Tuesday, December 11, 2007

A real eye opener.

Since December 1st, 2007, there have been 1211 listings put on the market in the city of Boca Raton. Yup, that's right, 1211 new listings added to the already swelling inventory in December alone. Now, I'll explain the different categories of listings for some clarification.

The first is a NEW listing. When a listing is first entered into the MLS (Multiple Listing Service), it is given 'new' status for 10 days.

After the ten days has passed, it becomes an active listing, marked ACT.

If a listing had been taken off the market only to return within 45 days, it will be placed in 'back on the market' status, or BOM.

If there is a price increase or a price reduction (yes, people do actually RAISE the price of their listing, even has the market tumbles) the status of the listing changes to PCH or price change. This change is reflected for another 10 days, and then reverts back to an active listing.

When an offer is accepted, the listing changes from active to contingent, or CTG.

I have NOT included listings that are pending, or PND, because most offices handle the pending listings wrong. That is, even though listings clear all the the contingencies within the contract and should then move to pending status, a lot of offices do not make the change from CTG to PND. They just let the listing go from CTG to SLD (sold), if it sells. There are even a few listings from 2006 that still show pending since nobody has bothered to update the listing.

So, adding all of these listings up, whether it is NEW, ACT, BOM, PCH, or CTG, we have had 1211 listings entered into the Regional MLS for the month of December in Boca Raton.

Well how many sales have there been in the city to offset all of those new listings? In the month of December (as of 4: 30 p.m. on the 11th) in Boca Raton, there have been a staggering 69 sales. Pretty disgusting if you ask me.

List-to-sell ratio so far for December in Boca Raton: 17.5:1.

If there are people out there who do not see a major problem with these figures needs to have their heads examined. For every 18 new listings put on the market here ONE is sold.

Any idea how to offset the issue and help your cause if you are a home seller that has equity and needs to sell? Lower the asking price of your home. Do this now. Do not sit on the fence and HOPE that things will get better. You must be aggressive and have enough sense to realize that you still have a bit of negotiating power, but not one single person will buy your home if it is not priced right.

I do NOT suggest taking out a home equity line of credit for repairs or upgrades. First off, you will not receive 100% plus on your money no matter what project you think will help you sell the most. The vast, vast majority of home improvement projects are money losing propositions in this market. Here is the Remodeling Magazine's Cost Vs. Value survey for 2007 if you would like to check for yourself. Simply LOWER your asking price and let the future buyer undertake any remodeling. Because any honest individual in this business knows that we are in a depreciating market, spending money that you don't really have in the first place is dangerous and irresponsible and can only hurt you.

My advice? If you don't need to sell your home, do not put it on the market. The inventory overload is bad enough as it is. If you do have a listing on the market and you can't figure out why it is not selling, lower you price. I don't care if you THINK it is priced right....if it were someone would have presented you with an offer.

If you are going to lower the price, do it the right way the first time. If you have a home listed for $400,000 and you lower you price to $390,000, you are not showing buyers that you are serious sellers.

Example: Lets say a potential buyer were to present you an offer for full asking price. That buyer puts 20% down and finances the rest. The loan amount is $320,000. They decide to get a 30 year fixed rate mortgage at 5.7%. Their monthly principle and interest payments for this mortgage instrument would be $1857.28 per month.

Now...same buyer, only this buyer presents you a full price offer on your reduced asking price of $390,000. Same 80/20 loan, 30 years, at 5.7%. The new loan amount is $312,000. Their new monthly payments come to $1810.85.

That is a monthly savings of ($1857.28-$1810.85) $46.43....hardly earth moving, and does neither you, nor any potential buyer, any amount of good. If you are considering lowering your asking price, make sure you do it right. Only then, will we start seeing more sales to offset the absurd amount of listings we continue to see.

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1 comment:

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