We were in a similar, but somewhat reverse situation earlier this year. Our plans were to accelerate our sell date and downsize for eventual retirement. Although we purchased well before the bubble and would have recovered our investment plus some, the decline relative to the 2006 peak was still hard to reconcile.
Here’s a brief summary of our experience.
We had planned on interviewing several realtors including a few on this site whom I would recommend consideration should you decide to sell. I’ve read their posts on and off for the past 2 years and find them very knowledgeable on local neighborhoods, measured, and usually balanced unless trolled into no win arguments. Unfortunately, my wife mentioned our intentions to a friend and before you know it, we were inundated with calls. We eventually selected with a local, top producer who was an acquaintance. Only real issue was asking price as we settled on a price higher than what this person recommended.
We received the most activity within the first two weeks. After that, the traffic dropped precipitously to probably 1 showing per week. Of interest was that 70% of the potential buyers surveyed thought the house was priced at market value and 20% thought it is was above market value. Unfortunately, the offers we received were all extreme lowballs, which we promptly rejected usually without any counteroffer. With respect to buyer profile, 40% were Asians who knew the local market inside out and probably go around making lowballs hoping one would bite. 30% were out of state professionals relocating to SD.
I think the biggest frustration for non-distressed sellers are the comps being biased low due to short and foreclosure closings. It’s unfortunate for sellers that comps are based on sales price rather than the appraised value. For example, if a foreclosure appraises at 500K but a shrewd buyer negotiates a deal at 400K, a follow on buyer for a similar house will baseline his purchase price at 400K, not the correct 500K. In effect you have a circular death spiral in home prices to the benefit of the buyer. For this reason and others, some homes have overcorrected as basic purchase metrics such as rent to PITI parity have been mutilated beyond recognition. Imo, the smart money began leaving the herd in late 2008 when fear was high, competition light and quality abundant.
Another interesting development was that many of our neighbors immediately assumed we were in financial difficulty and readily offered up all kinds of advice ranging from loan mods to rent with option to buy. In retrospect, the buyers probably made the same assumptions. Eventually we pulled the house off the market and will stay put until this storm passes. If you decide to sell your 720K house, be prepared for offers as low as 600K. Good luck.
