Joe Wilson's Silicon Valley Real Estate Blog

We've been into the current market downturn for well over a year now so both Buyers and Sellers have gotten somehat used to the new dynamic. What's stiil (and often) an issue for Sellers though is understanding the psychology of Buyers and using that understanding to properly set the sale price for their home. A Realtor's job is to bring that knowledge (and experience) to bear in order to guide the Seller in setting the right price. What is the right price? Quite simply, it's the current market value of the home...the price that a ready, willing and able Buyer is willing to pay assuming that the home has been adequately marketed and shown to a sufficiently large group of said potential Buyers.

Now the process for determining the current market value is both objective and subjective. Objective in that most Realtors have one or more analytical processes for estimating the current market value. Subjective in that a Buyer's emotions can often have a large influence on how much they're willing to pay for a particular home. For instance, a home within  a short drive of the Buyer's place of employment and perfectly staged to look like a model home can often command a higher price than an objective, comparables-based analysis would indicate. Conversely, a home with a unique issue like noise from a freeway or a neighbor with a few inoperable cars parked in the front yard can have a highly depressive effect on market value. The point is, the experienced agent can usually arrive at a fairly tight range for the estimated market value, but the only way to know for sure is to expose the property to the market.

No Seller wants to leave money on the table so the initial listing price is usually set at the high end of the estimated market value range. Then, if the agent's marketing is effective, the home will be exposed to a number of prospective Buyers looking for a home of similar size, neighborhood, condition and of course...price. So how does a Buyer decide which of the many homes on market to place an offer on? They look at everything on the market that meets their criteria (which may take weeks or months) and then choose the best home at that particular price point. They don't make offers on the third or fourth best home at that price point even though the Sellers of those higher priced homes might be willing to negotiate a lower price.

So, here finally is my point: If you're a Seller in this market you must understand that there are only two reasons a home doesn't sell...poor marketing or too high a price.  If you're getting a reasonable number of showings in the first 3-4 weeks of listing then the marketing is adequate and doing its job. If, on the other hand, those dozens of showings haven't resulted in an offer after 30 days or so, that's a clear indication that your home isn't among the best few homes at that price point. Your choices then are pretty clear- improve your home so it moves up in rank at that price point, reduce the price so it's among the very best homes at the new price point or...wait for a better market. It's really that simple. A Buyer doesn't care how much a Seller may need for his home; he only cares that he's getting the best possible home for his money.