Pricing of Homes
in the Current Market
All of us want to get top
dollar for our home when
it is time to sell. Of all the
tools we have to market
homes, the most important is the price.
Sure, price has always been important, but distressed properties such as "short sales" and bank owned properties have had a great influence on home prices the past few years.
Effect of Distressed Properties
For those that owe more than the market value of their home and need to sell at this time, the only option some may have, is to try to do a "short sale", where the lender agrees to accept a price lower than the balance due on the loan. This adversely affects the market price of all comparable homes, especially if the comparable home is not a distressed sale.
Loss of Equity
Those that must sell at this time and are not underwater with their mortgage are faced with a loss of equity...which can be significant. They have done everything right, but still are faced with competing with pricing influenced by "short sales" and bank owned properties.
There is some redemption in this scenario. If the seller is planning on purchasing another home, the new home will generally have a selling price also influenced by distressed properties, helping to mitigate some of the loss of equity in their home.
For those wanting to sell a second home it can be even more brutal unless the price is set for a fast sale. If the seller is not occupying the home while on the market, the costs of maintaining the home continue until it is sold. These monthly costs such as mortgage payment, property taxes, HOA dues, insurance, utilities, exterior maintenance and other miscellaneous costs rough average of $2,700/month, assuming a mortgage payment of $1,800. Even if the home is paid for there is a similar "loss of investment opportunity" as the original home investment is not available to use for other, and possibly more profitable, uses.