Looking for honest suggestions and strategies for selling a condo in this tough market

[dalsik]

I have been following this and other like-minded RE web sites for over a year now in anticipation of selling my condo. The discussion on these Boards seems to focus a lot on future market and economy trends but I haven’t found much discussion on strategies and questions to ask my Realtor concerning selling a condo right now.

Now I realize that a good Realtor should have strategies in place and be able to answer a seller’s questions and concerns but how can I really know that mine is doing a competent job? She can say that she’s marketing the heck out of my place but how would I know that the 13-16 or so “showings” I’ve had in the first 45 days on the market came from her signs, flyers, news/web ads, etc. and not from Buyer’s Agents finding my condo listing in the MLS? Are ads on Craigslist or in the Reader or the UT very successful? Do Open Houses really only bring in 1% of the Buyers? Would it be crazy for me to consider “Condo for Sale” advertising on my car?

My Realtor told me back in June that the average time on the market for a condo in my area was something like 70-90 days. I can’t remember the exact time but her average was more precise within that range. I’m assuming that avg. time on market has been increasing over the past 6-12 months so until I catch that magical number it seems to me I’ll have to keep adjusting my price downward (or adding incentives which seems to be popular with the condo conversion and new housing folk) in order to stay competitive with the other condos that have been on the market longer and have thusly already lowered their prices one or more times. You following me here?

So is there a way to figure out how selling prices have been trending vs. number of days on the market? Would knowing that give me an advantage or at least give me an idea how many weeks or months I have until I have to ask my Realtor the question, “At what price would I have to list my condo in order to pretty much guarentee selling it right now”?

The talk around these Boards has sometimes felt a bit doom-and-gloomy but I have definitely appreciated the frank and open discussions that have been taking place here that the media and some Realtors are only now just beginning to talk about.

I look forward to the plethora of advice.

[lendingbubblecontinues]

dalsik-

Peak buying/selling season is over. You need to ask your Realtor that question about “what price” to “pretty much guarantee selling it right now” immediately. If you don’t, you can pretty much guarantee staying in it through the winter and into next spring, when this market’s drop should really begin to accelerate.

good luck

[La Jolla Renter]

Do you have some equity? Are you upside down?

I assume there are a lot of condos up for sale in your building. I also assume that many have been on the market for some time. The bottom line… You have to have the best deal and a better agent then the rest of the listings in your building and surrounding buildings. If a 100% identical condo just sold in your building in the last 30 days, you probably need to be 5% to 10% below that number if you want an offer immediately.

[davelj]

Ditto La Jolla Renter’s suggestion. You need to be at least 5% to 10% below the closest comps for both recent sales and current listings. Otherwise you’re going to chase these prices downhill over the next year or more.

An Example:

I have a friend that lives in Carlsbad in a fairly typical condo development. She put her unit on the market six months ago at $410K (she bought it in 2000 for $180K) because two units had sold above $400K in mid-2005. There were four other units for sale priced between $360K and $400K, but hers has a very nice view and more upgrades. She got an offer early for around $405K but it fell out of escrow because they had an argument over closing costs. Big mistake. Six months later she’s offering her unit at $360K and the other four units are priced between $299K and $340K. Nothing’s sold in a year. She hasn’t even had a lowball offer in months. My guess is she’ll end up selling this thing next year sometime at around $325K and the others will clear between $275K and $300K, still all modestly overpriced by the way. If she had just listed it at $380K six months ago it probably would have sold. The point: Don’t be her.

[Diego Mamani]

I agree: don’t chase the market down. Painful as it may be, this is really a no brainer: price it a good $5K to $10K below comparable listings, and make sure you offer a buyer’s agent commission that is competitive (not necessarily the highest, but above average).

You may think that an X price is too low now. Just wait until next spring or summer, it’ll be even lower.

[PerryChase]

What? You’be been following this board for one year and are only now selling? Why did you hold off?

[SD Realtor]

Hi dalisk – I will try to address your questions…BTW this is SD Realtor not sdrealtor.

First off – You can verify the source of the buyers agents coming by through calling them directly and asking them. Most of them should have left cards. Simply call and ask. Unfortunately many of them may not remember so you may want to do that as soon as they come by. Altenately you can have a sign in sheet so that Realtors actually sign in when they show your home and leave thier contact information. That way you can call them if they do not leave a card. Also you can have a column that asks how they heard about your home. This will help you identify the sources of contacts. Finally if your home is on lockbox, your realtor can send you every agent that has entered your home (via lockbox) as the lockbox records when an agent uses it. Again, once you have that information you can do the legwork to check out what advertising means has been most effective.

