Fall Real Estate 2002

How much is too much?

Sometimes the trick to selling a 'dog' is lowering the price

by Adam Levermore-Rich

Last year, at the peak of the housing market an ambitious homeowner in Atherton put a house up for sale with an asking price of close to $16 million. In December, the house remained unsold.

A month later, Tom LeMieux of Coldwell Banker in Menlo Park was brought on to figure out how to get the house moving. Without thinking twice, LeMieux lowered the price of the house by more than 50 percent to $7.95 million, a price more reasonable for the declining market. Finally, the house sold for just under $6 million. It's a scenario that's been replayed often recently in the mid-Peninsula area. Sellers are finding that their properties are taking longer to move, and for the first time in years, they've been forced to take lower offers. LeMieux said the housing market has gone through a sea change this year. "Over the last couple of years, at any given time in the Atherton area, there were maybe 10 to 15 properties in an active listing status," he said. "That grew to over 50 homes for sale in Atherton this year. Right now it has declined a little bit." He said that there are currently 26 properties listed in Atherton. The same can be said for the market in Palo Alto. According to the Santa Clara County Association of Realtors, there were 56 new listings in Palo Alto in July, compared to 27 for the same month last year. Prices are taking a hit as well, with the average sale price dropping from $1.3 million last July to $910,000 in July 2001. LeMieux said sellers can blame these figures on the economy. For the last few months, he said, homebuyers have been very much on the sidelines, watching the economy, and they have been looking at value differently. They have wanted to prove to themselves that if they were going to make a purchase that it was worth what they were paying. "Our biggest barometer in this area is of course the stock market, and the NASDAQ in particular, just due to the types of jobs we have here," said LeMieux. "It all grew a little healthier in late April and early May when the stock market rebounded a bit. That gave buyers a little confidence to put their toe in the water, and we've had a steady stream of sales in all price ranges since that point in time." LeMieux said the message to sellers is that there are buyers out there. "It's not a terrible market by any means, but we're correcting off the frenzy of last year. Buyers are looking at value differently. They're very well informed. If they don't perceive value in a seller's price, they won't purchase." If that happens, properties start to linger on the market, meaning that prices need to be adjusted downward to achieve a sale. LeMieux said the rule of thumb is if a new listing sells quickly-within 30 days-then it was priced to the market. If it stays on longer than that, he said, the message to the seller is that they were priced too high. The American Homeowners Association says overpriced houses can have more far-reaching effects than just slow-selling houses. On their Web site, they warn sellers: "Set the price too high, and you'll get a bad rap from buyers and experienced buyer-brokers who can see through your inflated listing." They suggest getting an independent appraisal of a home's market value from a professional real estate appraiser. "Every real estate agent and seller has different philosophies about pricing," LeMieux said. "Mine is not to price it too high but not to price it too low, to get what the market comparables are and to price it to the market. If we're right we stand a good chance of selling relatively quickly. If we're wrong, or if the market continues to erode, then you have to constantly monitor the market conditions and adjust accordingly." Ultimately the decision about pricing rests with the homeowner. LeMieux suggests sellers should listen to the counsel of their real estate professionals, who, if they are doing their job correctly, will present them with a market analysis that will show them how similar homes are selling. But despite that counsel, he said, agents often see sellers who have chosen to list their homes higher than what the agent suggests. "That very seldom works, but sometimes they just want to test it higher and adjust it downward if it doesn't sell," he said. Price is not the only barrier to a timely sale, said LeMieux. He points to two other components that aid sellers looking to get their house moving. First on the list is to determine how well the property is being presented. "There are staging alternatives and tricks of the trade in terms of doing some personal editing of furniture and personal belongings to ensure that you're giving the most positive impression possible," LeMieux said. Second, he suggests sellers look at how the property is being marketed. Is it being regularly advertised? The property should be put out in the Realtor community through tours, open houses and other avenues that agents have at their disposal to expose a property to the marketplace. In a press release geared toward sellers, Michael Blomquist, owner of Michael Scott Properties, agreed. "I've always worked from the premise that selling a home is all in the marketing," Blomquist wrote. "It's important to set your house apart from all the others and bring it to the attention of as many prospective buyers as possible." LeMieux said even if all three factors-price, presentation and marketing-are in place, there are still things that can affect the speed at which a property sells. "If it's on a busy street, if it has an awkward floor plan-there are all kinds of specific elements about a property that affect its desirability," he said. Ultimately, then, those factors will translate into price. "Some houses," LeMieux said, "are simply perceived more desirably than others."