From the WSJ – HAT TIP CHIFI:
Should Home Sellers Overprice or Underprice Real-Estate Listings?
“The Price Is Right” isn’t just a game show. It is a mental strategy real-estate agents use to get the most money when listing a home.
When setting an asking price, there are two schools of thought: In one, agents overprice properties in the belief that a higher asking price will draw higher initial offers from potential buyers.
Wendy Jodel, associate broker with Town Residential in New York City, says overpricing works when inventory is low. Ms. Jodel recently listed a two-bedroom apartment on Manhattan’s Upper East Side for $1.35 million—4.5% above the price of similar apartments nearby. “I had no competition,” she says, adding that few comparable apartments are available in the area. The apartment closed this week with multiple offers for $1.32 million.
Other real-estate agents take the opposite approach, pricing homes below nearby properties in hopes of starting a bidding war. Chris McDonnell, senior associate broker with Coldwell Banker Distinctive Properties in Vail, Colo., says he prefers to underprice homes by 5% to 10%. Now, even in a heated market, buyers are looking for a bargain, he says. If sellers start low, they could potentially add 10% to 15% to the sale price. “There’s so much pent-up demand out there right now. Money is just waiting on the sidelines,” he says.
This strategy, however, poses a challenge: “It’s really hard to get your seller to agree to that,” Mr. McDonnell says.
New research tackles this dilemma. A study published in the Journal of Economic Behavior & Organization in May found that homeowners who set the initial asking price 10% to 20% higher than similar houses in the neighborhood see a slight increase of $117 to $163, on average, in their sale price. Pricing a home 20% or more than similar houses leads to an impact three to four times as big.
Pricing a home 10% to 20% lower than homes in the neighborhood leads to a decrease of $117 to $187, on average, in the home’s sale price.
The research explores a behavioral trait called “anchoring.” That is a common tendency to rely on the first piece of information offered (the “anchor”) when making decisions. Once buyers have an anchor, they typically interpret other information involved in the sale around it.
“Every house is different, and so those qualitative things really matter. Buyers will turn to the good attributes that justify the high price,” says Grace Bucchianeri, former assistant professor at the Wharton School of the University of Pennsylvania.
…
The study, “A homeowner’s dilemma: Anchoring in residential real estate transactions” found that “overwhelmingly anchoring is a good strategy,” Prof. Bucchianeri says.
…
Pricing low may speed up the sale, which can save the real-estate agent both time and money spent marketing the property. In the end, agents may get a lower commission, but the difference is usually negligible. “It’s intuitive if you think about it,” she says. “It looks like the realtors are doing what’s best for them, and as homeowners, we need to understand that relationship.”
Also from the WSJ:
Foreclosures Slow Home-Price Gains
Home prices in the tri-state area are rising at a slower pace than the national average, the lingering effect of a foreclosure wave that is gripping the region.
The median price of single-family homes rose 12.2% nationwide in the second quarter compared with the year-earlier period, according to the National Association of Realtors. That was up from 11.3% in the first quarter.
In the New York metropolitan area, which includes several New Jersey and New York suburban counties, median prices were up just 5% in the second quarter, slightly below the 5.1% growth in the first quarter.
Economists said the New York region is lagging behind the nation in home-price appreciation in part due to foreclosure rates, which are falling rapidly in most of the country but remain a serious problem in New York and New Jersey. Foreclosed homes are often sold at steep discounts, which can work to drive down home prices.
During the second quarter, 8% of all mortgages in New Jersey and 6% of all mortgages in New York were in some stage of foreclosure, according to a report released Thursday by the Mortgage Bankers Association. While those rates are down modestly from the first quarter, New Jersey and New York have the second- and third-highest state foreclosure rates in the nation. Florida has the highest foreclosure rate of any state, at 10.58%.
“Both New York and New Jersey have very slow foreclosure processes,” said Jeff Kolko, chief economist for the online real-estate company Trulia TRLA +2.95% . “A large backlog of homes could hold back prices in neighborhoods with more foreclosures.”