In this slow market my personal advice to you is to try anything. Nothing is “crazy” in a slow market. Personally I have found that the MLS is best as it also will be farmed out to all internet MLS providers such as realtor.com and the others. If you are employing a full service realtor make sure they are having brokers tours for your home. IMO open houses provide more buyers leads for agents then buyers for your house. However I encourage my clients to hold them. All it takes is one buyer to hook. Again though, I don’t find them particularly useful but in this market TRY ANYTHING.

If I were you this is what I would ask my agent to send…

1 – A listing of all active and pending condos that are comparable to yours. Cover a decent sized radius, perhaps even your zip code as a who.

2 – Grab all of the solds, expireds and cancelleds as well that have come off the market since June 1.

3 – Take a look at the ratio or pendings to solds.

4 – Take a look at the ratio of what sold verses what fell off the market.

Here is an example. Lets take 3 bedroom 2.5 bath condos in Carmel Valley. Currently there are 52 Actives and 3 Pendings. The price ranges for the actives are (loosely stated 489k for the cheapest listing low end and 695k for the most expensive on the high end) Also the 3 pendings are at 499k, 509k and 529k respectively)…

Now looking at more information…Since 6/1/06, 45 properties have come off the market in the entire zip code. 7 of them were solds, 15 were expireds, 16 were cancelleds, and 7 were withdrawn.

Okay lets analyze the data. 3 pendings, 52 actives… NOT GOOD. Less then 1 out of 18 3/2.5 condos for sale actually make to escrow presently. Of those that made it to escrow nothing is listed over 529k.

Now, 7 solds out of 45 properties that came off the market. Less then 1 in 6 3/2.5 condos in 92130 have sold. Again pretty horrible. That means that 5 out of 6 3/2.5 condos that have come off the market in 92130 since 6/1/06 were either expired, cancelled, or withdrawn.

************

Besides illustrating how bad the market really is, (at least for 3/2.5 condos in 92130) this is ALL data your Realtor can provide for you in order to help you price your home.

To be quite honest with you, this is well beyond days on market, and trying to find basic correlations. I am an engineer and a Realtor and I crunch numbers and search for correlations more then most Realtors in this business. However I firmly believe that we are entering a spot where you cannot find accurate linear correlations because of market psychology. Unless you can clearly demonstrate exceptional VALUE in your pricing, then you are going to rely on Lady Luck. I am not saying you won’t sell your condo by taking small nibbles downward, AKA chasing the market. However I am advising my clients to really think about exceptionally aggressive pricing. Not beating your neighbors by 2-3% but beating them by 5-10% or more.

With that said THERE IS NO PRICE THAT GAURANTEES A SALE. I wish there was. You may find that slashing it still may not do the trick. Again, the real estate market is a slave to momentum.

Now you may find that you cannot tolerate the sort of slashing that I am referring to. That it may be more prudent to simply hold on to your home and perhaps rent it out. Also there are seasonal components in all RE trends so we will see more sales activity in the spring. We will also see more inventory. I think this spring will be perhaps one of the most important springs of all for SD Real Estate. I am bearish, probably middle of the road bearish compared to some of the others here.

Also for a quick months of inventory calculation simply do the following. Take the total number of solds for the past 6 months. Divide by 6. That gives you a monthly average. Then take the total actives on the market today. Divide that by the monthly average. Make sure you use YOUR PROPERTY TYPE in YOUR REGION.

Example – Say in your zip, your housing type, there were 36 homes sold in the past 6 months, that is 36/6 or 6/month. Then there are currently 54 actives. So that means there are 54/6 = 9 months of inventory. Out there.

I will say however that in this declining market this calculation is simplistic and does not represent the shift in psychology from just 6 months ago.

I do not believe that chasing the market is effective. I believe you should gather all you can about the resale pricing in your area, the conversion pricing, and the new development pricing. Beat them all or be able to effectively prove why your home is the best deal. If you are paying a full service brokerage 2.5-3% to list your home make sure they are doing all your open houses, sending our direct mailers, running newspaper ads, doing brokers tours, and everything short of spinning a sign on your corner. Make sure your Realtor is constantly updating you with your competition. When a comp in your area changes prices, goes into escrow, or drops off the market you should be informed.

Be proactive.

[(former)FormerSanDiegan]

Here’s an idea …

1. Have your agent lay out a case that the condo can be purchased with 20% down on a 30-year loan and could be rented out at nearly break-even cash flow over the next 5 years, assuming 5% annual rent increases.

