There are some exceptions that come to mind. If one bought diamond ring 10-20 years ago and now wanted to sell it, the belief is that it might be worth whatever the current going rate for gold and diamonds or maybe more, if it is of exceptional design and quality. Antiques, whether they be furniture or cars or whatever are expected to go up, but we accept that they float in value up or down with their specific market. Collectibles are the same way (got any valuable Beanie Babies?). Stocks and some other, non-personal possessions could go either way and tend to float in value with the market, and we’re OK with that.
Then there are our houses. The need to change how we think about the value of houses is a huge issue right now. We have all been raised on the belief (held onto as common knowledge) that our houses always hold their value or go up. Now, it would be absurd to think that there are people who haven’t heard of the current economic meltdown; however, I certainly meet a lot of people who have yet to fully deal with the consequences of what has happened to the value of their homes.
I usually meet people in the stage where they are trying to see what their homes are worth on the market today, because they would like to move or might have to move. It seems like those who bought only a few years ago (up to maybe 6-8 years ago) know in the back of their minds that they have taken a loss. They are somewhat resigned to the bad news that I have to deliver. People who have owned for longer periods, especially the 10-20-30 years owners also know that the economy has affected the value of their homes, but they often aren’t prepared for how much that impact has been. Article after article has been written about the 35-30% drop in values in this side of Michigan, yet somehow that just couldn’t have happen to most of these folks, or so they think.
So I go in with my data and my analysis. I show them similar homes that have sold and ones that are currently on the market (I don’t use the word “Comps”, because that word carries more baggage than it can support). I look at the condition of their home – has maintenance been faithfully done, has it been remodeled or refreshed within the last 5 years (especially the kitchen and baths), what is the condition of the flooring, have the mechanicals been updated, how old is the roof, what are the style/layout issues, if any and on and on– and evaluate it as compared to other similar homes. I’m not yet even looking at the things that might have to be done to it to make it more marketable – de-cluttering, staging and the like – just for the things that impact market value.
Based upon all of my research and evaluation of the house, I come back with a price range. That’s when I often hear – "I’m not going to give it away." Well, I’m not really asking them to give it away, just to put it on the market for what the market will currently bear. Many times these days I hear that the price that I have returned with is less than what they owe on the place, sometimes because they have taken equity out and sometimes just because they paid top dollar to begin with. Many will tell me that they have more into the place that the number that I just put on the table or they’ll say, ”I need to get more for it than that.” Some have been banking (pun intended) on their home equity to fund their retirement.
Sometimes I deliver my little speech about how the market works and fact that it really doesn’t care what they want or need from the sale of the house. Our market-based economy is cruelly efficient at finding and setting values for anything that is for sale. There are always 10-20-100 more of whatever it is to compare with on features and price. In today’s real estate market we also have the huge foreclosure inventory that buyers can look at and compare. And they will compare.
It might not seem fair to most owners who are seeking to sell to have me tell them that their home will be competing with foreclosed homes, but it is a fact of the market and the competition isn’t even fair. I recently previewed a beautiful 4000 Sq Ft home in great shape that used to be valued at about $600,000 and which is now priced in foreclosure at $329,000. How do I explain that as competition to an owner to whom I have just given a $330,000 to 350,000 price range estimate for his owner-occupied home? Is it fair? No! Is it the reality of today’s market? Yes.
So I have to tell that owner that they really need to be down around $310 – 315,000 in order to be competitive. And they need to have the place in immaculate condition, so that they represent the move-in-ready option for buyers. It’s not an easy sell for me or for them. “I’m not going to give it away,” they often retort. I can’t blame you for being disappointed, but that’s the market today. I often advise, “Hold on if you can, but don’t look for things to return to where they were, maybe ever, but certainly not for a decade or more.”
The bottom line is that you aren't giving it away. You're selling for what the current market will bear. If you have to take a loss on the place, perhaps you'll make up some or all of that loss on what you buy next. If you don't plan to buy another place, then you need to be able to look at this loss just like you are looking at losses in the stock market. It's hard, but I try to use the "So What" technique of coping. So what if this or that happened, I'm still here. I still have great family and friends around. I still have my health, my faith and a lot of life left to live. I may have to live a bit differently than I had planned, but, so what. I try to let it go and move on. Besides, you have other things to do, rather than to sit around worrying about the value of your house.
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