Why isn’t my home selling?
It’s fixed up, easy to show, listed in the MLS with photos and a virtual tour, and offers a generous commission to the buyer’s agent. It has been on the market 90 days and there are no offers! Well, I haven’t seen your house, but when all else fails, you really have to look at the price! There is a magic number somewhere between $1 and what you are asking that will make a buyer jump off the fence and offer to buy it. In our current market, even the CAR (California Association of Realtors) spokesmen are saying that the market is declining – for both the volume and the prices and they are projecting a 4% drop for 2008. In Orange County the number of sales this year is already off by more than 40% for most areas.
So what is that “magic number?” It takes a bit of analysis to find the right one, but you need to start by looking at all the homes that are available up to the price where yours has failed to sell, and also within a reasonable distance of that property. If your home is in Lake Forest, for instance, I would take a look at all the homes in Lake Forest, and our neighboring communities of Foothill Ranch, Portola Hills, Mission Viejo, Rancho Santa Margarita, and Laguna Hills because these areas may also be considered by the buyer who might want your home. If you have 4 bedrooms and 2400 square feet, I would look at the total number of homes that have at least 4 bedrooms and 2000 square feet (everybody wants more square feet, but many buyers look more closely at room counts, and general layout.)
The first factor to look at is the number of homes that have sold in the last 90 days. Then look to see how many are currently in escrow, and finally, look at how many are currently available on the active market. The active market is your real competition – the ones in escrow or recent closings are the ones that successfully attracted a buyer and got out of the way.
I ran a sample of this type research just now for a hypothetical home that is 2400 sq ft, and not selling at $715,000. Today there are 148 homes for a buyer to choose from that have 2000 square feet or more. In the last 90 days, 52 properties have sold, there are currently 12 in escrow, and 27 have expired, unsold. Based on the closed sales of about 4 per week, if all properties are equally desireable, and the pace of sales continues, and no new listings come on the market, the 148 homes will take about 8.5 months to sell. It looks even worse, when you look at the rate of current escrows of about 2.4 per week, assuming 5 weeks average escrow period. That calculates out to 62 weeks, or about 14 months to sell them all! Of course, all 148 properties are not equally desireable, so the list of actual properties needs to be reviewed to determine how many are really in the competition. Some will be in terrible condition, or have incureable flaws and locational challenges, so they will be easily eliminated by buyers. But there will still be intense competition among the rest of them, and only the best will sell!
If you live in the home, what is your patience for being on the market – constantly keeping it ready to show on a moment’s notice? If your home is vacant, how long can you keep spending the monthly carrying cost? ($PITI + $HOA + $utilities)
Our market is very soft right now, and the few real buyers around are extra picky and looking for a home with a price that they can feel good about! Sellers have to let go of their hopes for getting the sales prices that their neighbors got 2 years ago, and just be realistic. If you don’t have to sell, please take your home off the market right now. If you do need to sell, get it priced right and move on with your life!
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