Friday, August 27, 2010

I want a great home, and I don't wanna pay a lot of money...

Who doesn't want a great home at a steal?  "Hey Tom, show me the crummy houses and make sure they're over priced." Never heard it, never will. I might be able to fill that order, as crazy as it is. But you know what order I can't fill, and it's equally absurd? This one: "Tom, show me the best homes, in the best locations, and priced below market value." If those homes exist, I've never seen one. But everyone wants one. I think, even in a tough economy, the customers will line up for great homes in great neighborhoods, if the home is underpriced. And then what will happen is the competition will push the price up to fair market value, or close to it.

Back in the mid 1990's a marketing strategy came to the west coast via Australia and eventually moved east to the other coast, and the strategy was called Market Range Pricing, or MRP. The purpose of MRP was to get conservative, but qualified buyers, to come and look at homes priced above their comfort zone. California has seen more drastic market swings than the rest of the country over the decades, so they were ripe for a tool that might spur competition where none exisited. MRP worked because it is basic human nature to feel a need to be conservative until we feel a desire to be comfortable. Well, I don't know if that's basic human nature or not, but it sure seems logical.

This humanitarian crisis may be a good time to employ MRP in Dane County because we sure are lacking motivation from conservative would be home buyers. Not everyone is going to live in a van down by the river, or even shack down by the lake, but everyone appears to be cautious about keeping more money in the bank, or mattress, than they are thinking of spending on a house.  Prices may be falling in neighborhoods where demand is next to nill, and a firm price doesn't move with the market. In fact, the market moves away from a price and there you sit.

Consider MRP with a wide enough range to reach down to the most conservative buyers who are qualified to purchase at your price. Bring them in. Invite them to compare your home to others they're seeing. It's possible they will decide that it's better to spend a little more than they planned, instead of less than they should, and own a home that has more of what they want to be comfortable.

MRP works a little bit like an auction and a little bit like normal shopping. The owner is not saying they will accept an offer at any price, but they will consider all of the terms of all offers. It your offer price reflects a value supported by recent sales, you have a good chance of owning a great home, in a great location, at a fair price---maybe even below market price. Click Here to see a great home in Madison Market Range Priced from $210,000 to $235,000.

Thursday, August 26, 2010

Recession, depression, recovery? Who cares; it hurts.

The beauty of a business built on helping friends of past clients, and friends, is that I continually get to work with smart people who come to me with a high level of trust. In this economy, maintaining that trust depends on my willingness to say what I mean and mean what I say…without saying it mean. Every person who chooses to work with me wants to know what I think is real and what’s fiction about the real estate economy.


A few decades ago then presidential candidate, Ronald Reagan said, “A recession is when your neighbor loses his job. A depression is when you lose your job.” He added for a laugh, “Recovery is when the President loses his.”( I don’t bring that up as a statement against the current administration; I contributed my part to this humanitarian crisis.) The quote makes the point that the difference between depression and recession is relative to how close the pain hits home.

Do we care if this situation is called depression, recession, or recovery? I don’t. It’s a humanitarian crisis and whether Dane County fairs better or worse than the rest of the country is of no significance. Losing a job, security, savings, home, peace of mind is painful. Some say the economy is improving and it may be. But if this is early stages of recovery, I doubt people are looking around and saying, “Wow! That sucked. Let’s go buy a house.” The sentiment, the emotional attitude, of people is transforming and it’s an evolution process. Two, or three generations emerged from the Great Depression with conservative attitudes. That huge population had an aversion to high risk, and their attitude carried the day for over 50 years. In the last 20 years of the 20th Century and into the 21st, elevated levels of risk were assumed by an unprecedented percentage of the American public. If history is an indicator, we are going to see people living with less and saving more for a long time. Risk taking and excessive spending are likely to be uncommon in all purchase decisions.

But what about selling decisions? Regardless of when a person wants to sell, the best information will always be for time that just passed. I can't tell you today if tomorrow will be a better time to sell than today. We don't know tomorrow, we barely know today. We can depend on what we know of yesterday...until next month when the government revises their last month figures by adjusting down. Isn't it better to look at what is available, consider what we know about our own situation, and make a decision that works best for ourselves in the present? Sometimes we will win, sometimes lose. But at least we make decisions based on what we can control and we aren't at the mercy of uncontrolled forces. Know your neighborhood. Be honest about your property. And be smart about your expectations.

A decision to sell always considers your alternatives and alternatives are not always best determined by dollars and cents. People who put their emotional and physical health and well being first typically find out that everything else takes care of itself.