Logic often has nothing to do with buying or selling a home. For ALOT of folks it's an emotional based experience and logic just doesn't enter into the equation as often as it should and then there's the greed factor.
Some folks believe because they put X amount of dollars into a home that they should get every penny of that money back and then some. They don't take into account that their home like any item for sale is only worth what a buyer is willing to pay.

Our market is definitely a declining market, comps from 6 months or a year ago definitely aren't relevant here anymore but some people are still clinging to the idea that their house is worth what it would have been worth last summer. This month two more houses went on the market in my subdivision. Both 2400 sq ft, 2 stories, 2 car garage etc., 12-15 year old homes in similar condition. One listed at $210,000, the other listed at $165,000. The home that was listed at $165,000 sold within 2 weeks and the other home which is priced at last year's market will sit. So yes in a declining market a seller needs to price below comps that are 6 months old or so.

I thought it was conventional wisdom that in a buyer's market, one prices the house BELOW the comps (just as in a sellers' market, one can price the house above the comps.

I'm so thankful for this forum! I've been in the 'getting ready' process of selling my condo for the last couple of months, and in two weeks, should have it listed.

I've looked at the comps, and resigned myself to 'give' a buyer more than the guy down the street~actually in this case, it's across the street. When I viewed the condo during an open house, I didn't particularly like it, but I don't care for light blue or pergo, but it's all about square footage, right? WRONG! Today's buyer wants granite, a new/remodeled kitchen, wood or tile floors, completely re-painted(of course in something 'they' like),new carpeting(ditto),resonably updated plumbing fixtures/light fixtures, and if there's landscaping involved, it better be nice! Have I done all this? Of course.

Now Mr. Condo-across-the-street is listing at what are *supposedly* the comps, but i'm going to list at the same, but 'throw in' an extra 200 sq ft of living space, not to mention a view.

Besides his new Pergo, he updated to granite,and what looks to be new carpeting, but that's the only updating he's done.

If I don't sell before him, Houston, we have a problem! ;o)

View the listing.....

http://homes.realtor.com/search/listingdetail.aspx?gate=msn&pg=1&source=a2mszh1t042&zp=92120&mnp=29&mxp=28&typ=7&sid=de48a1638ef74c29847ed58a6a0b6b4e&lid=1085221830&lsn=3&srcnt=11#Photo

My space is 1641 sq ft, 2/2 1/2, his 1408, 3/3.

Patty, if you look on the main page of the listing, there is a smaller link
http://homes.realtor.com/prop/1085221830?gate=msn

or, under where you type the post out, it says Optional Link URL: where you add the http, then where it says name of link, type some words.

I know you've been working hard the last few months, glad to see you are almost ready to list :) It's a big relief to finally get it done, but you won't have a clue what to do with your time .. lol

Now, that the market has tanked, comps seemed to have regained their former strength in setting price. It's one of the first things we recommend on this board when a house isn't selling or a low offer is received. So many sellers are clinging to the comps as absolute value.

The problem in my area is there aren't many houses like ours. Most are in rough shape, a lot of the houses up right now, they appear to want in on this market without doing anything or some did the cheapo cabinets without touching the rest of the house.

I've walked a few houses that were redone (kitchen / bath) and wished they would have left it alone. They appear to have gutted and thrown in, if it's been redone, I want function.

Yes, its just sooo wrong to hope to buy a house and at least break even when you have to sell. Seriously what's wrong with people who don't want to lose money?

"Some folks believe because they put X amount of dollars into a home that they should get every penny of that money back and then some."

