$99.99 or $100. Aren’t they the same thing? Marketing obviously says they are not. When it comes to pricing a home is there a difference between $499,950 or $500,000? A search in RMLS says that there are 234 listings priced between $400k-$500k in the area defined as West Portland. 46 of them are priced between $495,000-$500,000. That means that 20% of the homes are priced within 5% of the range.
When we look at those 42 listings this is what we see:
$495,000: 7 listings
$497,000: 2 listings
$497,500: 1 listing
$498,999: 1 listing
$499,000: 16 listings!
$499,500: 5 listings
$499,900: 9 listings
$499,950: 3 listings
$499,999: 2 listings
$500,000: 0 listings…
This surprises me. I’ve never had a client say my price range is up to $499,999. If we take two possible clients. One is stretching their budget at $500,000 but they say that is their upper range. We’re not going to search over $500,000 because it’s not fair to suggest property that is out of their stated range because the odds are good you are going to like the most expensive house. The home priced at $500,000 will appear in the search.
The second client has a price range of $500,000-$700,000. Plug that search in and the 46 listing above are missed though they are within 1% of the stated price range. It looks like there is a lesson here for both agents and sellers. I’m going to be a hero if we find a great home below my clients stated price. Sellers are potentially missing a large segment of potential buyers based on prices that are roughly the same.
21 Comments on “How do I Price My Home?”
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right now you should probably be thinking about the possibility of pricing a $499,999 house at $399,999.
Tip,
You’re a ridiculous alarmist.
The part that confuses me is motive. Are you in the market for a home? Do you really think you can bring home prices down by spewing paranoia in the comments of this blog. A few days ago, you even posted a link to a Yahoo article that had nothing to do with the post.
Me? I’ve had a home for a while now, and I’ve no interest in selling it. I’m just interested in the market. You, however, are undermining an otherwise productive exchange on an unusually interesting blog with your obvious agenda. Would you please stop.
Every buyer is different. We agree that most buyers will select a home near the top of their range. If we are given a range, we won’t suggest property over the range. It is up to the buyer to see some homes, decide that they are not liking what they see and want to push the range up.
If we’ve seen a home in the $495,000-$499,999 range that we think our potential $700,000 buyer might like I can’t imagine them being annoyed with the suggestion.
Anything that prevents a listing from being shown is the seller’s problem. The cause may be the buyer’s agent, listing agent, weather or neighbor’s 4×4 on blocks but ultimately the seller is impacted by those forces.
Anything that prevents a listing from being shown is the seller’s problem.
Does that mean we are in a buyer’s market? 😉
I guess I am missing the point of what you are saying then. If we can assume that the buyer will select a home at the top end of their range then no one is missing out with a home priced at $499,000.
Houses have reached into the supermarket shopper pricing mentality. What is with that 9/10ths of a cent with gasoline? (I think we all know, deception)
“Isn’t it eerie how all the prices end in 9s?” – Randall, Clerks
You want alarmist?
May 2006 BLS Wage Survey:
Median Hourly: $16.19 ($33,675.20/yr)
Average Hourly: $20.07 ($41,745.60/yr)
June 2007 Home Prices:
Median Home Price: $295,000
Average Home Price: $352,400
Salary to Home Price Comparison:
Median: 8.8x Salary
Average: 8.4x Salary
Now to comment on Charles’ post. He seems to be interested in noting that a customer with a stated limit of $500,000 is going to find one of the best homes (the one the like the most they are willing to spend the money for) in the 46 at the high-end of the range. This is commonly accepted notion. So if we take the customer that is willing to spend up to $700,000, it would go at assume that again, they would find the home prices at $699,000 to their liking, not the one at $499,000.
I guess the thrust is, will I offend my client by suggesting a home below the stated range they are willing to spend? What is the tipping point? Do you push the lower-end customer up to say “look what only $5,000 more will get you”?
Given the current market I think more customers will take offense when you try to push them up a price range rather than pull them down. I wouldn’t address this issue as a seller’s problem, but a buyer’s agent problem.