2. Have your agent advertise on Arizona State University Alumni newsletters in the San Diego area.

[(former)FormerSanDiegan]

(Previous Post was tongue-in-cheek)

Seriously, I think SD realtor is giving generally good advice. Except that I think a bird in the hand is worth two in the bush and you should ignore seasonal sales trends. Don’t wait for Spring when sales increase. You are interested in one sale, not trends. Yours.

I am sure there will be a number of exhausted sellers who take their homes off the market between now and Nov/December. Perhaps there will be activity from bargain hunters or a short-term pull-back in interest rates, bumping a few buyers into your range.

If you must rent it out … Run the numbers very carefully on renting it out. Use a property management company. Consider worst-case scenarios and whether you have enough cash reserves to stomach them.

[dalsik]

Thank you to everyone for your responses. You have confirmed for me that it would be prudent and wise to approach my price reduction much more aggressively than before.

I am scheduled to speak with my Realtor later today and will let you all know how we`re going to approach things.

To answer some questions that were asked…

I live in a 34 unit complex with 1 and 2 bdrms. A couple of other 2-2s sold 16-18 months ago. Nothing has been put up for sale since. A 1-1 has been on the market since Feb. A 2-2 across the street has been on the market 3+ months and already reduced a couple of times. My Realtor is having to go into adjoining zip codes to find enough comparables.

I`m not onsidering renting my condo because I do not want to hold on to it for the 5-10 years it might take for the market to start going back up. And I need the money now to pay off my HELOC as well as for living expenses while I reenter the film production biz up in L.A. Yes… leaving San Diego for smogier pastures!

Oh… and I didn’t sell a year ago because my unlicensed contractor took off with some of the money I was using to get the place ready to sell. That pushed my sale date back 4-6 months. And yes, I took him to court, he never showed, I won my judgement, he`s done this many times before, and my next step — should I choose to accept it — would be to trail him and try and collect his wages from another construction job.

I`ll be happy to slander him in private. 🙂

[barnaby33]

This is private, just you and two thousand or so of your closest confidants, honest.

Josh

[powayseller]

SDR – That means that 5 out of 6 3/2.5 condos that have come off the market in 92130 since 6/1/06 were either expired, cancelled, or withdrawn. Explanation, please, for us non-realtors…What does this tell you?

DOM has a strong seasonal component. Thus, DOM should increase in the fall and winter, and decrease again in the spring and summer. How do we thus use DOM in any logical way, since its increase in the winter is normal, not a sign of a slowing market, right?

[SD Realtor]

Be glad to give a bit more insight to the stats…Here is what I wrote:

“Now, 7 solds out of 45 properties that came off the market. Less then 1 in 6 3/2.5 condos in 92130 have sold. Again pretty horrible. That means that 5 out of 6 3/2.5 condos that have come off the market in 92130 since 6/1/06 were either expired, cancelled, or withdrawn.”

So what this means is that 5 out of 6 properties coming off of the market WERE NOT DUE TO BEING SOLD.

Simply stated this is PATHETIC and is indicative of a VERY POOR MARKET. This is not a story, this is a hard fact.

PS I am getting more and more convinced that days on market, DOM are becoming another false stat due to people relisting, cancelling, withdrawing and coming back on. So again, the best way I feel to get a sense of the market is as follows:

1 – months inventory
2 – number of sales compared to the same month last year
3 – actives/pendings ratio
4 – overall inventory level
5 – true solds compared to expireds, cancelleds, withdrawns

So basically I would not even use DOM.

[powayseller]

What’s the diff bet/ months inventory and active/pending? Is it that active/pending is more current, since months inventory uses sales, which are lagging since they were entered into contract 1-2 months earlier. However, many pendings fall out of escrow, so it this a reliable measure?

[SD Realtor]

PS – Recall the equation for months of inventory. Take a sample period of time that is reflective of the current market, then find a monthly rate, then divide number of actives by that rate. So this method gives you a linear representation. However comparing that number to the actual number of pendings lets you check to see if this current market correlates well to the linear average.

The ratio of actives to pendings is 3 pendings and 52 actives. YIKES!! However taking a quick look at the MLS we see a total of 26 sales in the past 6 months. So that is 26/6 or 4.33 sales per month. So the correlation is not bad.

Yes I agree PS that not all escrows make it to solds so that is an important consideration. I just think that the months of inventory is a stat that could hide things so I like to bolster it with current statuses. The thing that the months of inventory hides is the fact that expireds, cancelled, and withdrawns that have dropped off the market ARE NOT ACCOUNTED FOR! So if you look at the current ratio of 3 pendings to 52 actives, at that rate it would take around 18 months to sell out! If you factor in that some pendings will never make it to solds it gets worse…

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