Share This

Facebook Twitter
Live tracking and statistics
Seller Articles
Finding Napa Valley's Real Estate Pricing Sweet Spot
PDF Print E-mail
Seller Articles

Finding Napa Valley’s Real Estate Sweet Spot
5/2009
If you’re a golfer you are certainly familiar with the term “sweet spot”, though not familiar enough if you golf like me. The sweet spot in golf terms is the absolute dead on center of a club’s face. When the sweet spot makes contact with the golf ball it makes a particular sound, “whack!”- then you know you’ve hit your mark.
Pricing real estate is a lot like golf more often than it should be. You underestimate the length of the fairway, or you choose a club that doesn’t get you close enough, or, in some cases, you shank your shot and the ball boomerangs off a tree and lands back at your feet. In all cases the choice and swing is in the hands of the golfer. It wasn’t the fault of the wind, or the tree in the way, or the sand trap. Bad shots in golf are self inflicted, which is why they say golf is a masochist’s game. Homeowners are often the same way when it comes to pricing their house for sale. They take a lot of miscalculated swings before they find the sweet spot in the market.
There are many references for the sweet spot price of a house. For example, buyers call it the ‘get real price’. They say, “I’ll consider that house when the seller gets real.” It’s harsh, but true. And it’s the answer to the $64,000 question, “Why don’t buyers just make me an offer?” Of all the real estate pricing strategies that don’t work, throwing a ‘what if’ price on a house expecting to get offers in the range you secretly suspect the house is worth (the ‘real price’) is like dropping a line in the ocean baited with an apple in hopes of catching a fish, and then wondering why you’re not even getting a nibble.
Don’t take my word for the sweet spot theory ( though I’ve been expounding its efficacy for a long time) examine the facts: Since the dawn of accurate real estate statistics were tracked in Napa County (the 1970’s) the asking-price-to-selling-price ratio has been in the 90% range. Wow, you say, that’s an impressive ratio! Napa Valley sellers get within 10% of their asking price? That is both correct and inaccurate. The region’s Multiple Listing Service calculates the ratio based on the last asking price, aka, the sweet spot price. As an incurably curious statistician I’ve been pointing out this inaccuracy, and the advantages of sweet spot pricing for years, performing manual calculations of sold home’s pricing histories.
It turns out, when the ratio is re-calculated based on the true history of a typical home’s pricing strategy, (i.e., the chase to be right rather than sold) the actual ratio average of original asking price verses the eventual sold price is in the upper 70% range, or approximately 20% off base from buyer’s opinions. The over-pricing strategy makes for a lot of shank shots, stale bait in the water and a long hang time for houses on the market. And here’s even better news in support of finding real estate’s pricing sweet spot: in the last 5 years, (perhaps longer, my fingers got exhausted on the calculator) all the sold houses throughout the county were in the ‘for sale’ mode for between 100 to 200+ days on average;-the higher number reflects of the shift to a buyer’s market in late 2007. In comparison however, once the sweet spot asking price was offered, the number of days it took to go into escrow was only 51 days. Now you can say ‘Wow’.
Sellers are afraid to leave money on the bargaining table, and who among us wouldn’t feel that same way as a seller? As a result of this fear they employ pricing strategies that they think will assure them of the highest price the market will bear, when in reality they end up harming their chances of getting that best price a buyer will pay by testing the market, or by being stubborn, or inflicting personal irrelevant needs upon a sales price that have nothing to do with how the marketplace will value their home. Since I am only familiar with the Napa Valley real estate market I cannot speak to the effectiveness of unreasonable pricing in other markets. Perhaps in other markets buyers make lowball offers on overpriced houses. Here, they do nothing until the sweet spot is advertised. Then, they typically pay within 10% of that price. There are several decades of consistent statistics to prove this is the case.
Finding your home’s asking price sweet spot is achievable. You simply need to adhere to the following:
1) Listen to and follow the asking price advice of your Agent when you are presented with a comprehensive market analysis that shows what buyers have recently paid for houses like yours, and what your current competition is.
2) Don’t marry that first asking price. It is not a value. It is not a static number, and mostly, it is not part of a mathematical equation from which you subtract the difference between the next asking price as a ‘net’ amount you’ve reduced your house by. An asking price is bait- the best guess any person can make at any given time to see if it will generate an offer. One can never know what the fish are biting at until you drop something tempting in the water.
3) Reduce the price, i.e. change the bait, when it gets stale and you are no longer getting consistent showings and no offers are forthcoming. Only your agent can tell you when that time is right because they’re the ones whose finger is on the tensed fishing line checking for nibbles. Remember you agent is fishing the same pond as everyone else’s agent, so they know the ebb and flow of activity. Listen to what your agent tells you. Pull up line, switch bait and cast again.
When you reach the ‘sweet spot’ asking price it is unmistakable because it produces an offer. The ‘Whack!’ sound that is music to a golfer’s ears will be your phone ringing. Your agent is coming over to discuss an offer. You’ve been wisely flexible to get to this point but up until the event of an offer no Realtor on earth can change the market’s mind about what a particular house is worth. Not even Tiger Woods can thread a needle with a hose, and that is the insurmountable challenge agents are expected to overcome when a house’s asking price is entirely unreasonable. Don’t be afraid to switch bait right away if you don’t get a nibble or if market conditions change around you. Consistent price reductions are par for the course in real estate. Ultimately it would be in your best interest to trust the decades long statistics and list your house at the sweet spot asking price right out of the gate. You’ll know because an offer will be forthcoming on average within *51 days and you’ll get approximately *10% of your sweet spot price. *(These results are what the statistics indicate).
Second best would be to make consistent price reductions until the sweet spot is found, but that can take months and months, only to reach the same price conclusion on the market value of your house you could have achieved in a shorter period of time with much less hassle. In the game of golf a caddie is a caddie because he/she knows her stuff. The best advice for sellers is to set ego, irrelevant needs and fear aside and follow your real estate caddie’s directives. The sooner you do this the sooner you’ll hear the ‘Whack!’ of an offer.
If you’d like to know what your sweet spot market value is, give me a call.
(Katie Somple is a 10 year veteran of the Napa Valley real estate market and an intuitive statistician. She can be reached at (707) 968-9100)
*Averages determined from all sales since January 1, 2009 through April 30th, Calistoga and St. Helena. Individual experiences will vary.
 

 
<< Start < Prev 1 2 3 4 Next > End >>
Page 2 of 4