Time is Valuable By DeAnna Sickler and Dyan Lane
I think most of us have heard the old saying “Time is Money,” but have you ever thought about how that analogy applies to real estate? Let’s make it simple. Statistically, the longer a property sits on the market, the less a seller will receive when it’s all said and done.
We are definitely of the mindset that we prefer to price our listings with our clients, but we also want to be upfront with what the statistics show and what we think the market will realistically support. Time and time again in the end, overpricing almost always leads to leaving money on the table when the home finally sells. There is often a short window of time when a seller can test the market at a higher price than what is justified on paper, but it is extremely important to adjust that pricing. The current market conditions of Jackson County are very healthy and this market will tell us quickly if we are priced too high. How does the market speak, you ask? It’s through showings that produce no offers.
Sellers are usually concerned about a correction in pricing because they worry it will communicate to the buyers that they are desperate to sell. In our 30+ years of combined experience that just isn’t the case. What a price adjustment does say is that a seller is serious about selling. This adjustment re-introduces the property to the buying pool and sometimes opens the property up to buyers that haven’t previously considered it. We have found it is also a great tool to get buyers off the fence. If a buyer re-visits a property two times and is on the fence about submitting an offer, a slight price reduction can often help motivate them to put something official down on paper.
Over the past two to three years we have seen numerous sellers leave a fair amount of money on the table by not properly positioning their home for today’s market. In almost every case, the sellers listed with another agent at a much higher price than we could support in our market analysis. In our heart of hearts, we were hopeful they could get the higher prices they were promised. However, countless examples showed them sitting on the market for an extended period of time, only to sell for less than the price we recommended in the beginning. When factoring in the hassles of having your home on the market for longer than it needs to be, we are left wondering what the actual cost is for overpricing? Who are we kidding… making every bed every day, planning the fragrance of your meals around showings scheduled (i.e. eating seafood, cabbage, curry, etc.) and basically living out of your car so your place can be “show ready” with minimal effort…. No thank you. Coupled with the carrying costs of all those extra days/months/years on the market, being priced incorrectly can actually cost you more than the difference between the inflated value and the accurate one.
Words on a page resonate with some…numbers on a page resonate with others.
Example A: About 18 months ago we interviewed for a higher-end property. We knew the seller was meeting with several agents, but we still felt an obligation to provide sage advice on value. In this instance, we suggested a listing price of $1,350,000. They chose another broker to represent them and listed the house for nearly 10% higher than we suggested. In total, the home was on the market for 577 days and ultimately closed for $1,250,000, which was 84.7% of original list price. That 15% discount doesn’t factor in the mortgage, utilities or taxes, let alone the upkeep of a larger rural home over the 18+ months it was on the market, so you have to wonder how much did inflating the value really impact the bottom line?
Example B: This close-to-town property had quite a lot to offer because it had two rental units in addition to the primary home. Our research indicated a realistic market value of right around $675k. The sellers were less than thrilled with our assessment and ultimately decided to list in the mid $800’s. Just over six months later, they were still on the market – no price reduction and no offers. They took a short break and came back on the market at $750k. Fast forward another 225 days and still Active. They took another short break off the market and then re-listed their home with another broker for just under $700k. After an additional 80 days on the market, their property sold for $668k, which was 80% of the original list price and within $8,000 of what we told them the market would support. This is a prime example that even if the sellers would have started around $700k, much closer to what the market statistics appear to support, then reduced to our recommended price of $675k they would have still likely sold for more than what they ultimately did and also could have avoided the disruption to themselves and their two rental units during the combined 19 months their home on the open market.
And for those of you reading this who think it’s got to be our way or the highway…
Example C: Our market research indicated a value of $550k on this particular property. After speaking with another broker, the property owner felt passionate about listing their home for 10% more, though they wanted to work with us. Having already purchased their replacement property and spending a sizable amount higher than the value of the home they needed to sell, we completely understood why it was worth it to them to try for more. We had a frank discussion about the pros and cons of pricing too high and a game plan about our strategy if we didn’t get some serious activity early on. After 34 days on the market and 13 showings, they agreed to reduce to $575k. The process of preparing the home for showings was daunting for our sellers (large space, lots of hard surfaces, a four legged family member, etc.). After 15+ more showings and another 30 days, we had another candid discussion about value and all agreed it was time to reduce to the originally suggested price of $550k. Within a day or two of making that adjustment, two offers came. The property went into contract with a full-price offer.
It’s important to keep in mind that these examples are just that… examples. Each price band is different, and each area of Jackson County has different statistics. It is so very important to team up with an agent that has your best interest at heart. The days of adding 15-20% to a listing price for “blue sky” are over. Consumers have access to a whole lot of information and are highly educated on values before they even see your property. If you interview a broker who asks you what you want for your home or simply tells you what you want to hear – be prepared for the long haul. We certainly don’t like being the bearer of bad news but we also know our market and believe that people are relying on us to be truthful and transparent. We are prepared to have hard conversations about value, how your property presents, what is realistic given market conditions and buyer appetite. We can’t think of any advantage to a seller to have an inflated listing price for an extended period of time. Even if a Buyer surfaces who is willing to pay the price, the sold stats are so heavily relied on by my appraisers, you will more than likely be revisiting that value a few weeks into your escrow when their report is submitted to the lender. At that point, the seller may have already started making decisions on their replacement housing or future plans based on unrealistic expectations.
It wasn’t all that long ago a seller could ask pretty much whatever they wanted and more than likely they would get it, but the mess that was created in our market due to the lack of checks and balances is not a territory anyone in the industry wants to visit any time soon.
If you’re interested in learning more about what we think the market will support for your home, hearing more about our marketing plan and how it will be tailored specifically to your property, we welcome the opportunity. If you are looking for some friendly faces to simply tell you what you want to hear, we are probably not the right fit. Although we are very friendly.
If your home is currently listed for sale but not selling, it might be time to have a discussion with your broker about whether it is time to reposition your home. This market is healthy and if you are getting showings and nobody is writing an offer, whether they are saying it out loud or not, your home is priced too high. Sometimes all it takes is adjusting it 1-3%. Sometimes while you are waiting for an offer to come in, the property begins to become stale while all the new inventory captures the buyer’s attention. We can’t stress enough the importance of relying on a real estate professional to guide you along the way. If selling a home was as simple as pricing your home according to what you want or worse yet, what you need it to sell for, you wouldn’t have to hire someone to do it for you.