Market Correct Pricing Is Crucial, And Always Has Been

Now, perhaps more than ever, a sensible approach to pricing is imperative in today's difficult market. With more restrictions on appraisers keeping a tight rein on their work, it is important that both buyers and sellers are reasonable in their expectations.
Some weeks back I received a phone call from a gentleman whose home was currently listed by a friend (not always the best situation, in my opinion.) "Why," he wondered, "is my house not selling?" A quick search revealed the truth. His home was a plain Jane, builder-basic Formica and vinyl house in a large sub-division. There were many other homes with updated kitchens, granite counter-tops and top quality flooring on the market. He was asking $269,000 even though a near neighbor with a much nicer home was listed at $249,000. The only fix was to lower the price to a point where a potential buyer could perform the upgrades and be rewarded financially for doing so. He thanked me and I noted that a week later he had reduced the price. To $264,000! Clearly, he did not get it and his friend was not helping him. A month later, however, I noted that he had lowered it to $225,000 and now it was in escrow. A bit of a slow learner, but he got it in the end. You're welcome.
In a similar vein I got to talking real estate with a gentleman whilst on a hike recently, after he discovered I was a licensee. We were discussing recent sales on a particular street, one of which I participated in, at prices that were close to one million dollars. He opined that to him they were only "worth" half a million. To back it up he trotted out the old saw that something is only worth what someone will pay for it. Sure, except that people were paying those prices in many cases. I tried to explain that more accurately something is worth what the "market" would pay for it, not what a misguided individual my want to pay for it. It all fell on deaf ears. He then went on to say he thought that it was a good time to build his own home (???). However, he was having trouble, even in this down-economy, finding a contractor willing to discount his services enough to satisfy his needs. I wonder why.
Ultimately, I walked away and, unusually for me, decided not to offer him my business card. I have worked with difficult folks in the past, but as Ron White memorably stated, "You can't fix stupid!"

Real Estate Predictions For 2011

Well it's going to be a question of good news and bad news, depending on which side of the fence you stand: buyer or seller.

If you are a seller, I expect that prices in the Phoenix metropolitan area will remain flat, with a possibility of some areas losing another 10% in value. This is because we are not done with distressed properties. In fact, Bank of America's recent moratorium on foreclosures, since expired, only served to kick that can down the road. Add in the fact that the state of Arizona is suing them, and you can deduce that 2011 will also be a rocky year.

At this point I must add, and I have said this before, that the banks are also their own worst enemy. Their languid responses to short sales, (anywhere from two to twelve months) is costing sales and delaying the possibility of a return to a normal market; whatever that will mean in the future. Their utter disdain for the conventions and customs of the real estate market is certainly not winning them any friends among the ranks of real estate professionals. So, keep offering insulting commission rates for what are arguably more difficult transactions and see the caliber of agent you will attract. Keep insisting that potential buyers MUST pre-qualify with your Aunt's second cousin at Billy-Bob's Ammo, Pizza and Mortgage Emporium. Let me know how it all works out for you. Many real estate pros have long memories so your future will not be bright.

I think the main problem with the banks, due to their corporate culture, is that few of the people tasked to approve a short sale have the stones to actually sign off on that loss. Too often they are scrambling for excuses to kick it upstairs, or off to another lackey, so as to avoid responsibility for any decision-making. This further exacerbates the problem.

On the positive side, it won't be a bad year for buyers, price-wise at least. For those who saw prices sky-rocket in '05 and '06 and who thought that the dream of home-ownership had died for ever, the reprieve has been extended. It will be a demanding and possibly fraught experience due to the above-mentioned reasons, and the cautiousness, understandably, of the appraisal community. However, for those buyers with a steady job and a good credit score there will be some good deals to be had.

Here's hoping that everyone enjoys a happy, prosperous and most importantly, a healthy 2011.