I was recently talking to a home owner about why his home had not sold.  I told him he was having some major competition from a bank foreclosure home three doors down from him with about the same size, age and view as his home.  He said that did not matter because it was a bank foreclosure.

It amazes that someone who has enough money to own a house in a development like this would not understand the basic principles of supply and demand.  For example, if a service station had gas priced at $2.99/gallon and the service station right next door had gas priced at $2.49/gallon, guess who is going to sell the most gas.  Assuming the gas is of similar quality, I would guess that the station offering gas at $2.49/gallon is going to sell much more than the station at a higher price. 

This individual did not understand that the market does affect the price of his home.  It has nothing to do with what he paid for the home, what his appraiser said it was worth, what his banker thought it was worth, or what his friends thought it was worth – it only has to do with what the market says it is worth.

It is very obvious to me that nobody is going to pay $1 million for a home when the home two doors down the street is very similar in age, condition, size and view and is priced at $800,000. 

His “so what” was just another way of saying that he did not understand the principles of economics and value.  He did not think that counted because it was a bank foreclosure.  He might like to say that does not count, but unfortunately, it does.

I recently saw a statistic that said 82% of people who bought a house in the last year started their search on the internet.  I thought this number seemed low; it has been my experience over the last year that most everyone I have worked with concerning Hilton Head Island Real Estate has already researched the market and have ideas about what they are interested in.

In the “old days” of Real Estate, clients would come to the office and would tell us what they were looking for, we would make suggestions and then we would go out and look at property.  In today’s “internet age”, clients come into the office, tell us what they are looking for as well as what they would like to see and why.  If we make suggestions they sometimes say that they are not interested in that house as they have already seen it on the internet. 

Information is key and many times the buyer has the same information as Realtors.  In the “old days”, we were the keeper of the information – now, everyone has the information in front of them. 

This means that many times prospects will call the listing agent of a property because they will see it on REALTOR.com; because of this, it very important that you have a proactive Real Estate Agent.  If they call your listing agent and they cannot convert the sale then the sale is lost. 

The internet is also a great tool to determine activity you are receiving on your home via the number of internet hits and showings you receive on your property.

It has been our experience if you are getting a lot of internet hits but no showings then your property is probably priced anywhere from 6%-12% over value.  If you are getting a lot of showings but no 2nd showings, your property is probably priced somewhere between 4%-6% over market.  If you are getting a lot of 2nd and 3rd showings then your property is probably competitively priced and will sell soon.  Very few people look at a home only once and purchase.  Below you will see a diagram that shows this theory.

A client once told me, “my house must not be overpriced – nobody has complained about the price and nobody has looked at it”.  If no one is looking at your property, that means the public has gone online and made a decision – right or wrong – that the house is overpriced and are not even asking agents to look at your property.

One of my clients recently commented to me, “all we have been doing is chasing the market down”.  I had his property listed at $699,000 when the market was about $650,000.  We then reduced to $649,000 and the market had moved to around $600,000.  When we repositioned ourselves at $599,000 the market had moved to $575,000.  We put the property at $569,000 and the market had moved to $550,000. 

He commented that if he had listened to me originally he would not own the property, but he said he was “stubborn” and was trying to squeeze every nickel he could out of the property.  In reality, he had lost money because he was always a day late and a dollar short on pricing.  In our business we call that chasing the market down.  (more…)