Creating A Sense of Urgency or . . .

. . . Capitulation?

Here's the latest pricing activity at what I'll call "Motivated in Minnetonka":

7/17/09: old price - $595k; new price - $585k
8/7/09: old price - $585k; new price - $575k
8/19/09: old price- $575k; new price - $565k
8/26/09: old price - $565k; new price - $555k
9/3/09: old price - $555k; new price - $545k
9/9/09: old price - $545k; new price; $535k

So what happened next?

Three hours after dropping the price $10k on Wednesday, the Sellers did something unexpected: they took a whopping, $35k price cut -- to $500k.

"Motivated in Minnetonka"

Only the listing agent and Seller know for sure, but you'd guess one of two things is going on: the Seller is out of time, and is capitulating on price in order to get a deal; or, there are a couple of prospective Buyers circling but "sitting on the fence."

If the latter scenario applies, the rationale for taking one, last dramatic price cut is to create a sense of urgency amongst the "fence-sitters."

Often times, the ensuing competition for the home results in the Seller recouping at least some of the last price drop -- a phenomenon I refer to as "bouncing off the bottom."

Sellers Offer Goodies in lieu of Price Cuts

A Price Cut By Any Other Name

When is a home price cut not a price cut?

When it's billed as "Seller financing" (or other creative Buyer inducements).

In a soft rental market, landlords will do practically anything to entice prospective renters without actually lowering their nominal rental rates.

By far the most popular gambit is free rent (typically, one or even two months). Next most popular are "freebies": free plasma TV, free tickets to Hawaii, etc.

Similarly, home owners who are loathe to take (more) price reductions are starting to offer other Buyer incentives.

Anecdotally, I'm seeing more instances of Sellers who are trying to move upper-bracket homes dangle attractive financing terms: second mortgages on attractive terms; contracts for deed (essentially, a Seller-provided mortgage, but one where title doesn't transfer until the last payment is made); etc.

Which makes sense: one of the big impediments to selling an expensive home today is the premium attached to jumbo loans.

I've yet to see the "Buy this house, get the [collector sports car in the garage free] pitch," but it may very well be coming . . .