It's not wrong, Mary. But, it is naive. Many, many people have lost a lot of money in real estate despite all of the hype & 'get rich quick' books on the market. It's the same thing with every real estate cycle. When the market's going up...people talk about how "it's different this time" & "housing prices will NEVER go down because (insert reason of your choice)". Then, when the markets turn as they always do...people are surprised even shocked. Because it takes 10-15 years to make a complete real estate cycle loop...many first-time homebuyers get caught in the hyperbole. This time through, many Generation Xers were the ones getting a lesson in Newton science. The bottom line is that it's always the soundest financial decision to spend money on your house because you intend to live there & make it a home NOT in order to sell it for a profit. This "flip" stuff is something new (at least in its current rendition & enthusiasm)...many people have learned a valuable lesson though. Nothing is better than slow, steady, plodding along dollar-cost-averaging your savings. Get Rich Quick schemes work for some...but the problem is that by the time the general public catches on...the cycle has turned & they lose. It's like buying equities...by the time the average person hears that a particular stock is going up like gangbusters...the ride's almost over & it's really time to be selling not buying. Tough lessons.

/T

triciae - I view this board as a place where your average homeowner comes for advice. Not the flipper, not the person looking to make a bunch of money, mostly people who don't pay attention to the RE market until they are trying to buy a house or sell a house.
That said - I've seen similar comments to that here before. Perhaps this was the wrong particular thread to take umbrage to this sort of comment as thiks thread did specifically address a boom/bust market.
But this attitude that are greedy or naive to want to break even or make 3% on their home that they are selling for normal reasons (bigger family, new job) just seems wrong. Most of us here I think are trying to sell and buy homes, not money making boxes on lots. If we can't break even or make 3% why the hell buy at all? And even if you were unfortunate enough to have to move to DC and buy at the height of the boom - I still respect someones wishes that they hope they can break even or make 3% when they have to move again. May not happen due to the market tanking but those flippant comments, often parroted over and over about greed and what the market will bear just seem mean.

Mary, you are missing my point.

"If we can't break even or make 3% why the hell buy at all?"

You should not be buying a house in order to make 3% or even to break even. You should purchase a primary residence as a home you intend to live in for an extended period of time. If, down the road, you do sell & make a profit that's wonderful but it's not something to rely or count on. Generally, over the long haul, inflation has always trended home prices upwards so the "five year" rule is a pretty good concept.

I can't understand why you feel if somebody purchases at the height of the market they are somehow entitled to still make a 3% profit if they sell after the market turns? If I purchased GE stock for $1/share & the market brought it down to $.75/share...would you pay me $1.03 just because you're a nice person? I doubt it.

There's nothing "mean" or "flippant" about it. When we purchase real estate we are entering into a business transaction that is subject to the whims of the market. Period. Nobody is entitled to anything. And, for sure as a buyer, I wouldn't pay '05 prices to somebody just because they were "unfortunate enough to have to move to DC and buy at the height of the boom". I'm rather amazed that you "respect" somebody's wishes that they should be entitled to break even or even gain when they sell soon after purchasing. Why do you feel that way?

I view real estate in similar terms to my retirement portfolio. I only purchase what I can stomach the risk for. In other words, if I can't stand the heat...I'd best get out of the kitchen. I consider real estate a reasonably low-risk use of my funds over the long term. I consider real estate to be high-risk short term.

/T

If you can't even expect to break even - losing money due to inflation, taxes, insurance etc. Why buy?
Ppeople aren't going to buy a house and lose money. Most people aren't looking to make a killing, but they don't want to lose money either.

In the "old days" people bought a house and lived in it for a long time. Not so any more. People move around a lot more because they have to.

So.....mabye home ownership is just a thing of the past.

Mary, your remarks hint of capitulation. When enough people begin sharing your feelings...this market will bottom & start climbing again. As soon as you start hearing on the street things like, "I'd never buy a house. It's just a fool's game!"...then is the time to BUY! Unfortunately, we've got a long way's to travel before the majority share your thoughts.

Also, don't forget, Mary, that historically people who buy & then sell in under five years have frequently lost money. That's nothing new to this particular real estate cycle. It's just the nature of the beast. Only in the past five years has that been anything but true. The anomally is the past five years...not the concept.

