Fredericksburg Texas

With year-to-date Fredericksburg, TX real estate sales falling so far below the same figures from this time last year, it is interesting to note the “buzz” being proclaimed about the number and pace of price reductions on listed properties.

I continually hear from clients, etc. that prices must finally be falling as so many listings are being touted as “REDUCED”.  Is a price reduction truly relevant if the property was, a) overpriced to begin with, and b) still over-priced?

While many agents were quick to begin suggesting more realistic pricing for their clients, a lot of sellers have resisted the advice and insisted on prices that do not accurately account for current market conditions.

Less informed (or less scrupulous) agents will happily accept a listing at an unrealistic price just to “have the business”.  Hidden is their assumption (hope) that they can subsequently have the seller lower the price over the term of the listing.

When an agent suggesting realistic prices competes for a listing with an agent suggesting less realistic pricing the “realistic agent” must fight the urge to “get the business” and tell a client what they want to hear to do so.  If, against their better judgment, they give-in and secure an unrealistically priced listing, everyone loses.

The agents lose because they then face the cost of advertising a property that won’t sell (as priced) and the sellers..well, you know.  Taking it further, an agent will logically focus their best efforts on listing that will actually sell and the natural tendency is to “forget about” the overpriced one. The disservice this provides a seller is truly unethical.

So, back to the price reductions.  We’ve seen over 200 so far this year (compared to about 35 or so this time last year).  Does a drop in “price” equate to a drop in “value”?  Remember folks, it’s all relative.

Let’s say, for example that I feel my home is worth $1,000,000 and I list it at that price.  The property tax folks may have it valued at $600,000 and my neighbor just sold a house very comparable to mine for $700,000. If I “REDUCE” my price to $950,000 is that really relevant to “market value”?  Hardly.

While a $50,000 price reduction may sound awfully good, if the home was over-priced to begin with, it’s really not that big of a deal.  Always remember, “market value” is defined as:

“The most probable price which a property should bring a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.  Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated: (2) both parties are well informed advised, and each acting in what he considers his own best interest: (3) a reasonable time is allowed for exposure in the open market: (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property unaffected by special or creative financing or sales concessions* by anyone associated with the sale.”-National Residential Appraisal Institute

In other words, a property is worth what some is willing to pay for it AND what someone is willing to sell it for. 

I’ve posted before on pricing in a down market (e.g get ahead of falling prices and you’ll be noticed first by the most buyers) and, let’s face it, the Fredericksburg, TX real estate market, while (relatively) healthy is in a “correction”.  Sellers shouldn’t be fooled in to pricing that ignores that reality.

Here are six things that buyers of Fredericksburg TX real estate need to know about the freshly enacted $8,000 first-time home-buyer tax credit that is a part of the $787 billion stimulus bill that President Obama signed into law Tuesday, 2/17/09:

1. Eight grand, new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 credit previously proposed.  The approved credit is equivalent to 10 percent of the purchase price of the home–although it’s capped at $8,000–and applies only to first-time homebuyers and principal residences. But unlike an earlier $7,500 homebuyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a “first-time home buyer” is someone who hasn’t owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you’ve owned a vacation home–but not a principal residence–within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won’t be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that’s $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is “refundable,” qualified buyers can take advantage of it even if they don’t have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

More “stimulus” for the real estate market is being outlined daily.  Apparently, on March 4, we will have more details on what types of mortgage, bankruptcy and foreclosure relief is planned with the goal of jump-starting the economy.