One of the common activities all real estate agents engage in is preparing a market analysis of an existing home that a potential seller is considering putting up for sale. Most sellers will have more than one agent prepare an analysis, and they should do so.

The "Listing Presentation" is a primary activity most real estate agents seek to continually improve their skills in doing. Having been in this industry for a dozen years, I am amazed how many sellers get pulled in by a slick sales pitch, and then live in frustration with an silent, absentee agent. A hard working, professional, knowledgeable, ethical agent is unfortunately rare, and hence worth what they charge.

Common Misconceptions:

1) Prices of other homes for sale in the area are an important indicator of our home's value.
2) Custom or unique items in our home make it worth more than comparables in the neighborhood.
3) There is no harm in starting the price "a little" high just in case someone comes along and is willing to pay it.
4) I am capable of being objective about my home - its decorating, furnishing, presentation.

Observations on the above Misconceptions:

1) Homes in the Twin Cities in 2007 sell in an average of 60 days +/-, depending on exact zip code. "Actives" are simply homes that are for sale, and may or may not have any correlation to your home's value. Recent "solds" are the only true reliable indicator of local values. A lesser known indicator is "canceled" and "expired" listings - it will show what an overpriced property looks like.

2) We ALL think we have the best home on the street because we have the best lot-biggest garage-nicest kitchen- . . . . Experience has shown that there is very little difference in the eye of a buyer (especially in a slow market) on most things sellers think are priceless. This is especially true if you bought your home when new. Many new home upgrades, lot premiums, and custom options are practically worthless in a resale home environment. You may have spent $4,000 for a unique fireplace mantle treatment, but most buyers won't pay a dollar for it. If you have remodeled or upgraded your home in an unusual manner, the money you spent may not recoverable. If comparables in your neighborhood all have vinyl floors in the master bath and you have put in ceramic, it may help you sell faster, but not likely for more money.

3) Facts consistently prove that homes which are overpriced take longer to sell AND bring less than similar homes that were priced correctly from the starting point. In the 2007 slow real estate market there are no over-anxious buyers who are buying homes on an impulse and paying inflated asking prices. On the contrary, buyers are viewing more properties than ever before and making careful, well thought out decisions.

Correctly priced homes in today’s market, that sell with no price reductions, average 45 days. Homes that require 10% or more in price reductions take well over 120 days to sell - AND net less.

4) We have all decorated our homes in a manner we like and are proud of. Our home is an extension of who we are, and we naturally assume others will have the same warm, emotional, and positive feelings about it. This is why we think it is worth more than it indeed is - because we are emotionally attached to it.

MESSAGE:
A good market analysis is crucial in a tumultuous market. An agent must understand the uniqueness of your property, but have the experience and fortitude to price your property right from the start.

LESSON:
Homeowners emotional attachment to their home prevents them from objectively assessing an accurate picture of what it is really worth to prospective buyers.

OBSERVATION:
The free market forces are efficient, and ultimately any home is only worth what a willing-able-motivated buyer is willing to pay in a given time period. With new designs, technology, and even globalization of building materials, new construction continues to apply competitive pressure on resale homes. With the changes in the market the past two years, you do not get to sell at 2005 prices AND buy at 2007 prices.

Thanks for reading.