You Can’t Fool The Market

On April 2, 2012, in Buyers, Sellers, by David Monsour

The best house, the best marketing, the best agent, the best everything will still never fool the real estate market.  Today’s consumers are more educated than ever.  Blogs, twitter, facebook, pinterest the information they want and need to evaluate real estate is a few clicks away.  Zillow zestimates even if not the most accurate still provide ball park values.  Rest assured one fact; consumers are not going to overpay for real estate in today’s economy.

Distressed properties provide that downward pull on all homes.  Sure they aren’t as easy to purchase and come with risks attached but the upside, in most cases, far outweighs the downside.  The average distressed home sells at about 30% under market value.  People are searching these homes and evaluating the potential against your non-distressed property.  All else equal they are going to take the discount.  Just think if you could buy gas at a 30% discount.  Heck for my car that would give me 100 extra miles to go out of my way.  Money is hard to come by and people cherish it.

Competition is fierce across the markets.  Beyond the distressed competition buyers are trending toward the most complete property.  Renovations are expensive and if you purchase at the top of your price range there is little left over monthly income for costly renovations.  I’d personally figure about $5,000 per bathroom and at least $10,000-15,000 for a kitchen.  Most other renovations are affordable to the average person.  Paint and flooring can work wonders.  My buyers are looking for move in ready if at all possible.

New Homes have come down in price as builders try to keep moving inventory and make payments on their credit lines.  A new home will likely come at a price premium but their is that comfort level with a new home.  The systems are new, the builder warranty is in place, the roof doesn’t need replaced.  A new home means 5-10 years of low cost living.  Resale homes, like foreclosures, have to provide that appeal vs a new home.  Some resale properties may have a location advantage but the cost conscious consumer is likely to consider all associated expenses.

A home will never fool the market.  Buyers and their agents are keenly aware of values and expenses of repairs.  Showing frequency and offers are often a good indicator of how the market is responding.  Many showings with no offers tends to mean the price is too high or the condition is unacceptable.  Low offers can cite repairs or needed upgrades as justification.  The key is excitement which is generally generated by price.

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