- The Washington Times - Wednesday, June 14, 2006

When it comes to pricing your house to sell, keep in mind: You must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago or what the sellers of other properties are asking. All that matters is this: The most recent sales price of your model in your neighborhood is probably your sales price.

When you’re looking at what you’ll gain on the sale of your house, let’s keep it in perspective.

If house prices increased year after year at 4 percent per year and then suddenly people were selling their houses for 1 percent less than last year’s asking price, would that be reasonable? If so, when property is moving up at 20 percent per year for several years and then suddenly you have to sell for 5 percent less than last year’s prices, would that be reasonable?

The challenge is when we move from percentages to dollar amounts. If 5 percent represented $5,000, most people wouldn’t blink. It’s when 5 percent represents $25,000 that sellers start to freak.

In the Washington area, we were experiencing astounding rates of appreciation — as a region, 20 percent from 2004 to 2005. Many homeowners experienced a doubling in property values over the past five years.

The average home price is about $540,000, according to the local multiple listing system. Now price appreciation has subsided and is sitting at a mere 5 percent to 8 percent regionwide (depending on where you’re standing). Still sounds pretty healthy, right? You would think.

There are stories from the field, however, about how sellers are defending their prices as if their lives depended on it. Though sellers are sitting on hundreds of thousands of dollars in equity, they can’t stand the idea of dropping their price by $25,000 or $50,000 to sell their properties. The house that cost $260,000 in 1999 is selling for $569,000, but some sellers still want that same appreciation and can’t imagine selling for less than $589,000. Bringing the price down $20,000 or $40,000 seems, well, just not fair.

What’s even scarier is the agents who are defending their prices in a correcting market. I have to keep in mind that nearly half the agents in the country (as well as locally) were not in business five years ago. They just now are entering a market where prices have to be corrected.

However, as I talk with agents around the region about their listings, they’ll be the first to let you know, “It won’t sell for what the seller’s asking,” but they’re too afraid to tell the seller the sobering news.

Being in the market is like playing Russian roulette. Sometimes you don’t know what you have until you pull the trigger. Somebody needs to blink. Sellers seem to be saying to buyers, “I’ll drop my price; just make an offer.” Buyers are blankly replying, “I’ll make an offer; just lower your price.”

This stalemate has played a part in creating an abundant supply of houses. We’re talking upward of 200 percent more homes on the market in any given year-to-year comparison. After a dearth of homes in this area, that’s good. Is it affecting prices? Will prices come down? Absolutely. Are sellers going to lose money? In some cases.

Sellers staying in the same area, keep in mind, if you have to drop your price by 5 percent, the seller of the house you’re buying (usually a lot more expensive) probably will drop the sales price by about the same percentage. It means that though you may “lose” money on the sale of your home, you’ll more than likely “gain” it on the purchase.

The market is the market. When it’s time to buy, buy. When it’s time to move, sell. Work with the market you’re in, not in the market you wish it were.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions and comments at his Web log (https://commonsenserealestate.blogspot.com).

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