My wife stumbled onto a sale at a clothing store over the weekend and found a dress that had been priced at $750 marked down to $150, or something close to that. Don’t hold me to those numbers.
We both realized she bought a dress for $150 because no one wanted to pay $750 for it. The owner of the store was not feeling charitable but culling inventory that was not selling and cutting his losses.
That shop owner could not worry about the $750 price once he had reduced it because he knew that, at least on that item, he had missed his price.
That price was gone. It did not work and he sold it for a price the market would bear. A veteran of numerous years of selling, he knew as Don Schlitz wrote, “know when to hold ’em and know when to fold ’em.”
Unfortunately, and somewhat understandably, homeowners cannot do this. When a house is priced, that original list price is indelibly tattooed into the lobe of the brain that houses the memory. That is the price for all eternity.
The fact is that if any house does not sell it is due to price, condition or location, and in some cases a combination of the three.
Suppose a house is listed for $550,000 and has no showings for several weeks. If the Realtors are not showing the house to their buyers, there is a reason.
Occasionally, Realtors are not aware of the buyer’s true desires, the old “Buyers are liars” syndrome.
One way for listing agents to combat the buyers’ agents’ unintentional and unorganized boycott is to hold open houses in the hope that an unrepresented buyer will appear or that a buyer whose agent did not feel the home was a fit for her client may wonder into the abode and fall in love.
Those things happen and can result in sales.
However, if there are no showings after several open houses, the price should be dropped.
In this $550,000 home, the price should dip below $500,000 to garner the attention of real estate brokers. So let’s say the listing agent and the seller agree to drop the price to $499,000.
Again, there are few showings and no offers.
Finally, an offer appears for $450,000. The first response by almost every seller in this scenario is: “That’s $100,000 under list price.”
It isn’t, of course. It is $49,000 less than asking price, but don’t think for a minute the sellers are going to buy that. None do. OK, maybe 5 percent do.
The problem is that the home, like the dress, was never worth the list price. Both needed to go on sale to sell. The market sets the price.
What makes one home better than another home or one dress better than the other? Whatever it is, it is real, and unless the clothier wants to use the space on the rack to wait for the one buyer that would pay $750 for the dress, he must reduce the price to free the space so that he can replace it with something more sellable. He must then repeat the process a few times in order to earn the money back he might have lost on the $150 dress.
It is more complicated in the case of homeowners as the extra cash is a higher amount and may be necessary to provide the cash for the purchase of the next home.
Most homeowners and agents like to believe the house will sell for list price the first day on the market. As the owner deducts selling expenses and determines his net profit, he begins to make financial decisions based on the number of a first-day, asking-price sale.
As that amount is lowered, the dreams begin to evaporate. No, that student loan will not be repaid, nor will the car note, and the MasterCard balance may not improve.
The next house shrinks by 15 percent in size and moved from 12South to Sylvan Park, which is not a bad move.
This can be devastating. The other option is to wait. Luckily in Nashville, prices continue to rise as evidenced in the example below.
Sale of the Week
Condominiums have flourished since the Great Recession in a time when less is best and urbanites have flocked to the land where automobiles ownership is unnecessary.
Tony Giarratana’s Encore, his encore to the wildly successful Viridian, is no exception.
Last week, Kel Williams – who opted not to go with Keller Williams, choosing Exit Realty instead where he and partner Misty Hargis own The Gulch edition of Exit Realty – priced his listing in the Encore at $635,000 and sold it in one day with Becky Sullivan and Danell Thomas, both with the Weichert, Realtors firm, owned by the venerable Tom Andrews, bringing the eager buyer.
Located on the 12th floor, unit 1205 has 1,184 square feet with two full bedrooms and two full baths. Williams described the home as having sweeping balcony views – the Etch side of the Encore stares smack into the new Bridgestone building. So, for now, Encore has a great side made for people who enjoy views of downtown and the Cumberland and a good side for those who might wonder what is going on at Bridgestone.
One of the home’s bathroom has double vanities, separate shower and tub. The home also has a walk-in laundry room, pantry and the typical granite and stainless steel kitchen. The building boasts a large fitness center and a pool.
Encore has proven a sound investment. This unit sold for $376,250 in 2009, during the Recession, then for $480,072 in 2013 and for $635,000 last week.
With any Giarratana project, the sky is the limit. At least so far. Infinity and beyond could be next.
Richard Courtney is a real estate broker with Christianson, Paterson, Courtney, and Associates and can be reached at [email protected]