Your Home Can Sell in a Buyer's Market: Part Two--Location.

In my first post on selling your home in a buyer's market I examined three different pricing strategies I have been taught over my career as a REALTOR®. I argued that the one reliable strategy for pricing a home is to find comparable homes which have already sold and base your pricing upon these comps. If you didn't get a chance to see that article you can find it here.

In this post I have two points which I want to make in relationship to location and selling your home in a Buyer's market. First, your improvements must be in line with your neighborhood if you expect to get full value for them. Second, your neighborhood may not earn you extra money in a buyer's market but it still adds value to your property.

Let me begin writing about improvements with an obvious example. A granite kitchen in my neighborhood just wouldn't make sense. I live in a neighborhood of starter homes which almost universally have Formica on their counters. If I put granite on mine, I cannot expect to get full value for it.

However, I don't think that is the end of the story when you consider improvements and neighborhood, especially in a buyer's market. I think that sometimes you need to look at improvements as a loss leader. For instance if I were to sell my home in my neighborhood, I would be tempted to put in the cheapest laminate possible in my kitchen. It needs a new floor and laminate is cheap, cheap, cheap. However, if I have an understanding of how location and upgrades work in a buyers market I wouldn't make that mistake. First time buyers have many, many homes to choose from. It is the home with the upgrades that catches a buyer's eye. Since I am in a starter home neighborhood I have to stand out from the Formica and Laminate competition down the street. One great way to do that is with say a real wood floor in my kitchen or since my brother cuts granite for a living and I can get it cheap I might put in that granite counter after all. I may not be getting "full price" for the upgrades I have put in. However, I will be getting a sale while the Formica and laminate homes down the street are sitting vacant.

Don't get me wrong. I actually mean upgrades not incentives. I am not a big fan of incentives. Save the plasma TVs for yourself. At least in the Vancouver market a buyer would rather see an upgraded lighting package or living room floor than a plasma TV. It's all about perceived value. If your home is perceived to be the best value on the market for the price it will sell. Plasma TVs can't turn a fixer into a turn key home. Sellers aren't biting on the plasma TVs they want value instead.

My second point on location in a buyer's market has to do with premiums for neighborhoods and it is similar to the previous point I just made about upgrades. During a buyer's market neighborhood should be seen as a loss leader to create a sale not as a premium to increase value. During a seller's market certain neighborhoods can seem to demand any price they want. I remember two summers ago entering a new listing in a highly desirable neighborhood next to Washington State University Vancouver and asking the party who arrived just after us to wait outside as we had waited while another REALTOR® had gone in ahead of us. By the time we came out 10 minutes later there were seven groups waiting on the steps to come in. Now that is neighborhood appeal! I ended up writing one of three offers on that home that evening, and I presented the offer personally to the seller and their REALTOR® the next day. We didn't get that home, and my buyer's moved on to a neighborhood that had a little less appeal but also a little less demand. We got them the next home that we wrote on.

However, we don't have that market any more, and neighborhood appeal doesn't seem to show up as much in price. In fact when prices are equal many buyers are choosing to go with an upgraded home rather than that top of the line neighborhood. When two neighborhoods are right next to each other and one offers kitchen upgrades and the other offers prestige but no upgrades for the same price, buyers in this market are gravitating to the actual upgrades instead of the prestige.

So what does that mean for our prestigious neighborhoods? Are they no longer prestigious? Absolutely not. However, their prestige is measured in time on the market not in the price of the home. Again from the buyer's perspective prestige isn't necessarily as valuable as upgrades. However, if two homes have equal fixtures and equal pricing then the neighborhood may make one a better value than another. So as a seller remember that your location in a prestigious neighborhood does give you an advantage in a buyer's market it is just that advantage is going to be reflected in time on market not necessarily in price.

Next time I would like to talk about the issue of perceived quality in a buyer's market. Thanks for your time and interest. If you have any questions feel free to call me or email me.

Erik Wecks

REALTOR®, ABR

http://erikwecks.com/

erikweck@windermere.com