Wednesday, November 3, 2010

At What Price?

So I just said, “homes that sell, sell promptly, while those that aren’t meeting serious buyer interest just sit.” How do you make sure your home is priced in a manner that attracts buyer interest?

Careful and thoughtful positioning in the market is key! I work hard to ensure that we get it right on two fronts: price, and positioning compared to the real competition.


We need to get the price right. Let’s talk about “last listing price” vs. “original listing price” focusing on Oakland’s 94611 zip code for a moment: 64 homes sold in Montclair during the third quarter. The average ratio of sales price to original asking price among the homes that found a serious buyer was 97%. About a third of these sold promptly for over the asking price, while the balance sold for as little as 70% of the original asking price, usually after one or more interim price reductions and quite a bit of anxiety-producing time on the market.

Today, 138 homes are on the market in Oakland 94611, and most of these were on the market when the 64 homes above went into contract. (The average days on market for those that did not attract a real buyer is 72 days; twice as long as those that met market expectations.)

Serious buyers were purchasing other homes, and leaving these to sit. In many cases, the sellers of these homes can’t sell for much lower--in fact 49 of the 138 are either bank-owned (in which case the owner presumably couldn’t find a buyer so the bank foreclosed) or short-sale distress situations.

And it’s a mistake to think “well, 64 homes out of roughly 200 sold this quarter, so if I just leave my home on the market for 3 quarters, it too will sell. I’m willing to wait to get the price I want.” If only that were how it works! During those 270 days, dozens of new listings will hit the market, and the real buyers will continue to buy the pick of the litter, and leave the rest to sit. In fact 183 homes--that is, 183 hopeful but unrealistic sellers--have come off the market since the beginning of the year in Montclair (admittedly some came back on and their homes finally sold).

Homes are definitely selling in our neighborhoods, but only serious sellers who are willing to meet the market are successful; serious buyers are not wasting time with sellers who want or need more than the market is willing to pay (to say nothing of those pesky appraisers, who need to see value before they’ll give the thumbs up for the buyers’ loan).

Positioning for the Real Competition

Sellers in our market need to know what their real competition is. A nicely located home in central Piedmont is competing against other homes of similar size, condition, and location in Piedmont. But serious buyers looking at it are also looking to other communities with good public schools--most typically Lamorinda and Marin County.

Just last week I received a call from a buyer with an interest in Piedmont, who respectfully wanted to make sure I knew that they were also looking in Mill Valley. Buyers from earlier in the year found they could meet their schooling needs best by focusing on renting in Lafayette. It’s true that particularly at the higher end, many of our buyers are cross-town move-up buyers. But you need a good sense of the market in communities your buyers consider interchangeable (even though we, together with San Francisco magazine, know Piedmont is the place to settle down with its short commute to the financial district, better schools (Gold vs. Silver according to US News), greater diversity, and higher incomes and education levels than these competing communities).

Did you know that Piedmont is within biking distance (2 miles) of seven of the Chronicle’s Top 100 restaurants in the entire five-county Bay Area while all of Lamorinda has only three restaurants on the list? Or that Yelp says there are 53 burrito outlets within 2 miles of Piedmont while Orinda has four? I know these factoids as well as other objective demographic data because they are in my “Comparing Piedmont to Lamorinda” factsheet I prepare for buyers trying to get a better handle on their choices.

You want a broker representing you who understands the underlying market dynamics facing your real buyers, and spends the time to make sure interested buyers get the ammunition they need to decide that Piedmont, and your home, is where they will get good value and a great lifestyle.

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