Why Setting a Price Too High is as Bad as Setting it Too Low

The problem with setting your list price too low is obvious: you leave money on the table. But, the problems from setting a price too high are less so. Many sellers rationalize that we can always lower the price, but by then, the damage may be done. Here are some reasons why setting the right list price is possibly the single most important element of marketing your property: why you dont want to OVER-price!

1. Short Appraisal: Even if your agent convinces a prospect to buy at your inflated price, the deal may go sour when the appraiser comes acalling. Over 90% of buyers use some kind of financing, and that requires an independent mortgage appraiser, and the lender will only loan against the figure that appraiser produces.

2. Won’t Show: If the price is too high, you won’t be able to get prospects through the door to even look at the property, no matter what you have done to the interior.

3. Reputation: When a new listing hits the market, agents check it out against the needs of their clients. If your property gets a rep for being overpriced, getting the market’s attention later may take some extreme actions.

4. Helping the Competition: Your overpriced property will make your competitors’ properties look like real bargains, so you are actually helping your competitors’ properties sell FIRST!

5. Days On Market: The longer your house sits on the market, the more “Days On Market” show up on the MLS, and the longer it has to become “stigmatized.” Ever see a home or condo unit that seems to have been for sale forever? Did you wonder what might be wrong with it?

6. Negotiation Purgatory: The longer it’s on the market, the harder the buyers are going to negotiate.

7. Missed buyers: You will lose many buyers who are outside of your price point, but who are buyers looking in the price range in which your property will eventually sell. They’re off to buy your competitor’s property!

If you already have your unit listed for sale and have not had a lot of action on it, there is an opportunity to review your pricing strategy- we’re in low season right now and will be there through January. If you are considering selling your unit, be sure to consult with an agent who is familiar with your unique market and its current values in order to assist you with pricesetting… and no one knows the Plantation like Joe Savage and Mandoki Realty.

Mandoki Real Estate Newsletter July 2011

MID-YEAR RE SALES RECAP

Here is a snapshot of the Gulf-front/beachside condos currently for sale in Gulf Shores (GS), Fort Morgan (FM), Orange Beach (OB) and here at Gulf Shores Plantation (GSP):

	Units for Sale	Units Under Contract or Pending (UCP)	% UCP
Gulf Shores	229	23	10.04%
Fort Morgan	107	13	12.15%
Orange Beach	371	34	9.16%
Gulf Shores Plantation	43	7	13.28%

The inventory at the Plantation is getting whittled down, which is helping values slowly recover after the double-disaster that was 2010: 1)Taylor, Bean Whitaker foreclosures coming to market as “fire sales” in the first quarter and 2) the BP Oil Leak in the second.

The general year-to-year trend seems to show a slight price recovery at the Plantation and Fort Morgan in general:

# of Units Sold by Year and Area
	Jan-June 08	Jan-June 09	Jan-June 10	Jan-June 11
GS	76	128	129	90
FM	56	32	42	55
OB	102	108	133	162
GSP	29	9	20	17

# of Units Sold by Year and Area
	Jan-June 08	Jan-June 09	Jan-June 10	Jan-June 11
GS	76	128	129	90
FM	56	32	42	55
OB	102	108	133	162
GSP	29	9	20	17

This data comes from the Baldwin County MLS and represents sales of Gulf-front or beachside condos in the four markets for the period of January 1 thru June 30 for years 2008 through 2011.

The following graph shows how the four markets interact. Keep in mind that the data is a composite of condos of varying sizes, construction types and age, but they are all Gulf-front or beachside units. This data is useful in comparing each market to itself on a year-to-year basis, but not necessarily in comparing one market to another.

The bar graphs are the number of units sold in each of the four markets for the first six months of 2008 to 2011 (# Units Sold on the left side of the chart). The line graphs are the median price per square foot in each market for the same period (Median Price in $ per Square Foot on the right side of the chart).

The chart shows that Gulf Shores Plantation and Fort Morgan prices increased from 2008 to 2009, but at the cost of the number of units sold. Conversely, prices steeply declined from 2009 – 2010, with a corresponding increase in sales. (Note: The correlation between Gulf Shores Plantation and Fort Morgan stats is easy to understand, as the Plantation makes up a significant portion of condo sales in Ft. Morgan.) However, from 2010 to 2011, this pattern appears to change, with some interesting implications.