Signed,
Another Alarmist
Hoopty: Have you been reading my posts for long? I think I started back in January by warning about problems to come in subprime leading to problems in the RE markets. I can’t claim that as my own ‘prediction’ – I started reading lots of housing blogs back then. At any rate, what’s happened since January? Subprime is in shambles and now Alt-A is headed to the same place (something I mentioned here several months ago as well).
My agenda? Basically just warning people to think about what’s going on and to consider the idea that now may not be a good time to buy. In fact it could be a very dangerous time to buy. If I can spare some folks some misery, that’ll be a good thing.
Oh, sorry for a bit more alarmism (you can ignore it Hoopty if you like):
American Home Mortgage now appears to be toast. Done as in stick a fork in it. This was a major lender in the US (in the top 20) that originated about 5% of the mortgages in the US last year. Oh, and they didn’t do subprime. They did Alt-A and prime. They went from seemingly healthy a month ago to bankrupt today – amazing how fast it happened.
And for more confirmation that Alt-A lending is about to die check out CalculatedRisk today:
http://calculatedrisk.blogspot.com/2007/08/more-on-alt.html
What does it mean if Alt-A/Jumbo loans become endangered species? Well, remember that in California the average house sells for north of $500K. Jumbo loans start at $417K. That’s gonna kill a significant portion of the remaining CA market. Bye, bye equity locusts.
Welcome to the Credit Crunch.
Sorry, Turner. Your paticipation in the greed orgy is what’s going to bring this housing market and this economy to its knees. Sure, Portland houses are definitely worth 100% more than they were 5 years ago. They discovered OIL or GOLD underneath them! Oh, they didn’t? Then there is no supportable economic reason other than hysteria that caused that kind of an appreciaton in the absence of some other inflationary occurence. It’s not like salaries went up 100% in the last 5 years. Neither has wealth except for the top 1-5%.
Better start looking for some other line of work or a second job.
This blog works brilliantly. Without any effort, I know I will never have to work with Naysayer in a real estate transaction.
It is amazing that my participation in the Portland real estate market is single handedly going to bring it to its knees.
Greed? I guess that is why I am heading out to let a contractor into an out-of-town buyer’s house so that it can be painted and measured for carpet before he arrives. The transaction is closed. I’ve been paid. If I was greedy, I’d still be in bed, not offering customer service.
I’ll start looking for a new job as soon as people completely stop moving. You’re gonna see a lot fewer Realtors in the next few years but your stuck with me. Your not stuck reading this though.
naysayer: We can be alarmist, but let’s not be nasty about it – we alarmists want to be listened to after all. Reality is going to hit very hard very soon anyway, no need to rub it in. Let’s not gloat – there will be a lot of hurting people out there soon and it will spill over to people who had nothing at all to do with the speculative hysteria industry.
You’re gonna see a lot fewer Realtors in the next few years
Charles: I think your prediction is going to come true. And there will also be a lot fewer mortgage brokers and granite countertop installers and builders and contractors and carpet installers… A big chunk of our local economy was composed of these activities in the last few years.
I wouldn’t be enjoying this so much if it weren’t for the arrogance of the people who turned something as basic as shelter into a game of one-upmanship, pretense and ostentation. Flippers, self-important agents, snobby developers. If I heard the phrase “you missed the boat” once I heard it a thousand times. It got old hearing people crow about their savvy investment, the one they could not have predicted but merely walked into.
Sour grapes? You bet. And now we get to laugh at the people who used the term “sour grapes” as they scramble to unload a house they overpaid for or simply watch their equity shrink.
We live in a hyper-competitive culture of haves and havenots where the haves aren’t satisfied with just having but feel the need to make the havenots squirm with feelings of inadequacy. Now the housing havenots get to do the gloating. It’ll be worth going through some bad times to see this city taken down a peg or two and to see the fresh faces of real estate “professionals” that stare back at us from bus benches, billboards and way too many ads, disappear.
I wouldn’t be enjoying this so much if it weren’t for the arrogance of the people who turned something as basic as shelter into a game of one-upmanship, pretense and ostentation.
