Don’t let the South Lake Tahoe Real Estate Market Get Ahead of You.

June 27th, 2008 categories: About Us, For Buyers, For Sellers, Lake Tahoe Real Estate, South Lake Tahoe, CA, Tahoe Keys

South Lake Tahoe Real Estate: Take control of the market.

Playing Catch-Up in the South Lake Tahoe Buyers Market Can be Risky Business.

Other than up-to-the-minute information about your South Lake Tahoe real estate market, perhaps the main focus of our real estate seminars is a discussion of the risks of letting the real estate market get ahead of you.

The idea of a real estate market getting “ahead” of somebody applies normally to a Seller. It bespeaks a lack of control, which results in market forces controlling the outcome of a sale, rather than a Seller controlling the process from the get go.

This article has 3 main sections :

1. How does a seller control the market?

2. An Example to Avoid.

3. How to value a home properly (knowing the reasonable range)?

We will do a separate post about Market Control and the Buyer above this one.

(click “read the rest of this entry” below)

South Lake Tahoe Real Estate: Take control over the market.
How does a seller control the market?

It’s rather simple. The 5 key factors that determine a home sale are: Location, Condition, Price, Size, and Age. Of these, a Seller has no control over location, or size, or age. But a Seller does have control over condition and price.

A Seller controls the market by making sure a home is in the best condition possible, and by setting the best price possible based on current market conditions.

In a buyers market, one like we have now, the idea of putting a house on the market at a higher than reasonable price… “to see if we can get lucky” is one to avoid. It is that idea, and others like it, that costs Sellers time and money… every time.

Perhaps the worst idea, the one that immediately gives up control to market forces, is this one: “we can always drop it later if we have to.” What this idea always amounts to is the rationale for a Seller to list their house above the reasonable range, rather than starting out with the best price possible.

It is also the beginning of playing market catch-up. Big time.

 
A Good Example to Avoid:
Here’s what “we can always drop it later” thinking can lead to. Less, not more. This example summarizes exactly what we mean by the market controlling a seller. It was heartbreaking for the family involved, and for us too because we care so much about them.

We are resolute and determined on doing everything we can to make sure our Seller’s don’t get caught in the trap of losing market control and reducing later, and reducing later again, and reducing later again after that, and so on. This is what happened, and what getting caught in a market trap really means below:

South Lake Tahoe Real Estate: A lower price will get you more in a buyers market.We listed the house in the Tahoe Keys in May, 2006. The numbers revealed it should have been listed at $1,395,000. We suggested that price and reminded the Seller that we were post-Katrina and the market had changed. The Seller insisted on over listing it at $1,495,000.

The Seller put the house on an aggressive vacation rental program, which made the house difficult to show in the peak periods when people are most likely to come into town. (They needed the money.)

Not long after putting the house on the market, we got two different “temperature read” calls from established agents. Both were testing the feasibility of purchasing the house at $1,200,000. We encouraged that the offers be written, and thought we could likely negotiate at least one of them higher, but Seller instructed us to say that he would reject that price. As a result both offers failed to materialize.

The summer of 2006 came and went, and the property was so heavily rented we could rarely show it until after labor day. From the steady stream of vacation renters, the condition of the house, mostly cosmetics, declined as a result.

After labor day we asked the Seller to reduce his price. He declined.

In the spring of 2007 we got another verbal offer at $1,200,000. Again the offer failed to materialize due to the Seller’s instructions.

We again asked to Seller to reduce his price, and he finally did, reducing it to $1,395,000. We extended the listing for another year. But by now, it was a year too late for that price. The market had continued to change. The right listing price now was $1,250,000.  The Seller was behind the market; it controlled him, and all he was doing now was playing catch-up, rather that getting ahead of the market with adjusting to the right price.

The summer of 2007 came and went, and again the house was heavily rented, almost impossible to show, and the cosmetics continued to decline. We were finally able to show the house more easily after Labor day, yet to no avail. We got the Seller to reduce his price again after that, to $1,295,000, but the market had continued to change, and once again the South Lake Tahoe Real Estate: Don't play catch up with the market. It'll cost you.reduction did not put the Seller in front of the market; he was still playing catch-up.

Before the end of 2007, we reduced the price again to $1,249,000, and again no interest was sparked.

2008 did not start out with a bang with sales in the Tahoe Keys, the Sellers neighborhood. There were none for more than 4 months, which has never happened before. Obviously the market was continuing to correct. And increasingly our Seller needed to sell.

We reduced the price again in January to $1,199,000. There were a few showings, some inquired interest, but nothing materialized.

We got the Seller to agree to take the home off the vacation rental program, and then got bids on what it would take to bring the house back to tip-top condition. It was $20,000, or about half of the net vacation rental income from the last 2 summers.

We reduced the price again in March to $1,099,000. We got our first offer in May, one for $900,000. It was a fishing expedition from a Buyer making offers on multiple houses at the same time, a real bottom-feeder. But I had compelling comparables for a price at about $1,050,000. That price was too low.

We were still trying to negotiate that offer, seeing if we could settle it at $1M (the Seller's family was in dire straights), when a week later we got an offer for $1,015,000. We negotiated that up to $1,030,000 and settled there. To make the deal we eventually had to give up $16,000 of the $20,000 we were prepared to give up for repairs and cosmetics.

While we were in escrow, the first Tahoe Keys single family sale of the year closed. It was a larger house than that of our Seller, although a bit older, yet in good condition. It sold for $895,000. We were aghast. This was not a good sign, but one that may have been overlooked by both the agent representing the buyer and the buyers themselves.

The house closed last week. At $1,030,00 with a credit for repairs. But here’s the heartbreak: we could have sold this house a year and a half earlier at $1,250,000. (But here's good news too: that house could have stayed on the market even longer… and sold for even less.)

But not getting ahead of the market, and losing control due to overpricing, our Seller, and his family and children, lost more than $200,000. Please, do not let this happen to you.

How to value a home properly (knowing the reasonable range)?

This is rather simple as well. It takes a real estate agent you trust. And all of the numbers (it’s not what most agents call a “CMA”). See what we mean by all of the numbers here.

If you don’t already have an agent you trust, please call or email us.

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This entry was posted on Friday, June 27th, 2008 at 2:34 pm and is filed under About Us, For Buyers, For Sellers, Lake Tahoe Real Estate, South Lake Tahoe, CA, Tahoe Keys. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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