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Helping you find or sell a home in the best New Jersey towns.

Pricing Your Montclair Home: What’s the Sweet Spot?

5-back-iconWhen you’re pricing your home, it’s always tempting to ask for a bit more than you expect – to leave a little room for negotiating. But this strategy actually doesn’t work.

According to industry experts, houses priced 10% over their ultimate selling price typically receive no offers. In fact, even houses priced a mere 5% too high will typically get showings, but no offers. If you start too high, you’ll have to gradually lower your price over time until you find someone willing to buy.

In real estate, “gradually” is not great.

No one wants their house to sit on the market. Not you. Not your agent. The DOM (Days On Market) of a home is the leading indicator as to whether it is priced appropriately.

In Montclair, the average DOM is 50.

Examples of homes priced too high:
363 Park Street – Original price: $1,450,000; DOM-370
Offers started when price was dropped to $1,199,000

18 Capron Lane – Original price: $1,200,000; DOM-170
It sold when the price was lowered to $989,000

Even a house listed at its “correct” price – that is, the price it is likely to sell for – may not be ideal for the seller. Studies show that the market responds most enthusiastically when houses are priced just below their true value.

When a home is listed at about 5% under its ideal sales price, the property nearly always sells for more than asking, and often substantially more. This doesn’t make complete logical sense, so it requires a leap of faith on the part of the homeowner. As a seller, you need a strong stomach and a good realtor who knows the market and how to price at that sweet spot.

Here’s what happens when houses are priced to sell:

117 Haddon – Listed $699,000; Sold $826,000; DOM-11
19 Windsor – Listed $699,000; Sold $838,000; DOM-9
131 Wildwood – Listed $899,000; Sold $111,0000; DOM-10

When clients ask me how much negotiating room there should be when pricing their Montclair home, the answer is none.

If you’d like to talk about home pricing, or get a better sense of the market, call me. I love to talk real estate! 973.809.5277

*Studies performed by Jeffery Otteau of the Otteau Valuation Group www.otteau.com

West Orange NJ Real Estate Sales Report for May 2016

West Orange solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

South Orange NJ Real Estate Sales Report for May 2016

South Orange solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

Maplewood NJ Real Estate Sales Report for May 2016

Maplewood solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

Cedar Grove NJ Real Estate Sales Report for May 2016

Cedar grove 1 solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

Bloomfield NJ Real Estate Sales Report for May 2016

Bloomfield solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

Glen Ridge NJ Real Estate Sales Report for May 2016

Glen Ridge solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

Montclair NJ Real Estate Sales Report for May 2016

Monclair solds May 2016
Real Estate Market Chart by Altos Research www.altosresearch.com

4 Ways to Avoid Paying Too Much for a House in Montclair

Version 2Right now in Montclair, houses are selling for 103% of asking price. Meaning: on average, most sellers are getting 3 percent more than they list their home for. This is great for sellers! But how do buyers protect themselves from considerably overpaying for a house?

I tell my clients there are four things to seriously consider when buying.

1 – Understand the Market Conditions
Most of us are familiar with the concept of supply and demand: The fewer there are of something, coupled with the more people who want the thing, the more expensive the thing is likely to be. In housing, this can be a function of many variables, but I advise buyers to become familiar with the Buyer to Seller Ratio and the Absorption Rate.

The current Buyer to Seller Ratio in Montclair is 37/100, or for every 100 sellers, there are 37 buyers. That’s a lot of buyers for not much housing selection, which means the prices of “desirable” properties are likely to be bid way up.

The Absorption Rate right now is 2.7 months, which means that if no new houses come on the market, the current number of homes will sell out in less than 3 months. An Absorption Rate of under 6 months means that home prices are appreciating; under 3 months means that prices are escalating at approximately half a percent per month. In practical terms: if you bid on a house and lose it, by the time you put in a bid for the next house, it could be 1-2 percent more than it would have sold for a couple of months ago.

The lesson here is, if you find a great house in a rising market, don’t underbid. You may end up paying more in the long run.

2 – It’s Not Only About Price
When you have to compete for a house, you can make your offer stronger by adjusting some of the terms in your contract. If you are savvy about home systems or have family who are in the trades, you might consider waiving your inspection contingency. This can be attractive to sellers for two reasons. 1. They know they won’t be nickel-and-dimed for multiple repairs, and 2. They do not have to be bothered with estimates and scheduling contractors.

If you have the liquidity and you don’t need a mortgage, you can make a cash offer, and waive you mortgage contingency, but you will likely have to show “proof of funds.” Be mindful, however, that in the absence of a mortgage you will not need a bank appraisal, a measure that ensures that the bank is not loaning on a house for far more money than it’s worth.

You can also increase the chances of your offer being accepted by writing a letter to the owners – sometimes an emotional appeal for a beloved house makes you a more popular candidate, especially if the seller has a home that’s been in the family for years and is looking for just the right steward.

3 – Be Aware of Escalation Clauses and Buyer Fatigue
Obviously, if you significantly overbid, you may get the house, but you’ll be stuck with a big price tag. Some buyers include an Escalation Clause in their offer – agreeing to pay, say, $5,000 over the highest bidder. This can work well for some, but it wrests a lot of control from the buyer and often results in Buyer’s Remorse, so most seller’s agents advise against it.

If you underbid consistently, you put yourself at risk for Buyer Fatigue. You’ve lost 10 houses and a contender comes along and, no matter what, you will NOT lose this house. I don’t have to tell you what happens in this scenario. Suffice it to say: you get your house, but at what cost?

4 – Make Your Offer Based on Your Expected Residency
If you pay a bit more for a home than it’s technically worth, you will feel it much more acutely if you’re planning to put it back on the market in 5 years. However, if you’re planning to stay for the long haul, and can ride out market conditions and amortize your investment, most consider the extra money far less of a “real” concern.

One of the things my clients seem to like about me is my interest in educating them about the housing market – in addition to finding them a great home. If you’d like to learn more or have questions about Absorption Rates and Buyer/Seller ratios in other towns– call me! 973.809.5277

West Orange NJ Real Estate Sales Report for April 2016

West Orange solds April 2016
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Real Estate Market Chart by Altos Research www.altosresearch.com

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I was born and raised in New York City. Every Sunday, we walked from our neighborhood near the U.N. to the Museum of Modern Art. Undoubtedly, this influenced my love for walkable places. But it also influenced me in other ways. My dad, an engineer, loved art, and we… MORE >>

From my blog:

Pricing Your Montclair Home: What’s the Sweet Spot?

When you’re pricing your home, it’s always tempting to ask for a bit more than you expect – to leave a little room for negotiating. But this strategy actually doesn’t work. According to industry experts, houses priced 10% over their ultimate selling price typically receive no offers. In fact, even … read full post >>

 -- June 15, 2016