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A lot has been made of late about the rebound in housing.  Foreclosure notices are at a many years low; prices both year over year and month over month, seem to be on a solid upwards trajectory and inventory is so low that multiple offers are common place all across California and in many other parts of the nation as well.  So if prices are rising, wouldn’t it make sense to hold out and wait before selling?

This is the $64,000 question, so let me tell you what I would do: sell now and do it quickly.

I know what you’re thinking, of course the Realtor says sell now, that’s how Tim makes his money.  While true, I have every reason to tell you to sell now, let me explain the reasoning and then you can decide for yourself.

I wrote recently that all around me Realtors are very concerned that this year is going to be more of the same, that is, the same as 2012.  Low inventory, lots of buyers and no sellers; multiple offers; cash rich investors looking for a place to put their money etc., etc.  Realtors and buyers alike are lamenting the days when a prospective buyer could look at several properties and calmly, methodically, make a decision to invest in the single largest purchase of their lifetime.  But today buyers are struggling just to find homes to look at, let alone buy.  So for a seller, this is the ideal situation.  The imbalance in supply against demand can only mean one thing, and that is that prices are going to rise.  So make them rise!

If I’m a prospective seller, I am preparing my home for sale as quickly as possible.  This means I already have my Realtor selected and he or she is helping to advise me on paint and carpet and other improvements that add value.  I am decluttering like a mad person and I’m paying the gardener extra to clean up the yard.  We’ve all heard that we only have one chance to make a first impression and since I am singlehandedly going to make prices rise, my home has to be at its best.  And yes, you are hiring a Realtor and paying them a full commission because they are going to earn it after you tell them what you want for your home.

When preparing to list your property for sale, the Realtor is going to show you all the comparative sales in your area.  They will provide analysis and tell you about where you need to price your home to sell.  But in an environment where you have no or little competition, you should look at those numbers, those backwards looking numbers and then ask your agent about pushing the envelope.  Since you are convinced prices are going to rise, you are going to project that future rise and price your home accordingly.   That number may be 5%, it may be 10% above the comps and this in addition to the counsel of how best to prepare your home for sale, is what you need your Realtor for: to determine just how much you can push the asking price.

Some months back I told the story of Nate Shapell, the large Southern California home builder, who saw people camping out for homes on a new phase he was offering.  With a stroke of his pen, he immediately raised the price, significantly realizing a far greater profit.  You are going to do the same thing.  Granted, you don’t have the benefit of having people camping out on your curb, waiting to buy your home, but there is no reason you should not be the one to raise the price.  All it takes is a handful of higher sales to trigger everyone to do the same.  When the market was slow, being aggressive was critical to successfully selling.  You had to have a beautiful presentation and a low price to circumvent your competition.  You wanted to be the first one to leave the party not the last because in a declining market, waiting meant a lower sales price.  Conversely, when you find yourself in an appreciating market, you also want to have an aggressive price, but this time aggressive means going higher not lower.  But beware: the time to do this is probably limited.  Once everyone figures out that they can command a much higher price for their home, they too are going to put their homes on the market and all of a sudden, the low competition, low inventory scenario becomes more one of greater competition, a more balanced market and that makes extracting a premium much more difficult.

I should warn you that this strategy does carry certain risks, namely, I could be wrong and you could end up over pricing your home and it doesn’t sell.  But when there is risk, there is also the potential for reward and I consider this strategy a fairly low risk, high reward approach.  All I know is this, if there are no homes like yours on the market, what is a buyer going to do if you are asking more for your home than the last sales suggest you should?  Obviously every neighborhood is different; every home unique, appraisals are a problem and this strategy may not work across all price ranges.  But I predict that someone will pay the extra money for your home, because you can’t keep a good market down and ladies and gentlemen, we are in a good market.

Posted in Economics, Real Estate |