There are many reasons to own a house other than financial. Good thing too 'cause a good solid case can be made that it's less expensive to rent when you add in all of the miscellaneous expenses of home ownership. None of this negates though that, over the course of twenty years, a home is quite likely to be the largest & most lucrative investment the majority of Americans ever make. Please remember also that the only people who get burned in a market like today's are those who HAVE to sell. The rest just sit tight, enjoy their homes, & wait for the cycle to begin its inevitable climb upwards once again. There have been 3 major real estate busts since 1970; but, even with those precipitous drop-offs...the value of a 1970's ranch in CA has beaten inflation by several miles!

As far as moving around goes, for the past twenty plus years 30-year amortization loans have been paying off in approximately seven years & 15-year amortizations have been paying out in approximately five years. There's been no significant change in people's moving habits. Those numbers come from lender averages & is what they base their portfolio budgeting numbers around.

/T

Mary, insurance and taxes are the costs associated with owning real estate. No owner is assured of recouping these costs, just as no owner is assured of recouping the cost of routine maintenance or renovations. Because you have paid X amount for the property, there is no assumptive right that a buyer will pay the same. One neighbor purchased her home at the top of the market--she paid $585,000. Right now, her loss is close to $100,000. She and her husband cannot afford to take the loss but they simply paid way too much!

Triciae

What is the appreciation on a 70s ranch in Tennessee or Utah? I am not sure California is the best place to use as an example

I happen to agree with you but I can see the frustration for people that need to move for jobs. I have been in my house for 13 years and have no plans to move out of state although I would love to upgrade to a bigger house locally.

As NoVa posted on another thread, in some cases you can get a bigger house renting in this market.

There is a famous saying for the stock market that when you here doormen and cab drivers talking about stocks it is time to get out! It is so true because I remember being in a bagel store sometime in 1999 or early 2000 and hearing the counter people talking about their investments. Should have gotten out

I think in this market rather than comps you need to get a sense of why the people are selling. I was in a house about 2 months ago. It was an upper end house, they wanted what their neighbor got last year. It was the estate of a very weatlhy well known person. They had the money to wait it out and had already turned down more than I was willing to pay, I lost interest in the whole market.

OTOH, someone with a relocation package may be willing to make a deal, you never know

Mary,

I am sorry if my thread seemed mean. My apologies. I have great empathy for your situation. I've lived it. In my homeowning career, I've sold three times on the down part of the cycle and only once on the high. I've lost money and have had to bring real dollars to the table or wait out a bad market by becoming a landlord...hated it! I bought all of my homes as places to live and I don't regret a single purchase, despite minor losses or inconveniences. Home owning is a wonderful experience and can be profitable over the long haul.

Home ownership carries risk. Always has and always will. Life brings change. Americans have always been fairly transient and sometimes the housing market is very unfriendly to those of us who need to make a life change. The notion of managing the risks of home ownership seems to have gotten lost in the last five years. Some people were lucky and a number of speculators were very lucky, for a while.

We're the sum of our experiences...which is why, for now, renting makes sense for me. From what I've seen in my area, it's making sense to many people who otherwise might buy. When it no longer makes sense, I'll jump back in the pool and buy. I'm not comfortable making a long term commitment right now. Turning a profit or even breaking even on a home was never guaranteed to a short-timer. I think all that talk of new paradigms was hoooey.

You're frustrated as a seller and I'm frustrated as a buyer. I know how slowly real estate cycles but I have days when it just drives me nuts...because the decision-making process that makes real estate turn slowly seems so irrational to me. So many sellers in my area are clinging to 2005 prices or increasing above and beyond. The market is rejecting those prices, clearly, and yet the houses sit.
Greed is one answer...I prefer to think that these are decisions based on hope and well, frankly, some pretty poor decision-making during the boom.

The market isn't mean, kind, moral, fair...it just is. It doesn't care what you need as a seller or what I need as a buyer. It really doesn't care that, most of all, I just want it to be rational. As much as sellers get tired of being portrayed as greedy, buyers get tired of being portrayed as low-balling cheapskates poised to leverage some seller's tough moment.

Of course, I may be overreacting. The other day, a local realtor told me not to worry about paying a million plus for a home because in 40 years, the NAR says home in metro DC will be about $14 million. Yes, she said it with a straight face. Good news is I'll be dead.

