Many sellers who are barely breaking even or are under water are desperate for every penny they can get out of their home. For many their home was their nest egg and now rising taxes and financial hardship are forcing them to sell at the depths of the biggest housing recession since the Great Depression.
The question goes something like this:
“We need to get “X” out of our home in order to move on with our lives. You say it is worth 20% less. Why can’t we try it at the price we need and if it doesn’t sell, lower the price in a couple of months?”
Right now, this is still a brutal market for many sellers. Some areas have bottomed out – most are bottoming out – but quite a few markets aren’t there yet and buyers know this and are driving a hard bargain.
A few weeks ago I set up some showings for a new buyer client. There was a new house fresh on the MLS in the appropriate range with amenities that the buyers were looking for. Since it was new to the MLS – I didn’t have time to preview it. When we arrived, I realized that I made a mistake. I don’t know how the listing agent came by that square footage, but the house was much smaller than I had anticipated. The half-bath was actually in the unfinished basement and there was no bath on the ground floor. A fine house – but not at that price and not for that buyer.
During the first couple of weeks of the listing – this scenario was probably repeated over and over again with this listing.
Well – no – its not very likely. Why would I bring a client with a price point that was $150,000 lower to a home listed at this price point? Particularly if there is plenty of inventory in the appropriate price range.
After a couple of weeks the showings start to slow down…
The first two weeks of a listing are critical. The listing is fresh on the market and it gets a lot of activity – then the activity slows down.
Why does that happen? Because when a home is new on the market all the buyers that are currently looking in your price range tend to view the home. That existing inventory of buyers represents people who may have been looking for months. Once they have been through the home, the showings slow way down. After two weeks the primary traffic through the home are from new buyers just entering the market. Since they are new to the market, they are less likely to be pulling the trigger quickly.
The two charts below are courtesy of Keller Williams:
The first chart shows the relationship between appropriate pricing and the number of showings. Remember that the more traffic through the home the more likely you are to an offer or multiple offers:
A home priced at market value will drive 60% of the buyers in the appropriate price range to the property. Priced just 10% above market that number is cut in half and priced just 15% above market that number is halved again. In other words – pricing a home 15% above market value decreases traffic by 75%. Of course everyone likes a bargain – so underpricing by 15% ensures that 90% of the buyers shopping in your price range beat a path to your door.
The second chart shows how traffic through the property peaks at 2 weeks and goes downhill thereafter all things being equal.
The bottom line here is that you have about 2 weeks to create a buzz and then its over! At that point the listing settles in for the long haul competing with every other property on the market.
In a big bad bear of a market where depreciating prices rule the day – the worst thing you can do is chase the market….What does that mean? Many sellers desperate to get every possible penny incrementally reduce the price by a few thousand at a time. The trouble is, that as they are slowly reducing the price, the market is going down even faster and they are losing equity by the week.
A person puts a home worth $100,000 on the market for $110,000. The market is going down at a rate of $1000 a week. 10 weeks later, they have gradually dropped the price 3 times and are now at $100,000. The trouble is, the home is now worth $90,000 and the cycle continues. The final sales price ends up being lower than it would have been had the home been priced correctly from day-one.
At the end of the day – pricing it right the first time saves time, money and heartache.
© Ruthmarie G. Hicks – https://thewestchesterview.com – All rights reserved.
Please feel free to contact me anytime to request additional information or to set up an appointment so we can explore your listing or purchasing needs. I am easy to reach by phone, text or email. Or, if you just want to continue your search online, the links below will help you get started.