Why would retirees buy Sequim homes before they even move to Sequim?  Is this really happening?  Yes it is.  I’ve sold four homes recently to clients I represented as a buyer’s agent, and they will not be moving to Sequim for one to two years.  Are they going to rent their new homes to tenants?  Absolutely not.  Why would they buy homes before they even move to Sequim?  Here is their reasoning. 

Sequim Homes Selling to Retirees Early

“Why are we looking at Sequim homes two years before we move here?  Because we think that if we wait two years when we are both retired, several things will happen.  Interest rates are going to go up for sure.  And we have noticed that the homes we really like on the MLS are selling, so the home we want may not be available in two years because it will have sold to someone else.  And we think prices are pretty much at a bottom or somewhere near the bottom.  But even if prices are not at the absolute bottom, we are buying our retirement home to live in it the rest of our lives.  This is a 20 plus year investment for us, not a short term investment.”

My commentary on this is that I totally agree, and I’ve written articles about these very issues, which admittedly these clients have read.  But they also did their own due diligence, are very intelligent, and drew their own conclusions about their financial future and their retirement plans to look at Sequim homes and the timing to buy one.

Sequim Homes – Timing is Everything

Another couple said, “We planned to retire in Sequim in about one year, but we decided to buy now, primarily because we think we think we can do much better buying now than waiting a year, but also because we have the funds and do not feel comfortable parking our money anywhere else.  We don’t feel at all comfortable with the stock market, and our financial adviser seems to use a dart board to make investment decisions with our life savings, and even though we get barraged by T.V. commercials to buy gold, we think gold has probably already peaked and we are not interested in gambling with our retirement funds.  A home in Sequim, which we plan to buy anyway, seems like the safest place to park our money right now.”

Another couple said, “We haven’t sold our home in Illinois yet, but we have decided to move to Sequim, and we have the funds to close now with a small loan.  We think it’s wiser to buy and close now than to wait another year or two.  We’re not interested in renting, so we will support two homes for a while, but we can do that, and we’re more comfortable with that than any of our other options.”

This is why retirees are buying Sequim homes now even though some of them are not planning to make the final move for one or two years.

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Sequim home buyers come from around the country, of course, but the largest proportion of Sequim home buyers come from a handful of states.  No one has a complete survey of precisely where all Sequim home buyers come from, and so we don’t have a statistical database we can hang our hats on, but I have taken the liberty of my experience in Sequim in real estate going back 18 years, and being a buyer’s agent, to put together my estimates of how many buyers come from each state.  This graphic is a representation of where I believe the buyers are coming from.

Sequim Home Buyers

Out of 1,000 Sequim home buyers, 300 or 30% come from California.  This beats all other states by far.  The other states that bring the most buyers include Alaska, Nevada, Arizona, Florida, Texas, Colorado, Oregon, and Illinois. 

Sequim Home Buyers on I-5 Corridor

Sequim is best known along the west coast all the way down the I-5 corridor, but interestingly Sequim also has an intimate connection with people in Texas, Florida, Colorado, and Illinois.  Since I have used my own buyer database and my experience with buyer leads and various communications with buyers from all over the country, I could be wrong about the precise numbers, and I could be wrong about the order of the states, but I think the data is a reasonably accurate estimate of where Sequim home buyers come from.

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In this article I compare Sequim listings (active listings) in the current inventory to the homes sold in that same price range.  This is important for sellers to know.  Here’s why.  If there have only been a small number of Sequim listings sold in a particular price range, it makes a big difference if there are a large number or a small number of active listings in that same price range.  A large number of active listings with a small number of sales means many DOM (days on market).  And a buyer’s market like this plays against the sellers getting the price they would have expected in a better market.  Click your mouse on this chart below to see an enlarged version.

Sequim Listings vs. Sequim Homes Sold in 2011

Sequim Listings in Active Inventory

In a prior article I included this chart with Sequim listings sold, but in this chart I added the active listings in the inventory.  It’s a busy chart, but I think sellers and buyers will find this information very helpful.  Here’s how to read this chart.  In the price $500,000 to $600,000, there have only been four sales in Sequim in all of 2011 (the first 9 months), and there are 12 Sequim listings actively for sale right now.  This translates into a three year inventory based on sales this year.

Sequim Listings in Higher Price Ranges

You can see that in the higher price ranges this difference between hard sales and the inventory is more pronounced.  Above $900,000, only two have sold and there are currently 12 homes for sale above $900,000.

What does all this mean?  It is proof of something we already intuitively know–that luxury homes are more difficult to sell in a small real estate market like Sequim’s.  I would add that selling luxury homes is also different than selling homes in the lower price ranges.  Marketing to buyers of foreclosures or short sales or affordable manufactured homes is a different marketing system and reaches to a different segment of the buyer market than buyers of luxury homes.

These are challenging times.  Sequim listings are selling, but it takes much more to sell a home in this recession than it in 2005.

