Robert J. Gaffney-Leisure Land and-Properties Realty

Homeowner Price Reductions?

While reading an article in the Star Ledger this morning I came across a segment that talked about "Homeowners lower prices in bad market". I'm finding that the Real Estate market and industry is still a mystery to the average person. It never ceases to amaze me that homeowners put their homes on the market in a bad economy and still expect to get the price they thought up, with no market analysis, no professional direction or guidance and hope to sell the house quickly.

The article states, A quarter of the homes on the market in New Jersey have seen atleast one price reduction". When a home is placed on the market it all depends on several factors to when the property enters into a contract and closes the sale. The most important factor is price. The home can be updated, newly remodeled or have many modern upgrades just installed, but if the price is not set according to the current market and existing home sales in that particular neighborhood any realtor can tell you that atleast one or more price reductions are in the cards.

I have been on many listing appointments in my career and I've turned down many listings due to overpricing. It does not benefit me or the homeowner if the price is to high compared to all the other homes that fit the same criteria currently on the market and nearby the subject property. Sure many realtors out there will take the listing and have the home sit on the market selling all the other homes currently for sale, usually part time realtors with regular jobs and excited with the notion of just getting a listing, but what does that do for your listing. All it does, is show other realtors listing properties in that neighborhood that it's much easier to sell their listings by pointing out to thier clients the value they can achieve on his or her home compared to the over priced homes on the market, but they can get  it for much less.

With the economy the way it is, with no end in site, the bargain hunters are out in droves. People on the verge of losing jobs, losing 401K plans that was meant for down payments on a first home or losing the home due to falling behind in mortgage payments the average first time homebuyer or the investor is looking to capitalize on the misfortunes of others. The problem, with all of the sub-prime mortgages that were handed out to the majority of the homes on the market today a good portion of them are trying to sell just after a pre-foreclosure, foreclosure or have no choice because they have to sell as a Short Sale. For those of you who are not familiar with "Short Sales", it is when you have passed through all of the above mentioned and now you have to sell quickly before the bank repossess the home and you end up owing what ever the amount is above what the bank sells the property for plus attorney fees, taxes and penalties.

For example, if you owe $250,000 on a mortgage, you've only owned the home for two years and through the sub-prime loan you purchased the home with a 95, 97 or even a 100% (no down payment 30 year home loan) what do you think the price is going to be? Now, lets say that home is in Woodbridge, the Star Ledger says the average of listings with price reductions are 28% and the average price reduction is 6%, you now put your house on the market at $250,000 because that is what you owe and you don't want to go into debt on a home you don't own. Now, 28% of other homes on the market in your neighborhood have had price reductions already at a rate of 6%, your price should be to start around $235,000. The problem is, you're starting off $15,000 in the hole, you don't even have an offer on your home yet and you can guarantee the prospective buyer will try discounting the price even further.

The Star Ledger also comments on "Home Sales are often driven by the price which nearby homes have sold", I've understood it to be always driven by the price at which nearby homes have sold, comparatively speaking.

This is nothing new folks, price reductions have been around since the first piece of real estate was sold. It's called negotiating the price. If the price is to high, the property will sit on the market and sell all the other homes around it.  First you'll see a Century 21 sign on it, then a Coldwell Banker, then a Weichert sign and finally a "For Sale By Owner" because the property has gotten stale and all the realtors, "who are the people who generate the prospective buyers" know about it.

Well, the good news is price reductions will benefift the first time buyer, as well as the move up buyer and the investor and the economy. Price the house right the first time and you should be able to save yourself thousands of dollars in taxes, recurring fees from the bank and the always dreaded Attorney fees which could mount up to a large portion of what you may end up owing in the long run.

Robert J. Gaffney - Sales Executive

Leisure Land & Properties Realty

Off: 973-293-3267

Cell: 570-228-9126

"Rentals, Home Sales, Commercial or Business, NO JOB TOO SMALL"

Give me a comment, what are your thoughts on the current real estate market or my article, I welcome any opinions, good or bad.