If you have a home for sale in Tallahassee, you better understand what you are up against. As we saw in yesterday's February Housing Report, prices are dropping in the Tallahassee real estate market. Today, I will address a few thoughts from the comments that I am hearing from frustrated homeowners in our market.
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Tallahassee Home Prices Are Clearly Dropping
A traditional (but poor) method of marketing a home for sale involves pricing a home as high as one hopes to achieve for a sales price and then waiting for the market to catch up to that price (some people refer to this as market time). So, if a house is priced 5% too high, and homes are appreciating at 5% per year, it could take an additional 6-12 months to sell that home, but eventually, the home will be "priced to sell."
But what if home prices are dropping. A home seller starts 5% too high, and after 6 months, the seller is now 10-15% too high. So they drop their price 5% and where does that leave them? Still overpriced and still not sold.
Who Cares What A Home Sold For Last Year?
When we are trying to help homeowners select an initial market position for their home, one of the first things they like to point out is "the Smiths sold their home for $250,000 last year, and our home is as nice as theirs!" Unfortunately, buyers do not really care about historic sales prices. If they can buy a comparable house below $200,000, that is what they are going to do. Buyers want good deals, don't you?
Competition Is Real Estate Is No Different Than Competition In Any Other Market
When a home buyer is going out to buy a home, the buyer typically chooses what he or she feels is the absolute best deal, based on a myriad of factors, for his or her family on that day. There is a lot of emotion that goes into the decision, but value will be the glue that holds the deal together.
If you have to sell a home in Tallahassee, then you must understand that you are competing against everybody else who has a home to sell in Tallahassee! If your competition lowers their price, your value has dropped. Period! If you price yourself "with the competition," realize that over 70% are failing to sell right now. You had better price yourself better than the competition if you really want to sell your home.
Long Term Thinking Versus Short Term Thinking
If you do not have to sell your home today, you are in great luck. Take your home off the market immediately! However, if you have to sell your home today, price it aggressively so that it is by-far, the best buy on the market among comparable homes. We have plenty of buyers in most price ranges right now, but they are nervous about the economy and they are making sure they get a great deal. Would you behave any differently?
The good news is that the long-term outlook for housing is very strong. A growing population requires more homes, not fewer. We are just in a bad economy and a bad housing cycle right now, so choosing to sell at this point in the cycle is a bad choice. If you can refinance your home and stay in it five or ten more years, you will be fine.
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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.