It looks like Fort Morgan and the Plantation to some degree, are recovering in both pricing and sales. Unit sales increased over the same period last year (which was mostly before the oil spill) and pricing is also increased. This suggests that prices may have genuinely bottomed-out.

In Gulf Shores, prices seem to have flattened, but sales are down compared to last year. In contrast, prices have slightly increased in Orange Beach, but sales are up dramatically. In fact, sales in Orange Beach have steadily increased since 2008, again, as prices fell. Even with the strength of Orange Beach sales, I hesitate to predict that their prices will have flattened out by year’s end because there is so much beach-front inventory actively for sale (337 units).

Sales inventory at the Plantation is at a real low; the 36 units actively for sale represent less than 6% of the 623 units on property. Most of the speculators and many of the second-home owners who bought at the 2005-06 “peak” have been eliminated by foreclosure and/or short-sale, so there just are not many “distress” sales available. “Scarcity” is a factor in driving price, and it appears that units for sale are becoming scarce at the Plantation. Keep in mind that prospects are also looking at other properties and that Gulf Shores Plantation must compare favorably with them. It is critical that the property be well-maintained and have an up-to-date look and “feel.” Guests must enjoy positive vacation experiences that ensure that they return again and again. This is imperative to ensure GSP values recover strongly. In short: If the place isn’t kept up well and doesn’t have a strong rental demand, it doesn’t matter how few units are for sale...we still won’t be able to get the prices up.

Finally, a mid-year performance report for those of you considering listing your property for sale in the near future. Almost half (43%) of the 75 sales across the Plantation in the first six months of 2008-2011 were brokered by Joe Savage and Mandoki Realty. This represents 50% more than the next-highest performing brokerage, and FOUR TIMES more than the next best-selling agent. While there are other good reasons to use Mandoki Realty to market and sell your Plantation property (location, knowledge, availability) the proof is always in the performance….and ours speaks for itself.

Wishing you all a great Summer!

Real Estate "Farming" News

Many of you may have received correspondence from agents or brokers listing sales here at the Plantation. In the real estate industry, this type of mass mailing is called “farming” and is used to obtain real estate listings in a particular complex, neighborhood or community. The agent obtains owner names and addresses from county tax records, title companies or a marketing firm and sends these mailings soliciting business.

Such correspondence often suggests that the agent already has buyers lined up or that he/she is very familiar with or has been successful in selling properties in your area. As long as the agent is not outright lying, this is an acceptable practice. But, be a good consumer and look into claims critically before accepting them. For example:

• In describing recent sales in your complex, is the agent listing the sales he actually brokered himself, or all of the recent sales? There is a huge difference in the two: anyone can list sales - what matters is who did the selling.

• If an agent suggests that he already has a buyer, ask yourself why that buyer doesn’t already have a contract to purchase another unit. There are always units for sale at the Plantation. If a buyer wants only yours, why is the agent not soliciting you for a “one-time showing” listing agreement for that particular buyer? That’s how it’s done, after all.

• If an agent boasts of his familiarity with the complex, ask him for particulars:

How many total units are at the Plantation? How many are currently for sale across the complex?

How many units are in our homeowners association? How many directors sit on the board?

What’s included in the association dues? What are the other expenses of ownership at the Plantation?

What are the amenities at the Plantation?

This information is critical when working with buyers because this is what they want to know. Shouldn’t your agent have that information on the tip of his tongue?

• Finally, ask your prospective agent where his office is and how many properties he currently has listed in Fort Morgan. This will tell you how often he drives out here from town or does he even have to. With gas at $4-plus a gallon, you want an agent who doesn’t feel like he’s trimming his profit margin by showing properties in Fort Morgan.

Bottom Line: Be a good consumer by recognizing “farming” mailings from agents when they come your way and carefully evaluate all claims they make before you put the sale of your property in their hands.

April 2011 Condo Sales Gulf-front units south of the Intracoastal Waterway:

Gulf Shores

Units sold: 22

Average sales price: $233,232

Median sales price: $213,000

Average days on market: 207

Orange Beach

Units sold: 27

Average sales price: $369,593

Median sales price: $286,000

Average days on market: 255

Fort Morgan

Units sold: 3

Average sales price: $249,667

Median sales price: $259,000

Average days on market: 132

Source: Mobile Register, May 15, 2011