Perhaps, but let’s us “alarmists” try to avoid the same display of hubris on the way down. It sounds like you want revenge, naysayer, but the best revenge is just to remain gracious.
Now as for alarming developments: It seems there’s a lot of trouble brewing in the mortgage insurance biz. Big troubles at PMI and MGIC. What happens if one of both of them fail? They write the majority of mortgage insurance policies which are required when people put down less than 20%. We could see a return to the 20% down requirement – something I speculated about here a few months back, if I recall correctly. We could also see lots of mortgages not get written for lack of insurance.
How many people do you know who have $70K sitting around that they can use as a downpayment & closing costs for the median priced home?
“How many people do you know who have $70K sitting around that they can use as a downpayment & closing costs for the median priced home?”
Most who do will not buy until the dust settles.
Naysayer,
What’s the point of projectiling on Charles Turner?
The fact that he allows uncensored posts definitely sets him apart. He has also stated that he is against dual agency. Seems like an OK bloke to me.
We should give this shill credit for not censoring opposing opinions? Please. He’s like a carrier of some greed-disease that will end up sinking more than just the people he comes in contact with.
Take no prisoners.
Naysayer, please go find somewhere else to have verbal diarrhea. You are out of line and I will delete any future non-constructive comments from you. I will not tolerate name calling from someone that doesn’t even know me while they hide behind a pseudonym.
You’re right. I don’t know you.
Today’s Oregonian has a story about how the subprime debacle is coming to Oregon soon. As they put it, “lax market oversight and increasingly reckless lending have created a class of unscrupulous lenders who are selling loans designed to fail”. Though not discussed in the article, there’s also the people who were convinced by their agents that getting a risky loan was a good idea or that the price appreciation would continue forever making refi a snap.
Perhaps you can assure me that those in your profession saw beyond the fat commissions and were looking out for their clients. Maybe the agents didn’t encourage flipping and speculation that will end badly for many and has only served to make housing less affordable thus pushing people into financial risk and sketchy loans. Even if your profession was culpable maybe you were a saint who didn’t engage in such practices. Like I said, I don’t know you.
But when the Sh*t hits the fan, don’t expect your industry to be making any PR points. That’s what I find so galling. That you pretend that it was all done to serve the clients and make enough money for pet charities. My, what a philanthropic industry it must be. Please.
Naysayer, I’m sorry that you’ve had such a terrible run of luck that you feel compelled to bad-mouth someone you’ve never met, just because of their chosen profession.
You seem to be missing the fundamental point. Real estate agents are just that – AGENTS. You seem eager to throw blame at agents who have ‘encouraged flipping and speculation’ (perhaps you took a bath off some bad advice?), while neglecting to mention that these folks are AGENTS of the customers. Which means it’s the customer’s responsibility to know the market, know their financial limitations, know their must-haves/nice-to-haves/cant-dos, etc. And to use their agent’s experience and expertise as a supplement to that perspective – NOT as a substitute for it.
I would never sign my name to a multi-hundred-thousand dollar transaction without fully understanding every line of fine print involved, and the implications of different scenarios, different outcomes in the market, etc. Agents certainly have a financial incentive to close transactions quickly and at high prices. This isn’t some state secret – it’s painfully obvious to anyone who cares to think about the situation for more than 12 seconds. Meaning it’s the buyer/seller’s responsibility to manage their agent appropriately, to understand when the agent’s incentives might conflict with their own, etc. And – all together now! – UNDERSTAND WHAT THEY’RE GETTING IN TO. You want to blame the profession for doing exactly what the system is set up to encourage them to do? How about blaming the deluded souls who were perfectly willing to believe that paying 10% more than the most expensive house on the block for a two-bedroom shack was a sound financial move? Or that their two bankruptcies and repeated missed credit card payments shouldn’t have any implications for their home loan? Or anyone willing to deny thousands of years of human experience and trust that there is, in fact, such a thing as a free lunch?
Blaming agents for the fact that you’re sitting on an overpriced pile of bricks, or for the financial ruin that threatens to befall the entire free world at this time, is like a CEO blaming a consultant for his company’s bankruptcy. You may have gotten bad advice – but it’s your fault for taking it.
