This is what passes for a victory in the housing market these days: Homeowners are no longer in denial about how little their properties will fetch.
Several years into the downdraft in residential real estate, many sellers around Chicago have moved past shock, anger and disbelief, giving way to subdued resignation. Those who have stopped fighting their agents on pricing are allowing deals to be made quicker.
“A lot has changed,” says Elise Rinaldi, an agent in the @Properties office in Winnetka. “Three years ago, when this decline was still new, people insisted that the market would come back and refused to mark down their listing prices. Now people are accepting this landscape. They’ve had the recession and the depth of this decline blasted at them by the media, and they’re far more willing to go along with the market.
“Our jobs have become somewhat easier as a result.”
There has been a lot for homeowners to adjust to. According to the Standard Poor’s/Case-Shiller Index of Chicago-area single-family homes, prices have plummeted 31% since the market peak in September 2006. There have been portents of recovery in the past year, but prices are down nearly 8% in that time.
Many sellers have had to stare down the cold, hard reality of comparable sales, regardless of the factors they feel make their property unique.
NO LANGUISHING
Nichole Converse-Humphrey and her husband, Scott, listed their Glencoe home for $1.65 million in March. The price was in keeping with similar four-bedroom brick Georgians in the neighborhood, but Ms. Converse-Humphrey thought the home’s proximity to the middle school and the commuter train station made it worth more than the others.
“We paid $1.8 million for the house four years ago, and I was hoping to list it at $1.7 million and get something close to that,” says Ms. Converse-Humphrey, 40. “Our broker suggested we’d get more traffic if we priced it lower. It turned out she was right: We had lots of people looking on the first weekend and got an immediate offer and accepted it. Essentially the house was on the market for just 24 hours. We hope to close on the sale by the end of May.”
Stephen Haas, a broker at Koenig Strey Real Living in Glen Ellyn, took over a listing in Wheaton recently that had languished on the market for three years. Originally listed at $1.2 million, it was marked down to $850,000 by Mr. Haas late last year and sold in a week at $815,000.
That had to sting, but it got the job done.
“In this market, pricing a house too high is a waste of my time and my client’s time,” Mr. Haas says.
In a previous job, Ms. Rinaldi worked on a listing for Pamela Zdunek, who with ex-husband Clifford Sladnick owned a 5,000-square-foot home they built in 1998 on Old Green Bay Road in Glencoe. They put it up for sale last year. Ms. Zdunek, 51, calculated that the house was worth about $2.8 million at the market peak. She held out hope that she might get $2.2 million for it.
Instead, Ms. Rinaldi persuaded Ms. Zdunek to list the house for $1.9 million.
“Elise explained to me that the $2-million mark was a critical threshold. Houses similar to ours listed at $2.2 million had been sitting on the market for two years and more,” says Ms. Zdunek, a non-practicing lawyer with four children. “It was pretty tough, but I understood in the end. I was going to lose money in the same way that people woke up and found their stock market portfolios were suddenly worth half what they had once been worth.”
Within four days of listing the house, two prospective buyers made offers. By the sixth day, Ms. Zdunek accepted the higher bid, $1.82 million.
“I didn’t want the house on the market for six months or a year hoping for a better price,” she says. “At some point buyers begin to think there is something wrong with your house.”
Indeed, real estate agents are increasingly pushing sellers to price aggressively at the start rather than choosing a wished-for number and hoping to get lucky. Too often price “adjustments” become necessary, giving the house a stigma.
A recent study by @Properties finds that houses with no price adjustments from the opening listing sold, on average, at almost 95% of listing price at 122 days on the market. Houses that went through one or more adjustments—typically meaning that the asking price was originally too high—took an average of 218 days to sell and garnered less than 80% of the listing price.
That’s a big gap. “Simply put, the houses that are selling quickly today are the ones that have been priced right from the start,” says Matthew Dollinger, vice-president of strategic development at @Properties in Chicago, who counsels agents on listing practices. “Selling a home has become like opening a new restaurant or club: You want the buzz and promotion and red ropes out front right from the start. Lower prices draw lots of couples who want to look, and that creates a positive energy that puts the property in demand.”
Miss the splashy opening salvo, and the quest to sell can become a slog.
LITTLE INTEREST
Paige Dooley, an agent at Hudson Co. in Winnetka, put a house in Winnetka up for sale in May 2009 at $2.8 million. The owners had paid $2.29 million for the house, which had unusual 12-foot ceilings and a stunning panorama of private gardens, in 2003 and then sunk more money into renovations.
“I knew the asking price was too high, but the owners wanted to see what they could get,” Ms. Dooley says.
Diana Ivas, left, of the Re/Max Elite office in Hinsdale, with client Gayle Panos. Ms. Panos and her husband found that interest in their house spiked after they tweaked the price. Photo: John R. Boehm
The house got precious little attention. The asking price was lowered to $2.6 million in July 2009, then $2.5 million in February of last year, then $2.3 million in March. In July, the sellers bit the bullet and went down to $1.99 million. Within a week it was under contract, eventually selling for $1.9 million.
“Once we got under $2 million, we were entertaining multiple offers. That shows you how big a psychological threshold $2 million can be in this market,” Ms. Dooley says. “It also shows you how once you reach the right price, the market suddenly views your home as fresh and new, and you’re taken seriously. In retrospect, we probably should have adjusted prices faster.”
In Hinsdale, Diana Ivas, a broker associate in the local Re/Max Elite office, admits that she and her clients were in recession denial for longer than they should have been. “Some people still wanted to price houses here at 2006 levels well into 2009,” she says. “Now everybody gets it. When I call on a client, I bring lots of data on comparable sales, and I also bring lots of photos of other houses. You need evidence to convince people.
“I called on a couple the other day who bought a house for $920,000 back in 2003, and it’s worth at most $750,000 today. They mostly understand.”
Ms. Ivas is willing to correct pricing quickly these days. Gayle Panos listed the house she owns in Hinsdale with her husband, Tom, with Ms. Ivas on March 25 at $1.4 million, then lowered it to $1.28 million on April 13 when it drew a tepid response. Suddenly the home had nine showings in less than a week, with a bid in the offing.
“Buyers now view us as serious about selling,” says Ms. Panos, 55. “We didn’t want to go quite so low at the outset. As it is, we’re selling the house for less than we paid for it, which is upsetting. But we now realize we have to be realistic if we hope to get results.”
© 2011 by Crain Communications Inc.