Real Estate and Business

Hatteras Island Real Estate: Straight talk for sellers

By TOM HRANICKA

This summer marked the beginning of the fourth year of a buyer’s market on Hatteras Island. It is clear that something has to change before the real estate market can make a significant turnaround. Many observers around the country believe that the essential catalyst for change rests with sellers. To paraphrase the refrain of a Gatlin Brothers song that was popular in the 90s, “It don’t matter where you played before, (this market’s) a brand new game.”

In this article, I would like to offer 10 observations and recommendations to assist property owners with increasing the probability of selling their cottages and lots.

l – Owners are selling their properties in a market characterized by a very wide gap between supply and demand. The significant disparity between supply and demand is resulting in a decline in selling prices.

On average, only one out of every 46 residential properties for sale on Hatteras Island is being sold each month. Similarly, only one out of every 77 unimproved lots that are for sale is being sold. Since the beginning of the year, the median selling price of residential properties has declined about 16 percent compared to the same period in 2007. Between the second quarter of 2005 and the second quarter of 2008, the median selling price of homes has fallen almost 40 percent. The corresponding decline in lot prices is nearly 45 percent.

2 – In this type of market, price is a seller’s most effective marketing tool.

There are a tremendous number of available properties for sale from which prospective buyers may choose. If your cottage or lot is not priced at or near the lower end of the price range for comparable properties, then the odds of your home or lot being shown and subsequently sold are substantially reduced.

3 – No one knows the exact price point at which your property will sell.

Working with your Realtor, you should be able to establish a competitive listing price, but the ultimate selling price of your property will be determined by negotiations between you and the buyer.

4 – The market will determine your selling price.

Today, buyers and sellers have access to the same information. Both will be looking at the prices at which comparable properties have been sold, the listing prices of cottages and lots that are under contract to be sold, and the asking prices of similar properties. These indicators, combined with an estimate of the future direction of the market, will normally serve as the basis for the price that a prospective buyer will offer for your property. In other cases, buyers are simply stating, “This is the price that I am willing to pay.” If you as a seller are willing to meet their price, a contract may result. If not, the buyer may move on to consider another property.

5 – Sellers need to set a listing price that jumps off the page at prospective buyers and their agents.

The selection of properties that is available for buyers to consider is in most cases so large that your listing price must compel the buyers and their agents to place your home or lot at the top of their list of properties to visit.

6 – There is no point in setting a high listing price and hoping that a buyer will respond to it.

If you set a price higher than current market conditions warrant, your property may not even be shown, and you may end up chasing the market downward through a series of insufficient price reductions. Sellers must establish a listing price that is ahead of the market, not just at the market, since today’s prices can become outdated in a very short time.

7 – In a falling market, the sooner you sell, the more money you will make, and the less money you will lose.

It is an unfortunate reality, but in a market characterized by declining prices, your cottage or lot is declining in value each month. If you are serious about selling, your financial interests may be best served by selling your property as quickly as possible, even if the selling price is less than what you had hoped to obtain.

8 – There is essentially nothing that you can do to speed up the sale of your property that will be more effective than reducing your price.

The principal criteria that buyers are using in their purchasing decisions are price, location, and condition. As a seller, you can control price and the condition of your property. Location is fixed. Since most residential properties are in rental programs, they are generally in good condition. Therefore, we again return to price as your most effective marketing tool. You can be assured that your real estate agent will do everything possible to acquire a prospective buyer for your property. However, without an eye-catching list price, it is unlikely that even the best marketing efforts are going to be successful.

9 – The best feedback that you will receive concerning the price of your property is the number of times your property is being shown and the number of offers that you are getting.

The conventional real estate wisdom says that if your property is not being shown, a significant price reduction is needed. If your property is being shown, but you are not receiving offers, then a smaller price adjustment is indicated. If you are getting offers, then your cottage or lot is well-priced.

10 – In today’s market, the first offer that you receive will probably be your best offer.

Take the first offer seriously, regardless of where it is relative to your list price. It may be a long time before you have the opportunity to negotiate another offer, and during the interim, prices will probably have declined. As a general rule, this is a time to be flexible. Buyers simply have too many other options in the market from which to choose, and they seem to be exercising their options with increasing frequency.

In summary, I fully understand that the message that I am communicating is not what most sellers want to hear. It is, however, what they need to hear to be successful in the sale of their properties under current market conditions.

There is no question that real estate is cyclical and that the market will improve. The reality is that with the challenges that the island and the country are facing in the areas of general weakness in the economy, financial market dislocations of significant proportions, and extreme excesses of property supplies over buyer demand, the current real estate market environment looks like it will be with us for the foreseeable future.

In my opinion, the best way to operate in these circumstances is to understand and to accept the market as it exists and to adapt our behavior in whatever ways are necessary to reach our goals. The real estate market, like other markets, is a neutral, non-emotional mechanism. As much as we would all like for it to be otherwise, the market just doesn’t take into account our personal needs and wants.

We also need to remember that there are positive factors in the current market, such as increased numbers of property showings, very large amounts of cash reserves (an estimated $4 trillion in money market funds) that are available to fuel pent-up demand, and the ongoing desire to own vacation homes. Last year, one-third of all residential sales nationally were second home purchases. However, for the time being, we need to recognize that we are in a “new game” and that the greatest success will be enjoyed by those who are aware of the new rules and choose to play by them.

(Tom Hranicka is an associate broker with Outer Beaches Realty. Questions, comments, or suggestions for future articles may be sent to Tom Hranicka at P.O. Box 237, Avon, NC 27915, or e-mail to hranicka@hatterasisland.com )

Copyright©2007 Tom & Louise Hranicka. All rights reserved.