And, for the record, I have used Turner Realtors and found both Charles and Jennifer to be extremely professional and knowledgable in all the ways that an agent should be professional and knowledgable. I’m glad they make good money doing what they do, because they work for it. If you think realtors are unscrupulous bastards, then by all means, hang your shingle, and work seven days a week for half the commission the other guys are getting.
I’m sure you’ll have no shortage of business, and God will love you even more for it.
Either that, or you’ll quit after a month, because being a realtor is hard.
Ok, on the one hand this “profession” likes to promote the image as being all about “the client” and then you tell me it’s all just caveat emptor? Can’t blame the agents, SUCKERS, you didn’t read the fine print! So tell us, Mr Agent, which is it? Are you in it to make $$$ or represent your clients? And if the latter, how come so many people are upside down and treading water in the housing debacle? Tell me Dennis, is that what you mean by your posted rationalization of the greedy real estate profession?
We used to live in a world where the real estate agent, the stockbroker, the whoever, were honest specialists looking out for your best interests. The dishonest ones were considered bad and were the oddballs and often were ostracized. Now it’s every man for himself. You can’t trust any of those professions anymore. The dishonest are now lauded as huge “successes” and are the envy of the masses for their wealth. Doesn’t matter how they got it, really. Like you said Dennis, they’re only looking out for themselves.
And I thought my view of this culture was bitter and tainted. At least I lament the loss of honesty and ethics, and caring about your fellow man. You seem to accept the decline of ethics to the point of worshipping it.
Naysayer, I’m not suggesting that you tolerate/celebrate an agent who intentionally tries to deceive you, or gives you bad advice, etc. I merely pointed out that the structure of the buyer-agent relationship, and their relative roles in the transaction, can put the clients’ and realtors’ individual short-term interests at odds. Most realtors are able to navigate these tensions in an entirely ethical manner. Some are not. Surprise – there are bad people, greedy people, in all professions. There are bad teachers. Bad doctors. Bad realtors. Bad lawyers.
Oh, and there’s no Santa Claus, either.
So I’m only suggesting that you realize that it’s YOU who has to make 360 payments on the house, that it’s YOU who has to sell it when it’s time to move on, etc. Not your realtor – YOU. I would no sooner take one source of advice on the issue of how to price or select a home for sale or purchase, than I would put my entire 401(k) in one company’s stock, or take a single doctor’s opinion on a major surgical procedure, etc.
You may see these commonsense warnings as a sign of the decline of modern culture – to which I say, the good old days weren’t as good as you seem to think they were. At least these days we’re capable of arming ourselves with enough information to know when our broker’s advice is geared more towards his own fee generation than our long-term financial health; when our realtor’s advice is more geared towards their own commission than towards our ability to build & protect our home equity; and so on.
The housing market ain’t rocket science, Naysayer. If you’re too lazy to look at a set of comps on your own, or read a newspaper or two, or do *some* sort of reality check on the advice you’re getting to discern whether you’ve got a good agent or a bad one, if you just blindly accept the advice of whatever realtor you picked out of the Yellow Pages, then, yeah, you’re probably going to get ripped off a time or two. You say I worship the decline of ethics in our society? Hardly. I’m just aware of the fact that there are good people and bad people in the world, in every profession, and I’m out to protect my own well-being in spite of it.
My advice from my last post still stands. If you think the real estate profession is full of self-interested, greedy bastards, then do something constructive about it. Expose those who twist the ethical codes of the profession. Spread the word on those who give bad advice. Promote those who have demonstrated concern for their clients. Get into the business yourself and do it the right way.
But lobbing bitter bombs at hard-working realtors who do things the right way, by maligning their entire profession based on broad stereotypes and inaccurate generalizations, and holding individual realtors to task based on these ill-formed opinions, isn’t just unproductive, it’s downright slanderous and it entirely contradicts your self-proclaimed ethics, honesty, and concern for your fellow man.
More rationalizations for people who skirt the edges of common decency.
Slander will be the least of their worries when the dust settles on this. The real estate agency concept will become a thing of the past. And not a minute too soon.