Selling in the post-Katrina market.
(Note: this article is still true for many, but not all, neighborhoods in Silicon Valley.)
Hurricane Katrina hit the Gulf Coast over a year ago, on the morning of August 29, 2005. Our real estate market still hasn't recovered.
It's tempting but risky to link a market's decline to a natural catastrophe. The Loma Prieta earthquake of October 1989 is blamed for stopping the late-1980s real estate boom, when in fact the market had been slipping all that year. Sometimes milestone events like this are just the exclamation mark to the end of an era.
But whatever the reason(s)−rising rates, higher oil prices, shaken consumer confidence, perhaps even the psychological effect of seeing so many homes destroyed−local home sales dropped off in September 2005, at a time when they usually surge back from the summer doldrums. That's been our market ever since, with minor seasonal variations. It's not a bad market, but it has changed the rules for sellers.
Now, more than ever, sellers need to look at their home with a critical eye, because that's exactly what buyers are doing. Sales are down 17 percent in San Mateo County and 30 percent in Santa Clara County, and while 2005 is a tough act to follow, sales are just part of the story. Buyers are far more selective these days, "cherry picking" homes in move-in condition and ignoring the rest. That's one reason sales prices haven't declined, even though sales numbers have. It's also why what I call the "failure rate"−the percentage of homes taken off the market unsold−nears 50 percent in some areas. Buyers no longer grade homes on the curve; now it's either "pass" or "fail".
Time-proven, cost-effective enhancements like painting, re-carpeting and staging are more important than ever now. Yet I still see sellers who won't even clean the carpeting, let alone replace it. This isn't March 2005, and that kind of I'm-doing-you-a-favor-now-buy-it attitude won't cut it. Neither will a worn-out roof or thousands of dollars in termite damage.
What else has changed? Today, sellers need to be more open-minded about offers. I've seen sellers indignantly turn down a decent offer that in a few months they'd happily accept if they could still get it, and they can't. Does this mean that sellers have to throw in the towel and accept the first offer they get? No, but it does mean that the first offer is one they should try to work with, because it may the best they'll get. Listings don't age gracefully.
It may also take sellers longer to get that first offer. The length of time a house stays on the market has doubled since the boom's peak in early 2005.
Made it into contract? Congratulations, but be prepared for the buyer who wants to renegotiate during the contingency period and is willing to walk if you don't. Not only do buyers sense that they have more control these days. With all this bubble talk, buyers in contract feel like they've gone out on a limb, and a concession or two will make them feel more secure. Whether or not you make concessions is up to you, but holding firm to save a few thousand dollars now may end up costing you a sale and tens of thousands of dollars down the road.
copyright © John Fyten 2006 Site Map Home