Aug 29, 2008

The True Cost of Overpricing

What is more valuable to you today - time or money?

It is important for sellers to understand the true cost of overpricing their home is not just money alone, but also time.

In the past 90 days of home sales in these premier east metro Orlando neighborhoods, 48 of 78 homes had price reductions. Here is how non-price reductions versus price reductions stack up against each other in the two most critical areas of a home sale – time and money.

No Price Reductions
- 30 of 78 sales had no price reductions
- 78 days to sell average
- 95% sales price to list price average

Price Reductions
- 48 of 78 sales had price reductions
- 12% price reduction average
- 199 days to sell average
- 94% sales price to list price average

The majority of sales with price reductions had to reduce multiple times in order to sell.


- 1 price reduction 14 homes
- 2 price reductions 15 homes
- 3 price reductions 7 homes
- 4+ price reductions 12 homes

A seller cannot rely on simply one price reduction to make their home competitive and to bring in an offer. Until a home is priced in line with recent comparable sales, a seller will need to drop and drop their price. A buyer does not care if a seller has dropped their price one time or eight times; this will have no bearing on a buyer’s offer.

Though the average price reduction was 12% overall, the top 10 price reductions ranged from 16% to 32%! Wow, 32%…I can only assume this seller based their asking price on what their home was worth at the peak in 2005/2006 rather than recent comparable sales. This seller paid dearly for it, too – the house took just under a year to sell.

Summary The moral of this story is straightforward:

- Homes that are priced right sell quicker and for more money.
- Homes that are overpriced take over 2½ times longer to sell and sell for less money.

Even after a year as a buyer’s market in Orlando metro, many sellers are still making a fundamental mistake by overpricing their home. I understand we all want to make a killing on the sale of our home – which many folks did in 2005/2006 - but that time has passed.


Depending on when a seller bought their home and the amount of equity they have in it, a profit is still possible. A large profit – no - but consider the alternative. Not including short sales / foreclosures, there is a large population of sellers who are making zero profit or bringing cash to the closing table just to sell their home.

Aug 25, 2008

How Interest Rates Impact Sellers

The most important component of a home sale/purchase is unquestionably money. When a money problem arises, both buyer and seller are affected and an entire transaction can be derailed in an instant.

According to CNNMoney.com, forecasters have predicted mortgage interest rates will hit at least 7% by the end of the year.

Sellers, how does this impact you and why should you care?

Fewer Buyers As rates increase, the number of buyers who can afford to buy and qualify for a home loan will drop. Interest rates have a direct impact on a monthly housing payment, so any rate increase will have a significant affect on what a buyer can afford. These buyers will either lose the ability to buy altogether or have to lower their price range.

At the other end of the buyer spectrum are buyers who still have the financial ability to buy, but believe in “waiting for a better deal” on their financing. Well, they could be waiting a lifetime…the fact is no one on earth knows when or if this “better deal” will materialize.

More Time The average days on market (days from time of listing to closing) today is 117 days in Orlando metro. With fewer - and choosier buyers – remaining in the market, be prepared to add weeks or months to your home sale. The buyers who remain will be even more cautious, conservative and selective in their home purchase, which means more time on market for sellers.

Price Reduction The longer a home is on the market, the more likely a price reduction will take place. With buyers taking a more conservative approach in their home purchase and taking more and more time to make a purchase decision, homes that are not priced competitively will quickly go stale on the market. The seller of a stale home who truly wants to sell will be forced to reduce their price.

Lower Offers When a seller receives an offer on their home, it is more likely that they will receive a lower offer. Buyers are feeling the pinch from their lenders, are limited in what they can buy and expect to squeeze every last dollar out of their home purchase. That squeeze will be forced on the seller. Price reductions aren’t always enough for buyers - they aren’t concerned if a seller has already dropped their price once, twice or more.


Your New Home As rates increase, your ability to buy a new home is affected. You may have fallen in love with a $450,000 home; however, should your lender lower your approved price range with a rate increase, you may no longer be able to afford that home. That means back to the drawing board and back to house hunting at a lower price range.

Aug 21, 2008

Ideal Time To Sell: Holidays

As we approach Labor Day, I am reminded of an odd experience I had working with a buyer over a “holiday” weekend.

