Coastal Florida Real Estate

YOUR VALUE PROPOSITION IN A DECLINING OR SOFT MARKET

Sunday musings on the value proposition in today's soft real estate market.

No matter what you are selling, unless buyers perceive value...a lot of value, they will not make that purchase.

Several strategies exist to improve the value proposition that could trigger a sale. First, improve your own appeal through the use of framing the property.  To put it another way, Miller Lite knows this and positions their product with, "Tastes Great & Less Filling".  Once you've done all you can on your end, then you have to relate to the other properties on the market that are your competition......The Train.

See if this analogy makes sense.  A train is moving down the tracks. This represents our real estate market.  You are trying to get safely across the tracks.  The only way to do this is to outrun the train and get to a crossing.

If you only keep pace with the market, you will not have the chance to make it across the tracks.  Likewise, if you only keep pace with the market, you forfeit the value proposition and commoditize your home.  Once this happens, the commodity with the lowest price wins.

It can be shown with statistics that the quickest way to a bigger net check is to price your property accurately in the beginning.

Where do these listing prices come from?

As I've posted on this blog and my other one so many times, the numbers don't lie.  Every aspect of our life is dominated by numbers, ratios and the like.  Don't believe me?  Watch the evening news and listen to all the numbers reported.

So, when pricing a property it always make economical sense to hit the sweet spot of the market.  It can be proven statistically that the quickest path to the biggest net check comes from correct pricing.

"Pay no attention to the man behind the curtain"

In the Wizard of Oz, Toto pulled back the curtain to reveal the truth about the Wizard.  I often think that real estate jargon, learned on the job from other agents, camouflages the truth about selling houses or selling anything. 

Your value proposition will determine if the buyer thinks it is appropriate to make the purchase.  Although lifestyle may dictate where clients focus their search, it will be value that determines what they buy.  And even with all the amenities our club's offer, overcoming price is the biggest hurdle of all.

Why would I say this?  Well, just north of Tequesta, Burt Reynolds has had his 3 acre, waterfront estate listed for several years.  It was originally listed at over $ 15 million and is now priced in the $ 8.5 million range. Take a look at the property below.

The rear of the house isn't too shabby either.

So, what's the point of the story?

The two most expensive properties listed for sale in Jupiter/Tequesta are asking close to $ 1,000 per foot.   One is very close to Burt's place, which by the way is across the Intracoastal from where Tiger Woods & Celine Dion are building on Jupiter Island.  It's 13,000+ feet in size. If Burt can't find a buyer at $ 717 per foot, where is the buyer going to come from that will pay $ 1,000 to live in the same area?  By the way, Burt's place has no neighbors on the north side where it meets Jonathan Dickinson Park.

The other $ 12 million dollar plus home is in The Bear's Club, Jack Nicklaus' golf club in Jupiter.  The Bear's Club shares the land with the Ritz-Carlton and is within a mile or so of Frenchman's Creek, Frenchman's Reserve and Admirals Cove.  This home is about 12,000 square feet.

Pricing "one of a kind" properties is very difficult so I would submit that when putting one of these up for sale, it would make sense to invest in 2 appraisals and then add to this a hard, number crunching analysis to determine where the market is likely to be.  Of course, you could always get lucky.  But, I believe, HOPE IS NOT A SUCCESSFUL SELLING STRATEGY.

What do you think?

According to the FAR:

Florida’s existing home sales rose in October, marking 14 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®. October’s statewide sales also increased over sales activity in September in both the existing home and existing condominium markets.

Existing home sales rose 45 percent last month with a total of 15,160 homes sold statewide compared to 10,444 homes sold in October 2008, according to Florida Realtors. Statewide existing home sales last month increased 5.1 percent over statewide sales activity in September.

Florida Realtors also reported an 82 percent increase in statewide sales of existing condos in October compared to the previous year’s sales figure; statewide existing condo sales last month rose 6.1 percent over the total units sold in September.

As we continue to explore the dynamics of pricing strategies there are always cases that support this to share.  And in contrast, I can show numerous cases where that "really special house" with the shelving in the garage and laminate flooring that has been sitting on the market for months....or years.

So, here's this morning's example of good market positioning.

This 7,000 square foot house with 5 bedrooms and 7 1/2 baths  went on the market in October 2007 at $ 5.9 million.

It's located on the Loxahatchee River in a spot called Anchorage Point, one of our best riverfront spots.

After 6 months, the price was reduced by $ 1,000,000.

After another 10 months on the market, the price was reduced another million.  And POW, three days later it was under contract.

Now, you could postulate that the buyer suddenly surfaced that made this purchase but I would submit that this buyer did not make a snap decision and had been shopping.  The buyer, NOT THE SELLER, knew what was on the market in this price range.  When the seller reached this same conclusion, a sale was made.

Dynamic market positioning will get your house sold.  Remember,

HOPE IS NOT AN EFFECTIVE SELLING STRATEGY!!

The FAR published this information on foreclosures:

The number of homeowners on the brink of losing their homes dipped in October, the third straight monthly decline, as foreclosure prevention programs helped more borrowers.

But foreclosure filings are still up 19 percent from a year ago, RealtyTrac Inc. said Thursday, and rising job losses continue to threaten the stabilizing trend.

More than 332,000 households, or one in every 385 homes, received a foreclosure-related notice in October, such as a notice of default or trustee’s sale. That’s down 3 percent from September.

Banks repossessed more than 77,000 homes last month, down from nearly 88,000 homes in September.

Read this again, isn't this just a decrease in the rate of increase?

Reminds me of the news that Toll Bros.puts out. Cancellations are down.  Is this good news?

Only in the context of more total contracts being written.

Hope is not an effective selling strategy.

The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.

The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help. In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.

“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”

Recently, I posted on my website an observation that baseball coaches are calm and football coaches aren't because football is haphazard and baseball is a game of statistics.  In baseball, they know that numbers tell the story and analyze everthing out as far as three decimals places.  They don't say things like, "I think he's a pretty good player", they just look at the numbers.  Trades aren't based on what coaches think, they are based on the numbers.

So, when choosing a real estate agent did you get a thorough, statistical analysis of the market (like an apprasier would do) or did you get a boilerplate CMA with some nice pictures?

Think about it.

Hope is not an effective selling stategy.

Stan Humphries, chief economist for Zillow.com:

We haven’t seen much of an effect from the loan modification programs from the government. It’s possible that individual lenders in South Florida are working with borrowers to prevent foreclosures, but I don’t have any first-hand knowledge of that. Nationally, we do know that there are 1.4 million homes that are seriously delinquent but haven’t entered the foreclosure process and another 1.5 million that are currently in the foreclosure process but haven’t yet been foreclosed. That’s almost 3 million homes potentially headed for foreclosure – a big number considering annual home sales are only 5 million. The prevalence of foreclosures will vary by market, but it is clear that nationally, we’ve got a lot more foreclosures ahead of us.

If you've got a house out there to sell, you better think about this very seriously.

Remember, Hope is not an effective selling strategy!

To paraphrase Larry the Cable Guy, "Git 'er sold"

Richard Sites
Realty Associates-FL Properties
rsites@coastalfloridarealestate.net
www.CoastalFloridaRealEstate.net
561-762-4073