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Looking at older Sequim homes can be an adventure and a lot of fun.  The architecture was simpler in days past.  Many buyers are looking for the best value for their purchasing dollars, and older homes are often less expensive than newer homes.  There are many older Sequim homes in the area, some 100 years old.  Some of these old homes were farm houses in the center of a large 100 to 500 acre farm.  It’s surprising how many are still standing tall and lived in today.  As a matter of fact, my daughter was born 15 years ago in a 100 year old farm house in Sequim adjacent to the Olympic Game Farm on Ward Road . . . with the assistance of a midwife of course.  I cut the umbilical cord.  True story.

Older Sequim Homes

Two story salt box homes like this were common a century ago.  The construction was simple, and the floor plan with a second story was an efficient way to heat a home with a wood stove on the main floor and a large vent in the ceiling to the second floor.  If the vent was placed at one end of the home and the stairs were at the other end of the home, a hot wood stove would create a natural draft circulating throughout the two floors.

Older Sequim Homes

This home above is one of the small older Sequim homes that has long since been abandoned.  You can see the full photograph by clicking on the image above.  This old home has character, and I couldn’t resist having my own little photo shoot around this home last week when the sun was out.  (What am I saying?  The sun is always out in Sequim.) 

Older Sequim Homes

After looking at many older Sequim homes over the past 18 years, I would share these potential issues of concern that come up periodically and that you might want to put on your checklist. 

1. When you walk into an older Sequim home (whether it is 100 years old or built in 1927 or 1947), notice immediately if there are any unusual odors, of if there appears to be an excessively high moisture level.  A strong musty odor is usually the first sign of potential mold or mildew, which can be dangerous to your health.  Some people have no adverse reactions to mold in a home, but others have severe reactions, most notably irritations in the eyes, coughing or sneezing, scratchy throat, or other symptoms that are really warning signs of health endangering spores in the air.  When you walk through a home, look at the windows to see if there are any signs of black mold.  Look at the wooden window sills for signs of water stains.  You might also look in the bathroom behind the toilet and around the shower or tub, as well as in the laundry room for signs of mold.
2. If you are going to finance your home, it must pass the strict requirements of loan underwriters.  An appraiser will have a detailed checklist, and the home must pass the checklist.  Included on that list is a foundation that meets underwriting requirements for the type of loan you are seeking.  The VA, FHA, and conventional loans all have different requirements.  Older Sequim homes often do not have a continuous concrete foundation.  That could kill the loan.  There are other types of foundations that may satisfy lenders, but if the home sits on wooden posts that go directly into the dirt, you’re probably not going to get financing.

Newer homes are built to higher standards for air circulation and construction.  You might find an older Sequim home that has been rehabbed by someone who put a lot of money into it, but if it needs a lot of work, you might want to hire a contractor to provide estimates before you finalize a purchase.  There are many beautiful older Sequim homes for sale, and with some luck, you might find the perfect one that passes your stringent investigation.

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The question on how to price a home for sale in this market is perhaps the preeminent question of the day for sellers.  Everyone has an opinion, but not everyone gets it right.  I’ve examined thousands of homes that have sold and have not sold.  I’ve analyzed original listing prices, various price reductions, the timing of those price reductions, the days on market (DOM), and the final selling prices for those that actually sold. 

How to Price a Home for Sale

Opinions are often worth what we pay for them.  But this question about how to price a home for sale is critical.  Get it wrong and you may be stuck with your home for a long long time, and worse, you may actually end up selling it for a lot less than you could have had you priced it right from the beginning.  This is not an argument that you should sell your home at a garage sale price.  Anyone could do that if they were foolish.  This is an argument that there is an intelligent and wise approach on how to price a home for sale.  I’ll try to compact this entire article within this one long blog, but for a serious home seller who is grappling with these issues, I strongly urge you to sit down with me so we can have a two hour discussion to unpack these concepts and so I can give you a more detailed proof of these conclusions.

The issue is how to price a home for sale so it will sell within a reasonable period of time.  There are two keys: 1.) the original listing price must be right, and 2.) the price must be maintained throughout the term of the listing without irrational price reductions.  This doesn’t mean you cannot ever have a price reduction, but you should avoid irrational price reductions.  Selling your home is not just about selling it within a reasonable period of time, but selling it for the highest possible price.

