percent)
3. Pennsylvania (40 percent)
4. Connecticut (39 percent)
5. Rhode Island (38 percent)

States with the Highest Ave. REO Discount

1. Massachusetts (51 percent)
2. Connecticut (50 percent)
3. New York (47 percent)
4. Kentucky (47 percent)
5. Pennsylvania (45 percent)

States with the Highest Ave. Pre-Foreclosure Discount

1. Massachusetts (38 percent)
2. Nebraska (37 percent)
3. Rhode Island (33 percent)
4. California (31 percent)
5. Louisiana (31 percent)

Expiring Mortgage Debt Relief Act Fuels Strategic Default: Survey

A foreclosure prevention agency found that the pending expiration of the Mortgage Debt Relief Act of 2007 is prompting struggling homeowners to strategically default on their loan.

YouWalkAway.com conducted a national survey and found 34 percent of respondents indicated that the act, which is set to expire December 31, 2012, contributed to their decision to walk away sooner rather than later from their property. Those surveyed were YouWalkAway.com clients who were actively considering or navigating through the foreclosure process.

The Mortgage Debt Relief Act releases homeowners from the obligation of paying taxes on mortgage debt forgiven from a short sale, foreclosure, or modification. Taxpayers are eligible if the property is the primary residence.

“The survey results are not surprising; YouWalkAway.com saw a number of homeowners reach out to us in early and mid-2011 due to the impending 2012 deadline,” said Jon Maddux, CEO of YouWalkAway.com, in a release. “Many were prompted to begin the foreclosure process in 2011 in order to ensure their foreclosure is complete by the end of 2012.”

While the expiring act motivates homeowners to seek completion of the foreclosure process before the expiration date, for those who won’t qualify in time, Maddux said not extending the act will then cause short sales to stop immediately due to the fear of getting hit with a huge tax bill.

In addition, 78 percent of respondents from the YouWalkAway.com survey expressed intentions of walking away from their home. Of those, at least 74 percent would qualify for relief under the act.

“Potentially millions of people will find themselves stuck with a huge tax bill after foreclosure if the government doesn’t renew the Debt Relief Act at the end of 2012 or if they don’t finalize their foreclosure by that date. The bill may just expire, like when Congress chose not to renew the home buyer’s tax credit,” said Maddux.

Cheryl Gerhardt, a CPA who has worked with YouWalkAway.com clients, said about 80 percent of the people who approach her about foreclosure tax consequences qualify for the relief under the act.

“These are usually people who purchased during the height of the market from 2005 to 2007 and never had the opportunity to take out a second, whereas a few years ago clients who were getting foreclosed upon had made purchases in the early 2000’s, took out a home equity line of credit and could not qualify,” said Gerhardt.

In March, House Bill H.R. 4290, or Homeowner Tax Fairness Act, was introduced to extend the act to 2015. The bill is sponsored by Rep. James McDermott.

The Mortgage Relief Act was actually extended in October 2009, three months before the act’s expiration date.

YouWalkAway.com works with borrowers facing foreclosure as well as those opting to strategically default on their underwater homes. The survey the agency conducted reached out to 2108 borrowers and received responses from over 25 percent of those contacted

Time is Running Out: How the Mortgage Debt Relief Act can save you!

Time is Running Out: How the Mortgage Debt Relief Act can save you!

In 2007, the Mortgage Debt Relief Act was passed in an attempt to help the millions of homeowners who, due to the housing crisis and economic crash, suddenly found themselves in danger of losing their home to foreclosure.

 

The act has helped many distressed homeowners find solutions to avoid foreclosure and opened up options to them that were previously unavailable.

 

However, the Mortgage Debt Relief Act was always intended to be a temporary solution and it is now set to expire at the end of 2012. For distressed homeowners, this means that time is limited for you to take advantage of this program.

 

Time is running out. But there is still a chance to change your financial direction and avoid foreclosure.

 

 

 

 

Top 10 Places to Buy Foreclosures According to RealtyTrac

In its May foreclosure newsletter, RealtyTrac named the top 10 places to buy foreclosures in 2012. The selected locations were out of the 100 largest metropolitan statistical areas based on population. The list was further narrowed according to markets with at least 200 foreclosure-related sales transactions in January 2012. Then, it was whittled down again to only include metros with foreclosure sales prices at least 30 percent below the average price of a non-foreclosure property.

The number one metro to buy a foreclosure in 2012 is Kansas City, Missouri, where the average foreclosure sales price is $73,257 compared to $101,710 a year ago. The average discount for foreclosures is 51 percent. Overall, foreclosures make up 29 percent of all sales in this metro. Citing data from the Kansas City Regional Association of Realtors, the newsletter stated home sales in Kansas City rose 14 percent in March from a year ago, and prices increased 3 percent from a year ago.

Boston earned the number two spot with an average foreclosure sales price of $195,672 compared to $203,606. The average discount is 49 percent, and 18 percent of sales are foreclosures. Boston also had the lowest unemployment rate on the list at 5.9 percent.

Pittsburgh came in at number three. The average foreclosure sales price is $73,142; last year, it was $82,928. The average discount is 48 percent.

At fourth place, Tulsa has an average foreclosure sales price of $86,725 compared to $113,969 last year and also has an average discount of 38 percent.

San Francisco earned the number five spot. A pricey city to own a home, San Francisco foreclosures averaged $307,803, down from last year’s average of $317,409. Discounts for foreclosures are about 38 percent. Out of all sales, 47 percent were foreclosures in San Francisco, the highest out of all 10 cities. Real estate blog Movoto estimated Facebook’s initial public offering will add $1 billion to property values in the Bay Area.

Cape Coral-Fort Meyers, Florida is sixth best place to buy a foreclosure, and averaged at $102,022, with last year’s sales prices at $93,976. Discounts were also 38 percent.

Charlotte ranked number seven and averaged $118,808 for foreclosed homes. Last year, the average was $144,614, also with a 38 percent discount.

Tucson, Arizona was number eight at $112,660 compared to $129,500 last year. The average discount was also 35 percent. According to the Tucson Association of Realtors, sales rose 16 percent in February from a year ago. Also, the average sales price increased 4.75 percent from January to February, according to RealtyTrac.

Seattle foreclosures averaged $212,565, a drop from the year ago price of $237,852. At number nine on the list, the metro had an average discount of 35 percent.

The number 10 spot went to Columbus, Ohio, where the average sales price is $98,223, falling from $101,152 last year. Average discounts were 32 percent.

The newsletter was authored by RealtyTrac staff writer Octavio Nuiry.