Lessons in Pricing Honolulu Real Estate
May 5th, 2008 categories: Reasons To Sell
This Manoa cottage closed at $800,000 on April 30th. I represented the buyer and it was originally listed for sale at $799,000. There are many great lessons that can be drawn for from this sale, but the most important lesson for sellers of Honolulu real estate is that pricing is the key to creating activity and ultimately selling your property. First some back ground.
Given its location, condition and quality, many sellers and brokers would have been tempted to pick a list price of $850,000. This would have positioned the home as a moderate value. No one will ever no how how well $850,000 would have worked, but in my opinion it may have created a lower selling price. To begin with, the property would not have seemed like such a good value. Secondly, the home needed remodeling and at $850,000, once the work was completed, the prospective buyer would have been over paying. Thirdly, $850,000 would not have created the initial energy or momentum procured by $799,000 and would have extended the days on market for the home. Generally, as days on market extend, the sellers can expect more pressure to reduce the price, long market times lead buyers to believe that a property is overpriced. Again, nobody will ever know, but I estimate that a price of $850,000 and extended days on market would have led to a selling price in the range of $750,000 to $775,000.
Here is what the $799,000 list price did.
1. The property had an accepted offer 7 days after coming on the market.
2. There were 3 offers at the same time (though I don’t know for sure, I am told they were all at or over full list price).
3. The closing of the sale occurred within 39 days of the accepted offer.
4. The buyer put $300,000 down and the loan was very easy to get.
5. Due to the multiple offers, the buyer’s offer was very clean, which means there were few contingencies (ways for the buyer to get out of the contract) and all of the time frames were very short.
6. There was a tenant in the property and the buyer agreed to buy the home without having the seller make the tenant move. This would have meant closing at least a month later.
7. After having a professional inspection, the buyer was more willing to overlook defects.
In many markets, it is believed that sellers are at a disadvantage. This is an example where a seller seized the initiative from buyers by proper pricing. The price created immediate interest, multiple offers and put the seller in the transactional drivers seat! When you are a seller, be aware that a higher price could put you in a bad position and a lower price may lead to you getting a higher offer.
This is a great post about how to price something appropriately. To a lot of sellers, the logic is counter-intuitive, but I couldn’t agree with you more. The sellers that have caught on have always out-performed the competition!
Thanks for the comment you left on my site recently, and it’s a small world . . . just today I was forwarded an email from Jerry Hannan who told me to go check out your new blog because you are part of the Tim Wood group! I told him I already knew who you were!
Best wishes for continued success!