How to Price a Home for Sale – The Principles

• The original listing price should not be too high or too low.  There is a true FMV (fair market value), and it’s your Realtor’s job to help you identify that range of value and then how to pinpoint the ideal listing price within that range that will also be a sellable price.  Here’s where experience is critical.  An inexperienced Realtor can cost you time and a lot of money if he/she doesn’t know how to price a home for sale, but most sellers don’t figure that out until after it already has.
• Listen to your Realtor (if he or she is experienced and knows how to do this).  Don’t tell your Realtor the price you “want,” and don’t demand a certain price.  Yes, it’s your home and your money, but far too many homeowners decide what they want or need, and that has nothing to do with FMV or how to price a home for sale.  Many homeowners in this market force their Realtors to walk with them for six months or a year before the homeowners finally get educated in the school of hard knocks and begin to “hear” what their Realtor has been politely saying with a soft voice.
• Price too high in the beginning (because you wrongly think that leaves room to negotiate) and you will a.) miss out on buyers who never look at your home because it is priced just above what they will buy, and b.) pricing too high will turn off a lot of Realtors (they won’t admit this), and your listing will become stale on the market so it just won’t be on Realtors’ radar any more, and c.) end up with a big number of DOM (days on market), and that can actually be a red flag for some buyers.
• Price a home for sale too high in the beginning, and you can actually end up losing money, because it will be on the market for a long time, and if you chase the market down as many sellers have in these past three years, you will keep having price reductions but always be a day late, and you could have sold it at a higher price in the beginning.
• Price a home for sale too high in the beginning, and you may lose negotiating power as buyers will notice that you have had multiple price reductions (and buyers often laugh at how ridiculously high the original listing price was), and they will be looking for a steal–at your expense.
• Identifying the exact listing price is not rocket science, nor is it governed by mathematical precision.  Everyone knows that, but there is a psychology of how to price a home for sale within a range of reasonable values.  There are price points, also referred to as “break points.”  This has more to do with how buyers search for homes online in the MLS than actual appraised values.  Price points are more significant at prices below $400,000.  As the price moves higher above $400,000, buyers are less inclined to use restrictive search parameters at a maximum price point.  This concept is known in economics as the elasticity of demand.  For example, if a home is reasonably listed at a true fair market value (FMV) of $1,000,000, buyers will still search from a low of $600,000 or $700,000 to a high that is much more than they can afford to a price of around $1,500,000, knowing all along that they are expecting to find the perfect home around $1,000,000.  On the other hand, someone who can afford a home priced around $250,000 will use much more narrow search parameters, such as $175,000 to $275,000.  The psychology of pricing (identifying the exact listing price) is a bigger factor in the lower price ranges than in the higher price ranges.  If you exceed the upper price range of buyers who are searching for homes like yours simply because you priced high to leave negotiating room, you just lost a potential buyer, and they may never come back.  It’s important to know how to price a home for sale so that you do connect with potential buyers from the first day your listing goes on the market.

How to Price a Home for Sale – The Reality

Altos Research, a Mountain View, Calif., company that analyzes data for the real-estate industry, routinely compares initial listing prices around the country with final sales prices.  “Sellers generally start out with prices a bit too high, forcing them to later offer discounts to get a deal done,” said Scott Sambucci, Altos’ Vice President of Sales and Analytics.

“The amount of traffic that a listing gets in its first week is five to seven times what it gets in its ensuing weeks,” says Glenn Kelman, the CEO of Redfin, an online brokerage and listings site. “Let’s say you lower the price (later). No one will notice. You really are broadcasting that discount to a much smaller audience of buyers and will have the perception it is damaged goods.”

Every homeowner should have their listing agent explain how to price a home for sale.

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• How Does the MLS Days on Market (DOM) Affect Buyers?
• Looking at Sequim Homes
• Sequim Homes for Sale in the MLS – Shocking Discovery
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How many Sequim homes sold last month (September 2011), and what kinds of Sequim homes sold in this real estate market?   I share market statistics on this blog regularly, and for those who want to pull up their own market reports on active listings, sold listings, and many useful stats, you can create your own customized market report with my special service (free to you but which I pay for) with my MLS Market Snapshot, which you’ll see on the first page of Sequim-Real-Estate-Blog.com in the right side margin (to the right of this article).

We have to be careful how we use market statistics, because you can draw incorrect conclusions if stats are not weighted and homes not differentiated.

Sequim Homes Sold Last Month – All Prices

In Sequim and Port Angeles (all of Clallam County) a total of 26 homes sold.  Anyone who thinks homes are not selling should think again.  Homes are selling, and 26 is a large number of closings for one month, September of 2011.  [These stats include all of Clallam County, but most activity these days is found in Sequim.]

Sequim Homes Sold Last Month – Up to $200,000

When we look at Sequim homes sold, we should differentiate, because buyers are not all looking at the same homes in the same areas or price ranges.  There were 14 homes sold in September in the price range of $0 to $200,000.  And as the numbers below show, there were 12 that sold above $200,000.  Look closer at the lows, highs, averages, and median numbers, because these have relevance if you are buying.

Sequim Homes Sold Last Month – $200,000 +

Sequim Homes Sold Last Month – $400,000 +

In the higher price range, above $400,000, there were only 3 homes sold in September, and two were below $500,000.  This also sends a message to sellers that there are a small number of buyers in the $700,000+ price range.  This brief review of the Sequim Homes sold is brought to you buy Chuck Marunde, and the source of the data is the Olympic Listing Service.

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• How Does the MLS Days on Market (DOM) Affect Buyers?
• Looking at Sequim Homes
• Sequim Homes for Sale in the MLS – Shocking Discovery
• How a Home for Sale is Advertised