The Price is Right

It used to be that property prices had very little margin for negotiation.   Marketing materials used to read “The Price is Right”.  But times have changed, and not matter how much you tune the pricing of your property, there is always that feeling that the price is still not right in order to attract that one and only desirable buyer.

Many homeowners are struggling to find out what is the right price at which their property would sell.   Prices have dropped down dramatically, especially over the past year or so, and even though there are drastic price reductions, buyers still want to make a better deal and offers are much lower than asking prices at discounted rates.

 

There is then a big dilemma in the mind of the owner, and these are some of the questions that buyers frequently ask us:  should I reduce the price of my property to my rock bottom line?  Should I keep the property at the actual asking price knowing that if I get an offer it will be a low ball? Should I discount the price and keep some margin for negotiation? Should I take the property out of the market and wait for a market recovery?  Should I put the property for rent meanwhile the market recovers?  Should I start all over and reduce the price to a new price, without saying the price was reduced?  Should I offer owner financing to make it more attractive?  Should I rent with an option to buy?  Should I bring an appraiser to do a new appraisal at current market value?

 

There is no crystal ball to determine if the market will ever recover but for sure, it will not recover to the prices of years 2006-2007.  Those times are gone.  Real estate market conditions changed not only in Costa Rica, but all over the world and you are not alone in the task of trying to get your property sold.  The fact is that there are millions of properties out there with millions of buyers urged to sell, and many properties have been sitting for years without getting sold.

 

You only need one buyer, just one shot.  Buyers are looking for bargains, it is a buyer´s market, and because of the present market conditions, pricing your property right is the key to get the attention you are looking for.  Some ideas to get that price right are:  visualize what is really going on in your market area,  evaluate market comparables, but not the comparables of properties for sale in your market area, but comparables of properties like yours that have sold in your market area. 

Do your own market research, search the internet for comparables, consider market conditions in general, get several experts to give you their opinion in setting the right price for your property, get an updated appraisal on the property based on present market conditions (TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report -- the kind that's complete with photos of the house and neighborhood, a map specifying the site, and floor plans is sufficient), offer incentives, always think like a buyer and abandon your personal point of view.   Ask your friends, relatives, experts, get as much input as possible about the right price for your property from those who know your property well.

A property owner shared with me these thoughts by email today, and I think it is valid to share this with every one of you: "I do agree that the market decides price not the seller.  As you well know, in a seller's market sellers can get better prices and in buyer's market buyers get better prices.  And as you well know, location location location also has a big impact on price.  One can do a comparable sales analysis to estimate a market price. At the other end, if there are no buyers or too few buyers, a comparable sales analysis would not be valid.  So how would one establish a starting price?  If a seller is desperate to sell or must sell rather than lose his initial equity, this still does not represent a valid market price because it would be a price that is below market.  I do agree with you that house prices in Costa Rica are extremely high for a less developed country like CR with so many infrastructure and public services defficiencies."

Another property owner shared the following in regards to this topic:  " This market is looking like the US two years ago.  When people finally realized that if they wanted to sell they would have to take a loss.  The inventory in the States has now slowed in the better areas that I watch, so it looks like Costa Rica is three years out. I will try to get with you next week to consider whether I want to remove my house from the Market or drastically drop the price.  I may also consider rental."

If there are properties selling in your area, it would be good to find out for how much they are actually selling. Most owners that have been able to sell over the last year have lose on their initial equity.  It is sad, but is the truth. There is no data base of actual prices in which houses are selling for.  Such information would at least give sellers a much better idea of what is really going on.  On the other hand, owners that sell for very low prices, don´t want to disclose the information or would say they sold for a higher price.  There is then a distraction in the market that would not allow for a serious seller a way to visualize what is really happening in their area.  Even if there are just a few buyers for your market area, the aim is to get them enthusiastic about at least taking a look at your property, and pricing the property at a price that is attractive enough to call attention is most important. 

Buyer´s have many more options to choose from.  Competition is part of the process.  Your property will be competing with other similar properties.  After doing a throughout evaluation to price your property right, you will then be in a better position of deciding on a price that you deem competitive in order to attract a potential buyer.

Yalile Alpizar, President/Broker/Owner

Costa Rica Leading Estates CLE S. A.