What is an Energy Price?
Simply put, an Energy Price is a price that will clearly identify a home as the outstanding value in a community, or put another way, it will make it the most likely property sell next. Ideally, an energy price results in multiple competing offers that puts the Seller in the catbird seat.
How do you know your price is not an energy price?
- Few or No showings
- Lookers, but No Offers
- More than 2 weeks on the market with little or no activity
These three also may indicate that agents are using your home to sell alternatives on the market in your area.
- Feedback
- You have a deadline (job transfer, another home under contract, etc), and time is running out
- You can’t make the upgrades that competing homes offer
- The competition has changed. Competing homes have reduced their prices, but you haven’t.
How do we establish the price of a home?
The value of your home is almost entirely dependent on what someone is willing to pay for it, how much it appraises for, and how long you are willing to wait to find that person. Most sellers are not in the position to wait for the "ideal" buyer who will pay their "ideal" price. They want to find the optimum price at which their home will sell in a limited amount of time. Today, a market cycle is about 3-6 mos, and appraisers will give the greatest weight to homes that have closed within that time in determine the value range of yours.
Location is critical. Bear in mind that a community is not only determined by radius. For example, Coral Gables and Coconut Grove are adjacent to each other, yet they are completely different markets.
Then, we look at square footage, number of beds and baths, and lot size. Next, we'll want to look at amenities sought by buyers. An attached garage, a wood-burning fireplace, an updated kitchen and baths, and spacious rooms are among the factors that generally increase a home's value. Most buyers want good schools, proximity to work and lifestyle, and quiet safe neighborhoods. Any pluses or minuses in these areas will affect the price.
Perhaps equally important are your reasons for selling and how long you can wait. Typically, the most interest is generated in the first two weeks a home is listed. If you want to sell your home fast, you'll want to price it so that it stands out among comparable homes on the market (Energy Price). Sellers who try to hold out for the highest price in a fluid market like this one, however, usually regret it. We call that “Chasing the Market”, or as they say in boxing, “Leading with your chin”.
In the first two weeks, you will attract those buyers with the greatest level of motivation to buy; those that have a real need to act immediately. After that, you start to see investors, bargain hunters, and people who tend to look for signs of desperation. When an offer comes in, more times than not it will be a low ball offer. Then you have little choice but to negotiate the best deal you can.
Remember, it is always best to negotiate from a position of strength. For a Seller, that is when the house is fresh on the market, buyer interest is high and the Seller has the most amount of time on his side. The energy, therefore, favors the Seller.
Finally, sometimes time works against both Buyer and Seller. We have such a situation right now. As of October 1, 2011, limits on government backed home loans (Fannie, Freddie, FHA, VA) are scheduled to be slashed by act of Congress. For example, loan limits for FHA mortgages will drop $78,750 from $423,750 to $345,000.
What does this mean?
For Sellers:
- Less Buyers, Downward pressure on prices in all value ranges, as lender risk increases and rates likely go up.
For Buyers:
- Harder to qualify for loans, and less money available to borrow at a higher cost.
Remember, if interest rates go up 1%, principal must come down 10% in order to keep the same monthly payment. This hurts both buyers and sellers.
Therefore, if you are a serious Buyer or Seller, there is a window of opportunity that closes in about 75 days. Now is the time to act. If you are a Seller, Energy Price your home now to be the next one to sell in your community. If you’re a Buyer, there’s no point in sitting on a fence that may be collapsing under you. Act now.
We are in mid-July. Buying a home with financing takes about 30-60 days to close, short sales notwithstanding. On the outside, it will be the middle of September before you can close a deal you made today. Fortunately, my skills and experience has earned me the ability and reputation for closing your deal a lot closer to 30 days than 60. I'm here for you. Let me help.
Thank you for your time.