I worked with an out-of-state buyer on Superbowl Sunday. They had a tight time frame, their checkbook and a pre-approval letter - they were there to buy. I attempted to schedule eight showings several days in advance. Still, five of eight sellers denied the showing request because “we are having a Superbowl party”. The buyer saw three of the homes on their list and made a full price offer on one of them the following morning.

There is an incorrect assumption that buyers don’t house hunt during the holidays; this could not be further from the truth. “Buyers take time off, too” and “everyone leaves town for such-and-such holiday” are seller misconceptions. In reality, any extended weekend - national holidays, federal holidays and school closings – is an ideal time to sell your home.

Buyers Have Time & Energy A ready, willing and able buyer wants to house hunt when they have the time and energy for it. A serious buyer will plan an outing with their agent well in advance. These buyers come armed with a good agent, their checkbook and a pre-approval letter. Isn’t this exactly the kind of buyer you’re looking for?

Minimal Competition There is a limited number of homes available for showing – and therefore, minimal competition - during the holidays. A majority of sellers “close up shop” during the holidays. Some sellers go out of town and choose to deny showings while they are away. And other sellers remain home, but choose to deny showings because they are at home with their families and don’t want to deal with the inconvenience of showings.

There are several federal holidays approaching that will provide many buyers with an extended weekend to house hunt and potentially buy your home.

- Mon 10/13/2008 Columbus Day
- Tue 11/11/2008 Veterans Day
- Mon 1/19/2009 Martin Luther King Jr Day
- Mon 2/16/2009 President's Day

Aug 18, 2008

A Dirty Little Secret

I’ve had a dirty little secret at my house – literally – a foul, nasty master shower and kitchen sink. We have endured hard water, calcium and mold build up for over a year that wouldn’t come clean for anything.

The worst thing happened last summer when I made a cocktail of four cleaning products and went at it – I ended up nearly asphyxiating myself in my master shower. Scary and so very stupid of me. I had the windows open and fans going for days to clear the polluted air.

We’ve tried product after product with no success. My husband was fed up with looking at the mess in the two most used water sources in our home. Just recently, he went to Lowe’s in search of “something”. He bought three products just to try them out having no expectation of them working – hey, nothing else has worked for us in the past…


Enter a super product, my husband and some elbow grease. It’s called Calcium Lime Rust - more commonly known as CLR - a household cleaning product used for dissolving calcium, lime and iron oxide stains/deposits from sinks, showers, tile and grout. My master shower is now clean as a whistle with all the nastiness washed down the drain pipe and my kitchen sink looks shiny new.

Aug 14, 2008

How Short Sales & Foreclosures Affect Your Home

No east metro Orlando community is immune to the short sale and foreclosure epidemic playing out in every neighborhood at every price level. On my street in east metro Orlando, 5 of 69 homes are in some stage of foreclosure. I watch and worry as these homes quickly go from bad to worse. These short sales and foreclosures have serious negative affects on your home, neighborhood and ability to sell.

Home Value A straight seller - an owner who has equity in their home and is selling by choice - today is competing with majority short sales and foreclosures. These parties are not traditionally motivated (sell high, sell quick) and are willing and able to sell below market value. These short sales and foreclosures are undercutting competing homes and selling at a substantial discount because they can afford to. In many quality east metro Orlando neighborhoods, the only homes moving at this time are short sales and foreclosures.

Security Vacant homes are targets for unauthorized activity such as partying and squatting. This kind of activity will only lead to more bad news. Illegal activity in vacant homes can start the spread of crime to neighboring, occupied homes. I personally overheard a conversation between a police officer and a young man during an 11pm traffic stop that occurred in front of my home. Officer: “Where are you heading to?” Young man: “To the house up at the corner.” Officer: “That house is vacant and I’ve already arrested three people there.”


Image In most cases, once an owner has gotten to the point of a short sale or foreclosure, basic yard and home maintenance have long been forgotten.

Owners who are negotiating a short sale with their lender commonly rent their home to an unqualified/undesirable tenant for immediate cash flow in an attempt to prevent foreclosure. Even with a tenant in place, an owner in financial dire straights may collect the rent, pocket it and continue to neglect the home.

Owners who fail to negotiate a short sale with their lender may decide to take the most drastic step of all by abandoning their home. Owners who walk away from their homes leave an unattended and neglected home for their lender and authorities to pick up the pieces.

