Time flies. Back in April of 2006, I wrote a blog about pricing . Back then it was my contention ( I still believe it) that agents had developed a practice of pricing homes like they were fruit in the local grocery store. Everything was hitting the market with price points that ended in 900 or 999 (i.e. $349,900 or $349,999).
This may have been the result of the old marketing technique that was developed purporting that .99 cents seemed like less than $1. Well it is. It is one cent less. Visually, it appears to be more. The effect is marketing based and has had success in retail stores from grapefruit to small appliances to large appliances and even automobiles. It is a visual trick that is so successful there is a chain of stores in the southwestern United States named 99 cents only.
It is four years later and a quick look at the multiple listing service in any area reveals the practice continues. During the recent snowpalooza, I began wondering how this pricing and other practices might be affecting the sale of homes. The market has certainly changed. In a world that was recently filled with home owners with equity selling their homes we have seen things become quite dicey. What used to be the norm is now the exception and what used to be rare is now the rule.
Agents generally know what they are looking at when they view homes in the MLS. There are indicators that reveal the possible condition, true availability and potential value of a home. The average consumer that has access to hundreds, if not thousands of sites with listings, does not have the pertinent information. They go on line, enter some search criteria (often dictated by drop down menus) and begin looking for their dream home.
Many sites offer bits and pieces of information. A consumer can see days on market (DOM), which is how many days that the property has been listed within the multiple listing service. The consumer can go to local tax records and see the last recorded transfer price. The consumer can use some sites to find out about the neighborhood and recent sales.
Using the information available, the average consumer can not make an accurate informed decision.
The amount of money someone paid for the home they are selling has little to do with the amount of money that the seller owes on the property. All the liens do not show up in a public record search. All the refinancing and/or equity lines do not show up in a public search. The amount of money that a seller hopes to receive for the home may or may not be related to the amount of money that is owed on the property.
Short sale prices do not reflect anything other than the best guess of an agent coupled with a strong desire to generate an offer. The recent guidelines announced by the Federal Government do not seem to take into account the needs of the possible second mortgage holder. A price approved the primary mortgage holder may not be acceptable to the holder of a second lien. If the second lien holder does not agree…the transaction will not take place.
The days on market number does not reflect all the things that impact the days on market. For some reason, most people look at this number and make their own assessment regarding the value of the home, the desire of the seller and the value of other homes in the area.
This is a mistake.
Days on market is only the number of days a property has been listed in the MLS.
- If the home is priced incorrectly, it can stay on the market for months or years.
- If the price is reduced, and the price is just a bit off, it will sit on the market.
- If the home remains unsold, it may become stigmatized and passed over by potential buyers extending days on market.
- If there is a significant weather event (i.e. February’s back to back snow storms) the days on market will rise.
- If the home is located near several hypothetically priced short sales, it may be correctly priced and unseen.
There are many reasons homes sit. It is high time that someone began to stand up and say wait a minute, if interest rates remain relatively low (and that soon will end) and there is a pent up demand for housing (need has not changed and sales have been low for several years)…what is wrong with the current picture? It is my humble opinion that pricing has a major impact on viewings and sales. Price points of search criteria has to be considered. Agents will all object. They will point out that they expand the search criteria. Well, this is 2010 and agents are not doing the bulk of the searches. It is the consumers that have taken over this part of the process.
While I do not advocate for sale by owner, I do believe the owner should consider that buyers are doing the searching they should market to them and not assume that the agents are driving this bus anymore. If agents want to see a reduction in days on market, well then they need to end the daze of madness.