Mr. Kolko said based on Trulia data, prices in much of New York and New Jersey were actually flat. The average gains for the region were driven mainly by a few hot markets. “There’s an incredibly tight supply in Manhattan and Brooklyn, which has helped drive up prices.”
Prices on Long Island, according to the Realtors data, grew by 5.5% in the second quarter. Price gains were even lower in Connecticut, where New Haven rose 2.2% and Hartford 3.5% during the period.
Even though price rises in the region are running lower than the nation, some economists see reasons to be optimistic. David Stiff, chief economist at financial-services company CoreLogic Case-Shiller, said the fact the prices are rising at all means “the markets are turning the corner.” Many markets, he said, had falling prices last year but they “seemed to have bottomed out.”
Frist of the Non-Grims
You can’t say you weren’t warned:
http://news.yahoo.com/-harry-reid-says-obamacare-will-lead-to-single-payer-system–174601028.html
And here’s a brain teaser–What do the following quotes have in common?
“Sure I’ll respect you in the morning” JJ
“Read my lips, no new taxes” George H.W. Bush
“If you like your health insurance, keep it” Barack Obama
grim: Where’s the hat-tip you thieving scumbag? What’s the point of this blog without hat-tip?
I told my mom to price her pos apartment in NYC outside of the Con Ed plant a few years back. Actually, I just suggested a price that was $20k below comps because she had no clue. There were three people that got into a war and bid it up $40k higher. Then, when it came time to sell, a scumbag co-op board member rejected the sale. So it worked, but it didn’t. Apparently, the people that run this board think its ok to run it like Nazi Germany.
Hey, it’s a NYC co-op. Rules of the jungle apply.
How prescient was this call?
RE/MAX – Outstanding Agents; Outstanding Results
Liberate Tuteme Ex-Inferis (i.e. Save Yourself From Hell)
http://www.youtube.com/watch?v=pJAFuEuBqsE
Hey, it’s a NYC co-op. Rules of the jungle apply.
No doubt. In the jungle, people make up their own rules.
shouldn’t she be the one arrested for double cliking herself in public view?
@Gothamist: Man Arrested For Filming Masturbating Woman From Elevated Williamsburg Subway Platform
http://t.co/IvuRlkw9QU
Sitting on the deck in OC-MD, quaffing a Belgian white and enjoying the ocean view.
Ahhhhhhhh!
John C. | April 4, 2013 3:13 pm
I’ve noticed a very interesting trend. When people reach a certain age (usually around retirement) many seem to believe that the country and the world are heading for a big fall, and that the good times are inevitably over for good. I remember hearing this from my parents’ generation in the early 80s after the oil shocks and the recession. I head it ad nausem from seniors in the early 90s when they thought our cities would self-destruct from crime and crack and Japan’s technology and innovation would send the U.S. into an irreversible decline.
But in every case, the flowering of American innovation (fueled in part by the continuing influx of smart, hard-working immigrants) has shown the dire predictions to be false.
I think, as Joe suggests, it’s no different now. Like Joe, I have faith in American innovation and the country’s ability to continue to attract the best and the brightest in search of opportunity. As one poster suggested, what country can match the U.S. for opportunty?
Sara V. | April 4, 2013 3:58 pm
I’m sorry, John C. See Steve P.’s post – there is not the same opportunity in the U.S. that there used to be. Things are very controlled now. It is all about how close you are to the government/Fed money spigot (as long as they can keep printing.)
Did you hear Mr. Bernanke “assure” that it is “unlikely” that depositors will have their money taken from their bank accounts as is to be done by the ECB to Cypriot account holders? He’s not saying no – we are definitely on the way down.
I live in California and am seeing businesses closing or fleeing the state. We are planning to move ours to somewhere less constricted and thieving also. Do you know we even get taxed yearly on our furniture and office supplies? That stunned me when I moved here. I am pessimistic about the future and am afraid there may be nowhere to move to within our borders if things continue on their current trajectory.
Which side do you agree with?
Thanks for your informative post.
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