Right now we’re going to talk about pricing a residential property.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: We’ve been talking about pricing your property for sale. We’ve been talking about investment. Let’s talk about personal residence. It’s appreciated. The median sales price has appreciated over 10% in the last 12 months. Pretty amazing.
Bob Nelson: That’s pretty amazing, 10%. Now look at it this way. If I bought a property with 20% down, which is more of a down payment than I’d need to do, and a property went up 10% in value, my 20% down is one fifth of the overall price. If the whole thing went up 10%, what did my equity produce for me? Five times that amount. I got a 50% effective return on equity.
Marcia Edwards: Exactly. So that’s the beauty and the magic of real estate.
Bob Nelson: I mean, it’s huge.
Marcia Edwards: It’s huge. Now I want to talk a little bit toward the seller. If you’re sitting in the seat of a residential person who’s get out of their real estate, say they’re going to assisted living, leaving the area. They’re doing something that they may not have to be a buyer the next move and they’re saying, “I’m going to get everything I can out of this home.” So, they price accordingly.
Bob Nelson: What do you do in order to help that person achieve that end, assuming you’re representing that seller?
Marcia Edwards: There’s a lot of strategies out there. One that’s fascinating that I just ran into was a property that was clearly under priced by about 10%, I would estimate. So it was under priced and these people were from out of area. We wrote an offer and knew that there was competition. There turned out to be 11 other offers. Then we had to make sure that we were competitive, so there was what’s called an Escalation Clause, which says, if you offer this, I’ll offer 2,500 above that, up to this figure.
Bob Nelson: Now if you get two or three people with Escalation Clauses I think that turns out to be an infinite number.
Marcia Edwards: It actually goes to the cap with the biggest number. So it’s kind of a game. And just because a buyer proposes that the seller does not have to engage in the rules to that game. They could just counter my price. But the conversation is how do you strategize, as a seller, to get that optimum price out of the gate? I would argue that it may not be to put it at a price that’s above what its previous sales have been.
Bob Nelson: I think that’s also a function. Are you going to do an absolute open market exposure, like through multiple listing service so that a broad number of people, a broad base, would be able to view this thing so that they say, “Wow, that thing’s under priced. Let’s go after it.” And that starts the feeding frenzy.
Marcia Edwards: Exactly. Make sure everyone that should know about it does know about it to make sure you’ve optimized your opportunity.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.