The SE Michigan Housing Market – Problem and Solution

Or, how the media gets it right!

Wow!  Simply Wow!  Two excellent articles this weekend that could not have been more correct in their assessment of this market and how to overcome the challenges it presents.

Eh? the problem

There are currently a lot of properties on the market in SE Michigan.  And by properties, I mean condos and houses.  Brian J. O’Connor, in his December 2nd, 2006 Detroit News column, nails the problem with the current glut of homes on the market.  The problem is the number of sellers that do not need to sell in this market, but are just fishing to see if they can get what they want out of a possible buyer.

As Brian points out, there are two problems with this approach:  saturation of the market with inventory and unrealistic pricing.  This saturation creates a problem that we are very cognizant of now – sellers can be played against each other just to get an offer.  Unrealistic pricing in a relatively stable/even market tends to disappear after the first listing expires and no one has shown the home.  Unrealistic pricing in this market has the additional ability to force realistic sellers and their pricing even lower to attract attention – Vicious Pricing Strategy.

The Solution

The obvious solution is to get rid of the “un-serious” sellers and then those that need to sell are only competing against those other “need to sell” sellers.  Also this weekend, the Detroit Free Press’ Margarita Bauza writes an article on a “lucky” family that sold their home in two days.  Oddly enough, this transaction inlcuded two other properties that were sold in under two weeks themselves!  Holy smokes, someone alert the authorities!  Properties are still selling in this market!

The Stelkics priced their home 3.5% lower than similar houses in the area and sweetened the deal for the buyers agent. They offered a 5% commission to the agent — a typical commission is 3% — so he or she would push the house more aggressively.

To cause their home to break out of the noise in their market, they incentivized  the buyer by pricing below their competition.  They then incentivized the area agents by offering to compensate them at a rate higher than their competition.  The fact that they also did some recent updating to the home, solidified the value of the home in the minds of the buyers.

For those serious, gotta-sell-it sellers trying to figure out what to do in gaining greater exposure to their market and obtain a purchase agreement heed the example of the Stelkics.  Your agent should be extremely amenable to any thoughts you have about incentivizing buyers and agents.  In fact, they should be pestering you to do just that in this market.

For those sellers that are fishing for their price in this market, please heed Brian’s advice to wait on the sidelines.  The longer overpriced listings are in this market, the longer the slide will take.

 

3 Responses to The SE Michigan Housing Market – Problem and Solution

  1. In Theory that sounds great! BUT the reality is that most of the “need to sell” buyers are tapped out with equity and have no room to lower their price and raise the commission unless of course they want to show up at the closing table with their checkbook! Have you taken a look at how many “subject to short sale” properties are being offered right now? Seriously, the statement in the above article really only works for people who have been in their home for a long period of time and/or have gained equity without using it all up in the process of living…So they really aren’t the “need to sell” sellers are they…The article is misleading…I know…I sell real estate!

  2. Marie,

    There is no “theory” in those articles. Those were actual transactions that took place. And no, the practice works for anyone who needs to sell.

    I sat a closing last year where the seller brought $25k to the table to get out from underneath the house! They had a need, priced the home accordingly, and faced the piper.

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