North Shore Views

The Odds of Selling Your Winnetka Home

If you are planning to sell your Winnetka home, chances are your real estate agent has shown you a CMA (comparable market analysis) to support her pricing recommendation.  Basically, a CMA shows you what similar homes in your neighborhood have sold for in the past few months, so that you know where you should price your home to get it sold.

I have found that a helpful supplement to a CMA is an analysis of how many real buyers there are at each price point. For purposes of this  exercise a real buyer is the same as a sold home. Thinking about it this way enables us to get our minds around how many real buyers there are out there in a particular price point, because if someone purchased a home they are certainly a real buyer. Taken together with the number of homes listed at this price, you can calculate the odds of selling your home within the next, say, six months. It’s an easy way to see the level of activity for every price point;  it’s also a good tool for determining your pricing strategy. It provides a pretty compelling picture of how moving from one price tier to another could dramatically improve (or hurt) your odds of selling.

Take the following as an example. The chart shows price tiers for Winnetka single family homes in $100,000 increments. Dividing the real buyers (homes sold) by the number of homes currently on the market, you can get a good sense of your probability of selling, depending on which price tier your home falls into.

In Winnetka, a home that is appropriately priced within the $900-999,000 tier has a very good chance of selling within a six month period (100% according to this chart). A home between $1,000-1,999,999 also has a very good probability of selling (75%). But get over $2,000,000 and the odds decrease significantly because there are more than three times as many homes for sale as there are buyers.

What that says is that if your home is priced in the low $2,000,000’s, you may want to consider rethinking your pricing strategy. Bringing it down to the next tier may be what it takes to get it sold. I recently advised a client whose house had languished for a year on the low end of that $2,000-2,999,999 tier to consider bringing it down to $1,999,999. Once they did, the house sold within two weeks.

Tags: Home prices

Home Prices on the Rise?

The National Association of Realtors just released the latest data on the housing market and the numbers are cause for cautious optimism.   Nationally, home sales rose almost 23% in April for the U.S. In Illinois sales grew 34% over last year. And in the Chicago area home sales jumped 47%.  (These numbers are for single family homes, condos and townhouses).

But  the improved affordability of homes has been a double-edged sword. Great for buyers, but horrifying for sellers as they watched their homes lose value month after month as home prices plunged  from  2006 highs. Now, finally,  prices seem to be starting to  turnaround. Nationally the median home price increased 4% over last April. Illinois home prices rose 5% and in Chicago the median price incresed 3.2%, the first annual increase in nearly two years, according to the Illinois Association of Realtors.  Good news for homeowners, finally.

But what about the North Shore? How did we fare? From a sales perspective, great. Things are moving again and we are even seeing multiple offer situations. Home sales were up a whopping 52%. vs. last April (which was the worst month on record for some North Shore communities). But here on the North Shore prices are not yet making a comeback. The median price for the North Shore overall was down 6% vs. last April. However, looking closer at the individual towns, the results are all over the board. Evanston, Northfield, Glenview and Winnetka were bright spots, while communities to the north (Glencoe, Highland Park and Lake Forest) did not fare so well:

Median Home Price Change (April 2010 vs. year ago)

Evanston   +8%

Wilmette   -16%

Glenview   +40%

Winnetka   +45%

Northfield   +51%

Glencoe   -80%

Highland Park   -99%

Lake Forest   -21%

A word of caution: one month does not a trend make. We will need a couple more months of data before we can draw any conclusions about where prices are headed on the North Shore. Stay tuned.

Tags: Home prices

The 5 Pitfalls of Overpricing Your House

These days I am finding that the “pricing talk” is one of my least favorite parts of the job. I feel for my clients when I have to tell them that their house is not worth what they thought it was or what it used to be. It’s especially hard when I have to tell them that it’s worth less than they paid. And I know how they feel because I am in the same position as they are. Luckily for me, I don’t need to sell my house.

Usually, after I deliver the bad news about where I think we should price the home, I hear one (or more) of the five “buts”:

1. “But the other agent  said it was worth x” (a higher number)

2. “But my neighbor sold his house for x” (a higher number)

3. “But my house is much nicer than the ones you’re comparing it to”

4. “But if I price it that low now, then the buyer will still negotiate it down and I’ll make even less money.”

5. “But why can’t we just start a little higher? We can always reduce it later.”

All of these are natural reactions under the circumstances. But these “buts” can lead to pricing decisions that will ultimately cost you money. Here’s how to avoid these five pricing pitfalls:

“But the other agent said it was worth x”.

I don’t want to say that there are agents who will inflate the price to get the listing, but it can happen. More likely the agent is throwing out a ballpark figure without having (yet) done an in depth competitive market analysis. Don’t ever hire an agent based on the price he or she gives you. Your choice of agent should be based on experience, track record, knowledge of your specific market and the marketing plan for your property. Above all it should be based on trust and confidence that the agent has your best interests at heart.

“But my neighbor sold his house for x”.

When? Three years ago? The fact is, unless his house is almost the same as yours and he sold it last week, it’s an irrelevant comparison. The market has changed and the hard reality is that your house is almost certainly worth less now. You need to do (or make sure your agent does) the research to determine the value of your house today. You should only be looking at comparable homes that have sold in the last three months. AND you should be looking carefully at the homes that are on the market today, as this is your competition.

“But my house is much nicer than the ones you’re comparing it to”.

We all become emotionally attached to our home. It’s our refuge and our haven.We’ve added our personal stamp. We’ve made lots of wonderful memories there. But when you go to sell your house, you have to emotionally disconnect. This is not your home anymore. It is a product for sale and you need to look at it objectively vs. its competition. Then price it accordingly.

“But if I price it that low now, the buyer will still negotiate it down and I’ll make even less money” .

This is one of the most common “buts” and I have to admit I’ve been guilty of it myself.  The problem with pricing a house higher than it should be because you “can always negotiate” is that it will attract less buyer interest because it doesn’t measure up to the other houses at that price point, and you won’t end up having anyone to negotiate with. It seems counter-intuitive, but pricing it lower may actually net you more money in the end, because it will attract a lot of interest and potentially multiple offers and a bidding war.

“But why can’t we just start a little higher? We can always reduce it later.”

This is the slipperiest slope of all if you are in a depreciating market, because you end up chasing the market down and are always higher than you should be. You will end up months later with an unsold house at a list price that is much lower than the price you could have sold for if you had only priced it right from the beginning.

The other thing to keep in mind is that a new listing gets the most buyer interest and activity in the first 2-4 weeks after it goes on the market. If it is priced too high, you are only helping one of your well-priced competitors make a sale. And your home will be invisible to those people who are its most likely buyers, because it is out of their price range. When it doesn’t sell after a few weeks it becomes “stale” and people begin to think there’s something wrong with it. So you reduce it, but you’re still behind the market, and so on.

Like it or not, in this market pricing will be the deciding factor in whether or not you sell your house.  If you really need to sell your house, then you need to price it so that it is the best house at the best price, and not a penny more. End of story.

Tags: Home prices, home selling tips, Pricing your home to sell