Property Crime I’ve personally seen foreclosures stripped of anything of value (appliances, cabinets, faucets, trim) including its infrastructure (hot water heater, furnace, plumbing). These property crimes are commonly committed by the owner who lost the home to foreclosure or someone connected to that owner. This situation makes the home virtually impossible to sell. It is the rarest of rare buyers who would even consider buying a home that has been destroyed by vandals.


HOA Your HOA is a business. It’s in the business of operating and managing your association: landscaping, gates, recreational facilities, dues collection…all areas that have a direct impact on the value of your home. HOA dues are used to operate the community, so when short sales and foreclosures don’t pay their dues for months on end, the HOA is shorted and cannot maintain normal daily operations. HOAs may have to make a difficult decision to curtail or eliminate otherwise standard community services. Even in the case of a short sale or foreclosure successfully changing hands to a new owner, it is common for that original lender to settle with the HOA for a discounted amount.

Aug 11, 2008

Lenders Fear Bigger Wave of Loan Defaults

Homeowners, are you tired of short sales and foreclosures in your neighborhood and their affect on your home and your ability to sell? Unfortunately, this downward spiral is expected to only get worse in the next year or two.

According to The New York Times, the first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.


The neighborhoods in east metro Orlando that are most affected by short sales and foreclosures are the communities that were built in 2005/2006. This period was the peak of the Orlando metro real estate boom where we experienced limited homes for sale and quick, easy financing. These neighborhoods are where you will find the greatest number of short sales and foreclosures today. Their levels have reached epidemic proportions and presently show no end in sight for frustrated homeowners.

Aug 5, 2008

What Buyers Want To See At Your Home

Fresh baked cookies. Fresh flowers. Potpourri. Scented candles. Soft music. When your home is on the market, these details are…nice. But will they sell your home - no. What will sell your home is simply getting back to basics. Here is what buyers want to see at your home…these are all simple to implement with no cost to you.

Light & Bright Open every window treatment in your home (yes, even the baths, laundry, stairways/hallways). Even better, turn on every light in your home. The number one pet peeve of buyers (and me) in viewing homes is a dark, hidden home. You can’t see the place and it feels and looks like a cave…why on earth would a buyer find this appealing?

Sparkling Clean A spotlessly clean home is a must in today’s market. Maintaining a spotlessly clean home while it’s on the market is a worthwhile investment of your time and energy for a quick, top dollar sale. The chores that require daily attention are the kitchen, baths, making beds and straightening up. Other chores that can be done a couple times per week include dusting, vacuuming, mopping, weeding and laundry.

Clutter-Free Banish clutter from all rooms, surfaces and storage areas. Show no mercy…recycle, donate, sell, give away and throw away with abandon! There is nothing pleasurable about viewing a cluttered home. In fact, it’s a real turn off to buyers…they can’t envision their family living in a place where every nook and cranny is overflowing with someone else’s clutter.

Spaciousness Be mindful that your rooms have an easy, unobstructed flow. Excessive furniture or furniture blocking windows, doors or walkways makes a room feel awkward, uncomfortable and congested. You may adore your grandmother’s behemoth antique china cabinet located in your eat-in kitchen, but all buyers will see is an overstuffed, cramped room.

Not You Get out of dodge, sellers! Let the buyer and their agent conduct a leisurely showing on their own. The buyer is there to view your home in order to possibly buy it…the buyer is not there to meet you, ask you questions or receive a personal guided tour by you. Leave in advance of a scheduled showing and return after the showing is complete. If the showing goes over the allotted time, great! Let them be! Run another errand or wait in your car several blocks away until they are finished.

Aug 1, 2008

Price Right Now or Price Reduction Later

In the past 90 days of home sales in these premier east metro Orlando neighborhoods, 37 of 51 homes dropped their list price an average of 11% (list price is the asking price). chart

What does this mean for you? This summary further demonstrates the reality of price reductions today. A homeowner has an important decision to make…price according to market straight out of the gate or be prepared to drop your asking price down the road.

Your agent will conduct a Comparative Market Analysis in order to arrive at a reasonable range of value where a buyer and seller may arrive at a satisfactory sales price. But ultimately, it is the homeowner who decides what price to list their home at.

The first and best indication of your home being priced too high is the lack of showings. A lack of showings will lead to a home languishing on the market for an extended period of time – something no seller wants. Ultimately, an overpriced home will come to the end of the line, will not sell and the seller will have to start from scratch.