Just when you thought it was safe to believe home buyers now focus on the quality of improvements in a home, bingo! They still care about price first. Second most important issue is: also the price. And then it might expand into location or views or bedroom size or acreage. But first and foremost, it is price that is driving the market right now. That fits the definition of a buyer’s market.
In our market, where your home might be listed for sale for months if not a year, while the price is criticized and the condition is questioned, asking price is the key to a successful sale. I don’t know who first made the statement that an overpriced listing will sell (“Alan, if a buyer wants my house they can just make an offer!), but if the overpricing is substantial, it will not attract offers as a rule.
Please allow me to elaborate about how important the initial price is to selling your home. This can be useful for a buyer also, but my message is for sellers today.
A very high percentage of sales reported to our MLS database have an agreed upon and final sales price below the original asking price. A fairly large number of those include several price reductions over the course of the listing term. So what do you do with the information that a home first listed at $654,000 later has a price drop to $625,000. Then about 10 months after the day it first became available, it sells for $596,000. Is this an actual example? No, but it certainly is representative of what is going on in Santa Fe residential real estate. By the way, the sold price is almost 9% below the asking price. No wonder some buyers present their initial offer at 10 or 12 or 15% below asking price. They have studied the market and looked at numerous homes. Their sales professional has helped them with comparable sales so they know they are paying market value for their new home; no more and no less.
So why start at $654,000 when data indicates it will likely sell for 9% less? Part of the answer is the season. We are at that time of year where sellers are polishing door knobs and repainting the kids rooms to get their home ready for the spring and summer rush of activity. Optimism is huge right now. A wise seller may decide that they should stand firm with their asking price for now. Buy what about in October? Will it still be at $654,000? Why not put it out there at $600,000 right away and deal with several buyers at once? Remember those days?
Many buyers are in the habit of expecting to negotiate a lower price than the asking price, no matter the condition or the comparable sales. Why try to shorten the length of time it will take to sell your home? Everyone else just puts a dream come true price on their home and then waits and suffers waiting for the market to catch up to them. And it rarely does catch up. Why be different from everyone else?
To clarify, there are more homes for sale than there are buyers. If 100 homes are for sale and 10 are selling every month, do you want to be in the first month or the last? If you have plans for the funds received from the sale of your home, think about what you will do with those funds. Buy another home? Possibly now is a great time for that while the market is basically flat, and interest rates are very reasonable. The average length of time on the market is not the statistic you will find in the MLS detail by the way. Days on market is a field of data that one should not rely on. You already know that story, right?
People wiser than me wanted to stop punishing sellers who were unable to sell their homes that had tried and tried for years. There are ways to disguise the fact that the home you might be looking at has been for sale off and on for about 40 months. At various prices and with various agents, it has become a known quantity to the sales associates. They have seen it, maybe a couple of times and they have it pegged as a problem for some reason or other. Maybe the floor plan is difficult to work with. Possibly its on propane and the dirt road access is rough and unsafe to drive after a storm. Can a newly listed home really be new on the market? Yes and no. Some detective work may turn up meaningful history on the home and buyers will find out what that history is. Ask questions! Insist on answers!
So what is the solution? If it’s not obvious, pricing a home to sell quickly is simply a matter of honestly setting the price in the beginning. That is mostly true (see first paragraph), but also attention should be given to what a buyer’s first impression will be and removal of clutter is essential. Get a storage locker somewhere. And yes, I suppose some sellers don’t have to sell and can and will wait for the time it takes to sell, whatever that is. Guessing the majority would rather sell in 3-6 months and move on to the next chapter.
There are exceptions such as foreclosures, short sales, etc. Estates selling a property are often more realistic, but not always. Its understandable when you occupy a home that you may want to stay until you get the price you want. If it’s a vacant home, that reason just went away. Since the majority of sellers continue to price well above the market, it may not feel right to get real from day one. But think of the advantage of closing on the sale this spring versus next fall or after.
Need assistance with pricing your home? My contact information is available on this site. You well know most sales professionals will prepare and present a market analysis for free, hoping you will list the home with them. The person that gives you the highest estimate of final sales price is not always the salesperson you will want to select. Review your asking price frequently. Time is of the essence.