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Sunday, December 23, 2007

A trap of your own making...

I was perusing the various news feeds on my Web site – yesterday when I came across a feed that focused upon the reactions to an article written recently in a Florida newspaper. The gist of the article was that many seniors in Florida feel “trapped” in the homes or condos that they bought decades ago because they can’t sell them for what they think they’re worth now. Apparently one example sited by the reporter who wrote the article was of an elderly lady who wants to move into assisted living, but refuses to lower her asking price for her condo to a price that is in line with the market today. The gist of the remarks posted about the article were very unkind to the writer – did she do any homework or have any understanding of the market – as well as about the seller who was used as an example – get over the paper loss you are taking and get on with life.

I thought back to the blog post that I did on this topic (August 8 – Coping with paper losses). I have had some clients who are in similar situations and who, for similar reasons, have not yet sold their houses. They were mostly older clients (actually around my age) and most have owned their homes for decades. Some had paid the houses off and some had very small mortgages. They all shared the characteristic that they just can’t bring themselves to give up the paper appreciation that they thought they had made over the years and which they believed is still there in the "value" of the house. Some of these owners paid less than $100K for the houses 2-3-4 decades ago and now they can’t bring themselves to lower the prices below the $280-300K that the tax assessors say the place is worth and which even the market said they were worth 2-3 years ago. Unfortunately in today’s Michigan market, the houses are probably worth less than $250K. That’s just the cold hard truth of the market that we are in.

Some of these seniors had been counting on the payout from their investments in the houses to help fund their retirements. Others aren’t dependent on what they get by selling to be OK in retirement, they just refuse to “give the place away”, as they saw it. So, they sat on the market - overpriced, not being visited by buyers and frustrating the heck out of the owners and the Realtors involved. I've tried everything that I know to get the sellers that I have in this situation to understand that they are just not going to get what they thought out of the old homestead, but these are proud and stubborn people who really believed that they’ll get what they‘re asking if they just waited long enough. In most cases, it didn't happen! One seller eventually and begrudgingly lowered his price to the what the market dictated and sold, another just gave up in disgust and took his house off the market. He's still sitting there waiting out the market and feeling "trapped" in his house.

So, if you’re a senior citizen who is ready to cash-out of the home that you’ve owned for a long time, the best that I can tell you is to get over whatever pre-conceived notions you have about what your house is worth, get a good Realtor (if you’re in Southeast Michigan that would be me) and TAKE THEIR PRICING ADVICE. Understand that your Realtor is working for you and trying to get you the best deal that he/she can, with the most money to you; but they don’t do you or themselves any good by going along with a bogus, high price just to make you feel good.

Let your Realtor do the research and the competitive market analysis (CMA) and when they do, they’ll give you a suggested price range. Don’t take that price suggestion and add “some wiggle room” to it or anything else. What they're trying to tell you, with the CMA, is what the market will pay for your home. Your real choice is whether or not you want to sell right now, not how much to ask. Trust me on this; the market just doesn’t care what you need or want for your home; it just knows what it will pay for a home like yours. I can sell your home, but only you can determine when. The market will determine for how much.

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