Interesting......;o)

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/ItsStillBetterToBuyAHome.aspx

nova - no need to apololgize. I may disagree with comments, some may even upset me (it was carols comments) but that's ok. Its the net and I realize that there are limitations to the communication method and don't get mad at the person. As long as people cut me the same break:)

And while I'm still trying to sell I'm also a frustrated buyer. I'm in a new state, new town, new job. Not my dream state/town/job. Its nearer to my elderly mother. Should she die I would consider looking elsewhere.
That coupled with the fact that Ohio is a troubled rust belt state and Dayton is dying rust belt town, flat market, no appreciation = rent. But I hate renting. I'm a home-body. A nester. I don't expect to make money in real estate. I just don't want to lose money, that's so stupid and I can't afford it, I'm an ageing single income lowly civil servant. So I'm stuck. Buying is stupid, I hate renting.
And while it may be stupid to expect not to lose money on your HOME, your average American doesn't expect to. They've been sold that a house is an investment. Or at least a break even. When you can't, the perception is something is wrong.

Personally I think bad economic times are coming, recession, inflation. We haven't been told the real cost of the war and what we've been told is already freaking over the top astounding (not so much the amount as the sheer flinging of it around with no accountability and no return, the corruption has been incredible).
I get the picture that joe bag of donuts may not study the news or the real estate market but he's got good survival instincts and people are uneasy, putting off decisions, hunkering down a bit - that more than anything I think is slowing the market and its not going to change. Thats my prediction anyway.

Mary,

I'm sorry to hear about your selling and buying troubles. I read Carol's message not as a general house buyers shouldn't expect to make any profit over time but a much narrower message. I thought she meant the sellers who spend $25,000 in new kitchen appliances, $15,000 in new flooring, and another $10,000 in new counters (you realize I'm making up these numbers, okay?) and expect their selling price to be $50,000 higher than their neighbors are unrealistic.

We found out last year, to our advantage, that remodeled homes (our neighbor's house) do not necessarily command higher prices than un-remodeled homes (like our old one).

If you think you will live in your new area for 5 or more years, buy a house. Anyone who lives in a house for five years or more should expect to at least break even, although there is a risk that won't happen. You sound like you really want to buy a place of your own - it'll be yours. This seems to me a good reason to buy and own. There may be no good financial reason to buy but I'm finding out that many of my decisions are not based on financial reasoning. I've made some decisions that have poor financial outcomes (e.g., quitting my job to stay at home with my children) but at the time, the life reasons trumped the financial ones.

Mary,
I agree that we have been sold a bill of goods in thinking that we have an investment when we buy a home. It never really should be seen that way. The problem is, for the vast majority of us, it is the largest investment we have. I think it has been only in recent years that the home was seen as a way to make money, though. The run-up in prices in the last 20 years has led us to think it should always be that way. I know when I bought my first house, in 1985 in New Jersey, it was a fast-paced market. I know that home prices were accelerating at a few percentage points a month. We felt we had to get into the market as quickly as possible because of the fast rise in prices. We bought the house for $96,600. Then DH got transferred and we sold it for $124,000 nine months later!

You know my story - remodeled the kitchen to meet my every need, including huge pantry space for my vegetarian husband and a dog paw-washing station at the back door. We never expected to sell. Then I got a better-paying job and Dad moved in with us, and my knee went kaplooie! The steps in the home were a problem for Dad and me, and we were just too tightly packed in. We went to an open house and ended up putting a contract on a house within three weeks. Then we needed to get the old house ready to sell. We tried FSBO, for six months, then got a realtor. We are now selling it with a two-year rent-to-own contract with a closing in August 2009.

