But We Have To Sell It Twice!! (Putting a Price on Your Home)

Here’s the thing: these days we’re selling homes not once, but twice. And it’s not an easy sale.

It’s no secret our market is ‘challenged’. This is the worst downturn I’ve experienced. Period. There are very few buyers, and many of them are looking to finance their property. We have great cross-border mortgage companies and the interest rates are the lowest ever. So you’d think that would be good news, right? But it isn’t.

About 95% or even more of the properties in Los Cabos are owned out-right. And our carrying costs are very affordable. So, in prior downturns no one lowered their prices, they just hung onto the property until the market turned back in their favor. Many of our sellers are treating the market this way again: refusing to lower prices or lowering them only a percentage point or two. It’s just my opinion, but I think this time that strategy is fatal.

It’s really too soon to say what the recovery will bring, but already I’m seeing signs that financing will play a larger roll than in the past. Not only is it available, and affordable, but many buyers will be reluctant to tie up so much of their portfolio in a single asset. By financing the Los Cabos property they can use only a fraction of their cash for real estate and invest the balance elsewhere. Which is all great news; except that it also means that now we have the sell the property not once but twice. Once to the prospective buyer and after that to the loan appraiser.

If you will be financing your home here it’s critical to tell your real estate agent and get yourself pre-qualified for several reasons:
1. Only a pre-qualified buyer can really negotiate. These days any contingency for the buyer to obtain financing weakens the offer.
2. Only by being pre-qualified are you sure of your price range.
3. Your agent will select homes to show you based on their ability to get them closed. The harsh fact of the matter is that it’s immaterial what you are willing to pay for a home: the more important factor is how it will stand up to the appraiser.

Even with pre-qualification, if the banker can’t be convinced that this home is a good value and worth the price they won’t complete the loan. Therefore, when deciding which of many homes on the market to show my buyer I need to focus in on those I think are priced well enough to make it through the appraisal process.

So far the movement we’re seeing is on smaller, more affordable properties whose price has been reduced significantly. Of course the first buyers are going to go for the true bargains, that’s the nature of the beast. Or you could make a case that the actual property values have dropped to the point that those are the new, real values. Homes selling today are selling for 2005 prices: about 30% less than they would have fetched in 2007. Of course there are so few transactions that it’s hard to say for sure, but that’s my gut feeling.

So here’s the dilemma of a listing agent in Los Cabos in the fall of 2009: so many sellers are either in denial that our real estate has gone down in value, or counting on doing the old fashioned wait-them-out tactic. No matter how many statistics I have to support my pricing suggestion they put a higher than realistic price on their home and all I can do is hope the buyer, if we’re lucky enough to find one, is paying cash. Which is unlikely considering most of our ‘cash’ buyers in the past were really self-financing (pulling equity out of their U.S. property) because of tighter restrictions on loans in the U.S.

So here’s a tough love appeal to sellers: get real with your pricing or take your home OFF the market until conditions change. And be ready for a long wait, we’re not going to recover from this mess over night.

Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. A Certified Home Marketing Specialist, she has enjoyed working with both buyers and sellers for nine years and still thinks hers is the best job on earth. She is also the real estate columnist for Los Cabos Magazine. You can read more of her articles on http://www.reloscabos.com. You can reach her from the U.S. or Canada at 1-760-481-7694, or in Cabo at 044-624-147-7541.

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© 2009 Carol S. Billups