Pricing it Just Right
Sellers need to do a reality check as values flatten out
"Two or three years, max."
That's about how long Shirley Aguilar says she and her husband, David, planned to stay in Boston, after he accepted a job offer there in 2001.
In a normal real-estate market, such a short stint wouldn't warrant buying a house. But with the area then showing double-digit annual appreciation, the two figured they'd buy a fixer-upper, do the work themselves, and walk away with a tidy profit before leaving town.
So they bought a 1950s-era colonial for $430,000, and four years and $100,000 in home improvement receipts later, their sweat equity was ready to pay off. Prices had surged since they bought, "and we figured we could get about $750,000," Shirley Aguilar recalls.
But their real-estate agent wasn't so sure. The 1,400-square-foot house was on the small side, and the market had begun to slow. To sell quickly, the agent suggested a price of just $620,000, "which we thought was way too low," says Shirley. "So we compromised at $725,000."
Deals. With prices flattening and inventory growing rapidly in many once hot markets, setting the ideal asking price for a house can be the most crucial decision sellers make. "Unfortunately, they've often got their heads stuck in the clouds," says June Fletcher, author of House Poor: How to Survive the Coming Housing Crisis. "People want to think their house is worth what it was when the market was peaking. But the days of looking at what the neighbors sold theirs for, then adding 10 percent, are over."
Real-estate agents typically recommend that serious sellers price their houses at or just below what comparable homes are selling for. But in a flat or declining market, some now suggest setting the price 10 percent or more below the market. "The idea is that if buyers see it's really a great deal, they'll go after it even in a down market," says Fletcher. "If enough of them do, they'll bid up the price to what you wanted to get in the first place."
Ask around. Experts like Fletcher suggest doing a reality check: Visit local open houses, find what comparable homes are selling for, and ask several agents to suggest an asking price. The Internet, too, offers sites like zillow.com, which lists estimates and comparables.
Some also advise sellers to reduce their price quickly if buyers don't emerge within a few weeks. "Taking a small loss today is better than sitting on the market for a year," says John Schaub, author of Building Wealth One House at a Time.
It took two months for the Aguilars to lower the price on their house. Even then, at $650,000, they still didn't get an offer.
Finally, in April, they took matters into their own hands. Shirley found an Internet company willing to put the house on the local multiple listing service, a key resource for brokers and buyers. They'd pay a 3 percent commission if it found a buyer but nothing if they found one themselves. With the chance to save on the commission (about $30,000 if they'd gone with a traditional agent), they lowered the price even further, to $630,000.
Then they posted an "open house" ad on the Internet classified site Craigslist.org and tacked up a "For Sale by Owner" sign on the lawn.
A flock of would-be buyers soon showed up. By the end of May, they had three offers and negotiated a final price of $610,000. "Fortunately, we got more than what we would have if we had paid the commission," says Shirley, who figures they walked away with about $80,000 in profit. "We're just glad we got out when we did."
This story appears in the August 7, 2006 print edition of U.S. News & World Report.