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Price Positioning is Crucial:

As has been observed, 75 percent of for sale Santa Monica homes eventually sold in years gone by, regardless of their original list price. This was often due to a strong upward moving market which resulted in increasing values that eventually got close enough to what otherwise was frequently an over-priced listing.

Buyers today are far more cautious and conservative than they have been for many years. Lenders are using very strict standards for approving loans, and their underwriters often seem to throw “roadblocks” up late in the escrow process. Thus the entire sales process is more challenging than it has been for many years.

In today’s world, accuracy of pricing is far more important, especially since only about 50 percent of the homes now for sale might succeed in being sold. Are there any guidelines for setting a price that will not result in under-selling or “leaving money on the table,” yet will assure a high probability of success?

Experience has shown that if one had a crystal ball that could predict what price the home would sell for, the ideal price position to start with would be at a level that would allow about 2 percent latitude for negotiating. One of the keys to making an accurate price decision is to fully understand the very local price trends at that moment in time, and to price just ahead of the current market trend.

For example, if prices for very similar homes and in that particular neighborhood are increasing at an annual rate of 5 percent, it might be wise to set the price on a new listing at approximately 3 to 5 percent above the current average market sales level. On the other hand, if the market is decreasing at an annual rate of 3 to 5 percent, it might be wise to set the price on a about 2 to 3 percent below the previous average market sales level. This would assure that the owner will most likely have a sale much quicker and with much less negotiation needed. If the pricing is off the right mark by 10 percent or more, it might result in not being able to sell at all… or a sale that takes much longer and ultimately is at a lower price. Studies confirm that sellers receive more money when their initial price is right to begin with.

In 2010, 34 percent of the Santa Monica homes that were sold had price adjustments before being sold. As of Dec. 13, more than 40 percent of the homes listed for sale have already had price adjustments.

Another factor involved is that the current market has become even more “neighborhoody” in price dynamic. Thus it is most helpful to work with an agent who truly has a high level of expertise in calculating the marketing value. For example, the price movements north of Montana are quite different then those of Santa Monica as a whole, and this would necessitate handling these issues differently. Also, price movement for condominiums might not be the same as homes nearby.

For those considering placing their homes on the market, it would be highly beneficial to talk with at least two real estate experts before setting a price level and deciding with whom to entrust the marketing and escrow management processes.

For the past 25 years Michael Edlen has provided real estate counseling services to prospective buyers and sellers. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.

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