Our pricing probably had a lot to do with the long time to sell (17 months). We started at the price a comparable house sold for two months earlier. The market had not started going down, yet. We had an appraisal done because the comps were really not that comparable - brick 1300 sq ft plus a finished basement with a 2 car garage on a smaller lot with no updates to the house vs a frame house with decorative brick on the front with 1450 sq ft and a 1.5 car garage, completely updated, custom kitchen with over 20 cabs and a pantry, unfinished basement, larger lot. So we paid for a professional appraisal and then upped the price to $165k when that was what it said. We didn't know it then, but that was a mistake, because the market was starting to go down. Pre-appraisal, we had no MLS, no advertising, so it was only known to the open house attendees from the month of March that we had upped the price, so it was not too obvious. We lowered the price in June, and again in August, when we listed it with a realtor at $159k. We got our only other offer besides the rent-to-own last Christmas time. It was for $119k, and we had to pay $6000 toward her closing costs! It turned out that she could only qualify for a house up to $140k, so she chose her offer price where $140k would be halfway between our asking and her offer. We lowered the price to $149k this spring and it seemed to generate a lot of interest, but no offers! I found the buyer at work - she is a nurse at one of the nursing homes I visit. She knew she could not buy right away, so we spent about a month going back and forth about how long she could rent before buying. Once I did the math and found that our cost basis exceeded $145k before adding the costs to sell the home, we told her to make an offer. We have now spent a month getting the price agreed on. Now we are going to get a lease application from her, and if that is acceptable, then she will move in in a few weeks. Our mistake through all of this was FOLLOWING the market's prices down, I think. That and a single bathroom, which we could not change. We were on the top two or three of several buyers' lists, but never made #1. Our misconception of what our house was worth was also buoyed by the neighbor's house across the street. It sold for $160k last September and had only 1000 sq ft. But the huge, high mechanic's garage is what sold that house, and the against-code urinal and furnace in the garage helped. This sale led us to keep our price higher too long. That is the trouble with comps. Our house is identical to that 1000 sq ft house except for our $30k kitchen, our extra room off the kitchen, and our extra 12 x 23 room above the garage. He didn't have these things, but he had that garage. Why shouldn't we get a price similar to his? We has 445 more sq ft - almost a third larger home.

The moral of our story is that comps can lead you astray in a declining market. You follow the prices as they plummet, and you lose. We have put $145 into a house that is selling for $139 - two years from now! Did we lose money on the deal? Sure we did. We also rescued a house that was on the verge of having structural dry rot problems and turned it into one of the nicest in the neighborhood. There is some spiritual value in that. We added value and lifespan into that home. The buyer is coming off a bad time in her life, and the nice home she will live in will give her some comfort as she rebuilds. There is certainly value in that. I guess you could say we lost monetarily in this home, but gained a lot in knowledge and karma.

We learned not to do that again with our money, and to never say "never" (as in, "we are never going to move from this house.") when it come to plans for the future.

I do want to point out that if you finance most of your home purchase, it becomes even less of an "investment" in the long run - on a $100,000 house, you may pay $250,000 or $300,000 in monthly payments alone. If you sell that house for $150,000, you've still only gotten maybe halfway to a profit - ignoring the miscellaneous expenses everyone has mentioned.

Of course, this ignores the time value of money, which can be substantial, so take it with a small grain of salt!

I do want to point out that if you finance most of your home purchase, it becomes even less of an "investment" in the long run - on a $100,000 house, you may pay $250,000 or $300,000 in monthly payments alone. If you sell that house for $150,000, you've still only gotten maybe halfway to a profit - ignoring the miscellaneous expenses everyone has mentioned.
Of course, this ignores the time value of money, which can be substantial, so take it with a small grain of salt!
The time value of money is a huge grain, leveraging gives you a huge return, in the long run, maybe even in the short run, but prepare for the long haul.
Ignoring miscellaneous expenses, buying for $100k, putting even 50% down, selling for $150k, I've got a 100% return on my investment. Now figure 20% down, wow that is looking good.
Let us not forget, rent or buy, we must pay something for our housing.
But this doesn't really discuss comps.

One of the problems using comps in this market is that the selling price usually has other hidden costs in the price such as seller paying closing costs or points. When we decided on the offer on the house we just bought, our realtor discovered that the two closest comps had given $13K and $15K. So in my mind, the real selling price on the comps was minus these amounts. Of course, the sellers and their realtors disagreed with me on this.