Even Martha Stewart might have a hard time selling a mansion in this market.
Sales of new homes dropped last month to their lowest level in more than 12 years. Mortgage applications have fallen to their lowest level in a year. Bidding wars are pretty much done. Homes in great neighborhoods boasting stellar architecture and well-landscaped gardens are languishing. During the boom, such properties practically sold themselves. Now, homeowners are figuring out what strategies will help unload a quality piece of real estate.
The top tip? Proper pricing, say economists, brokers and home sellers.
A mispriced home sits on the market longer, and eventually sells for less than a similar, correctly priced home. So found John R. Knight, a professor at University of the Pacific. In his 2002 study, "Listing Price, Time on Market, and Ultimate Selling Price," he examined 3,490 Stockton, Calif., homes and found that sellers who didn't reduce their prices sold for 97% of the initial list price. Homes with a price reduction sold for 88% of initial list price.
Though Stockton isn't rife with multimillion-dollar homes, the same theory holds for trophy properties. Slightly lowballing a listing price upfront often results in a higher sales price, because it generates greater interest and more offers. It is also less likely to languish; when this happens, buyers wait, hoping its price will go further south.
"In a down market, that's a good way to go for houses that, in an up market, would have multiple offers," says Courtney Charney, a broker with Alain Pinel Realtors in Atherton, Calif. "But I would not advise that on houses that you know will sit, whether because of location, or something odd about the floor plan or some other set of issues."
Generating interest through luxurious throw-ins is another effective strategy in the high-end market, especially if you're selling a prime property, as opposed to a McMansion or median-range home. Increasingly, sellers are including cars, stereo systems, gym memberships and other high-end perks as signing bonuses.
While these incentives might not be enough to seal a deal, they can serve to lure buyers who might have otherwise passed by a property.
"The price of a stereo is almost irrelevant--and so is a car, when the apartment price is several million dollars," says Harrio DiOrio, a broker with Prudential Douglas Elliman in New York City. "I don't think anyone would buy an expensive piece of property just to get a free stereo system, but the lure of the price may be the catalyst for the sale."
Using an Internet brokerage or going the "for sale by owner" route are two tactics that can ease the pain of a low listing price by cutting out the broker's commission. The National Association of Realtors estimates that three-quarters of home buyers start their searches online, and internet brokerages like Redfin take commissions that are 50 per cent to 75 per cent less than traditional brick-and-mortar outfits. In addition, selling a home online comes with the benefit of Web analytics.
For example, Redfin notes that homes debuting on a Friday get 7.7 per cent more viewers their first week than those homes that debut on a Thursday. Online services can also track which Web sites, like Craigslist.org, are diving web traffic to your listing.
The problem? It remains to be seen whether or not Internet brokerages can hold their own when prices are falling, especially in the high end of the market.
Internet brokerages also don't provide traditional marketing services. This might be one of the best reasons to hire a broker; he or she can help combat the present negative psychology in real estate in a way Internet brokers can't. There isn't a "national" real estate market, especially when it comes to high-end properties, but the national trends have made potential buyers wary, often requiring more aggressive marketing on behalf of the seller.
Charney says negative perceptions keep buyers on the sidelines, especially in places where the cost of entry into the marketplace is high.
"We're up this year," she says, "but people are always surprised to see what homes in their neighborhoods are selling and for what price." She adds that in the high-end market, "it's like Chicken Little thinking the sky is falling."
There are scores of strategies to sell a million-dollar-plus home in a down market. The one that works best for you depends on the quality of the home, the particular market and neighborhood you're selling in and the condition of your home.
The most important thing, however, is that any strategy you choose must be implemented quickly--before you list your home.
That's because, "if prices are headed lower," says Knight, "the importance of selling quickly is amplified."