From the Star Ledger:
Lenny Klein thinks home sellers could learn a thing or two from eBay.
Nothing draws bidders quicker to an auction than a low opening bid, the real estate agent said. Setting a list price slightly below market value builds excitement and is more likely to create a bidding frenzy — which can ultimately drive up the final price in the end.
“If you look at ebay, sellers start with the lowest price,” said Klein, a sales agent with Schweppe Burgdorff ERA in Upper Montclair. “They say 99 cents and no matter what the product is, it’s going to find its value in the market place.”
It’s a lesson homeowners across the state are learning well, these days.
Certainly, Realtors have a vested interest in pricing homes so they move quickly since their compensation is tied to sales — and a slumping real estate market has put a major dent in their commissions.
But new data from a New Jersey consulting firm suggests over-priced homes not only take longer to sell, they consistently sell for thousands of dollars less than similar homes that were priced lower in the first place.
The study by Otteau Valuation Group measured and analyzed more than 15,000 transactions annually over a period of several years. The same pattern emerged in every price range, regardless of whether the properties in question were entry-level or luxury million-dollar homes: Sellers who priced their home below the market from the beginning, often received a higher price and a faster sale.
“We haven’t hit bottom yet,” said Jeffrey Otteau, a long-time consultant and appraiser. “For every buyer that comes to the market there are two, or three or more sellers who put their home on the market.”
During 2005, when home prices were doing like Marie Osmond and dancing with the stars, there were about 30,000 homes for sale in New Jersey, he said. Right now, that number has more than doubled, to 62,000 homes for sale.
At the peak of the housing boom, there were 105 buyers for every 100 sellers in New Jersey, he said. Today, there are typically just 10 or 20 or less.
In Bloomfield, for example, there are roughly 18 buyers for every 100 sellers, he said. In Mendham and Scotch Plains, eight. Even Montville, which ranked 13th in Money magazine’s best 100 places to live in the United States in 2007, can only conjure up four buyers for every 100 sellers.
Otteau estimated home prices in New Jersey will not recover to 2005 peak levels until the spring of 2015, at the earliest.
All of this, has Realtors and homesellers scrambling to figure out the best listing price. It’s an inexact science at best.
The traditional thinking in pricing a home was to aim high so there’s wiggle room for negotiations. But in a market with a glut of properties for sale, a price that undercuts the competition is a surefire way to make your home stand out and attract more prospective buyers.
And Sobeck said when buyers smell a good deal, it creates a sense of urgency and pits them against one another.