The last decade in real estate has been a real crazy one! Check out this historical chart to see how prices have changed. AOL Real Estate posted an interesting article about a local couple that tried to sell their house for $600,000, only to actually sell it a year later for $400,000. Luckily the couple had bought the house originally for $250,000 before moving out and putting it up on the market….so they still ended up with a large gain, albeit $200,000 less than they ultimately wanted.
So what happened? They priced the house high at first, and kept lowering the price $10,000-$20,000 every month or so that it did not sell. It finally did sell when they had it priced at $450,000, but only for $395,000.
There are two lessons to learn here from both the buyer and seller perspectives. From the buyer perspective, it goes to show you that there are good deals out there, especially in todays market. It’s all about finding the right situation for the seller. In this situation the seller was sitting on the house for over a year, paying two mortgages. By selling the house for $395,000, they still profited a hefty amount, but the buyer also got a great deal for a house that was listed $200,000 higher just a year previously. The seller also learned an important lesson:
Still, Dave has plenty of regrets. “It’s your biggest investment and every seller wants to get the most they can out of their home. Frankly, I think what we chose to do in selling our house was to be greedy and to see how much we could get. It’s an emotional thing. It’s really emotional. Whenever you’re talking about that much money, sometimes it’s hard to think straight.”
Dave has gained perspective on his experience, and he’s worried for sellers new to the market. He says that when sellers price their homes, greed, emotion and sweat equity can all affect the decision making process. Dave warns that selling your home should be, “a more emotionally detached financial decision. You have to just say, ‘This is a transaction. It’s an investment.’ For a lot of us, our net worth and our retirement is tied up in our homes. So you just have to play it as unemotional as possible, and if you do, it seems you are unlikely to make a mistake.”
As a seller, Dave says, “You keep thinking, ‘I’ll hang onto this a little bit longer, it’ll sell.’ That was ultimately the fatal flaw of our experience. In the process, the market gets worse and worse and worse and the sellers continue to be optimistic. But the smart thing to do is to tighten your belt and say, ‘I’m going to lower this to a very aggressive price because I want to sell it now, because I don’t know what??s going to happen with the market.’ If you’re a seller and there isn’t a strong prognosis for a turnaround, then be aggressive and try to price under. Now we all have the benefit of hindsight of what this real estate market has been like nationwide. It??s always 20/20 in hindsight.”
Just some food for thought.