How Your Asking Price Impacts The Sale Of Your Home
There is a relatively simple concept home sellers should understand about the how your asking price impacts the sale-ability of your home.
While this has always been true in the past, today's home selling technology makes it possible for us to actually prove it to be true.
So if you have been curious about how long it takes to sell a house, this little demonstration should make it perfectly clear.
Defining "Market Time"
I have written numerous articles demonstrating that "time on the market" is a myth that is perpetuated by marginally analytical real estate agents who don't truly understand the relationship between asking price and the amount of time it will take to sell a home.
We tell the home sellers with whom we work that market time is about 4 days. We will reach roughly 95% of the "ready buyers" for your home in 4 days, so if you present your home correctly in a market with enough liquidity, then you should expect to sell your home within 4 to 14 days.
In the real estate graph above, we measure time on the horizontal axis, and your home's value on the vertical axis. As most real estate markets appreciate over time (yes, they rise and they fall, but over the long-term, values rise due to inflation and scarcity).
So the lower you price your home, the quicker it sells. The higher your price it, the longer it is likely to take to sell. The real value of your listing agent is to show you how to get the most amount of money, within the time frame that is optimal for your move.
If you want a price for your home that is higher than your listing agent recommends, then you are really saying you want to wait for the market. Is it realistic that you will sell your home at its future value today?
We spend a lot of time examining, analyzing, and producing real estate liquidity reports that demonstrate the relative supply and demand for homes in the Tallahassee real estate market.
Every home has it's own market, and an informed listing agent should be able to demonstrate how many buyers are likely to want a home like yours. This is the "liquidity" of your home as a commodity. If 50 people want a home just like yours every month, you have great liquidity and sell your home in a matter of days. But if only 2 people each year buy a home like yours, then it creates a much lower confidence level in value analysis and means you will have to react to the feedback that you generate after hitting the market.
Imagine you are selling a home, and you are considering three different asking prices (A, B, and C).
If you price your home at "A," can you see it is not likely to sell anytime soon, as it aligns with a far future value.
If you price your home at "B," it appears to be dead-center of its market value. If you are in a highly liquid market (your neighborhood is hot and active), then you can expect immediate attention and likely an offer.
If you price your home at "C," you should expect buyers to be knocking down your door and competing for the right to buy your home. If you are in a highly liquid market, you should be able to turn these buyers against each other and drive the price up, perhaps even higher than where "B" falls on the graph. Remember, people want "what they cannot have," and there is no easier method for attaining top dollar for your home than having multiple buyers fight over it.
Presentation Of Your Home
I hate the misuse of the word "staging," because it now has a duel meaning in real estate.
In the past, "staging" meant getting your home ready for sale. It meant removing a good amount of your personal items (de-cluttering) so as to make the house a blank canvas for prospective new clients. It meant keeping everything neat and tidy, touching up blemishes, cleaning floors, etc.
Nowadays, there are a lot of companies that promote "staging" as a way of selling a home for more money. Generally speaking, I have proven these to be bad decisions for home sellers, as they fail to recover their "risk" of money invested in "staging." The market has sufficient liquidity to produce buyers, so spending money to make your home more desirable yields less money than that which is invested.
Of course, if you have a home that is in a low-liquidity market (for Tallahassee, all homes priced above $500K are in a low-liquidity market, as are some lower priced homes in certain areas), you might need to consider professional staging as a way to show-off your unique property. But take my advice, more likely than not, a price reduction will put more buyers into your home than will the same amount of money spent on staging, and you will almost always net more money this way.
Your Asking Price Determines Your Position In The Market
To understand how to sell a house in 2014, you first need to examine what home buyers are doing. And unless you live under a rock, we know that buyers are using the internet.
In fact, an NAR survey revealed that roughly 94% of homebuyers used the internet when buying their home, so you must recognize the technical aspect of home selling that really did not exist even ten years ago (take note that if you have not sold a home in the past ten years, then the whole process has changed dramatically).
Take a look at any property search tool, and you will see that buyers whittle down the thousands of homes for sale by adjusting selection criteria. But what is the first criterion considered?
And how do buyers use price range to determine which homes to view? A simple example will demonstrate it clearly.
Let's say a buyer wants to purchase a home in Tallahassee for roughly $250,000. Surveys show that buyers will pull up an average of 250 homes per search, but only view 11 of the homes. So somebody planning to spend $250K might do a search for homes priced $225K to $275K, and then just look at very few of the ones that are generated.
Now let's say you have a home on the market, and your listing agent has advised you that it has a market value of $230K to $250K. But for some reason, you felt compelled to set an asking price of $276K. Will the buyer in the above example ever see your home?
Our studies show they don't even look at all the homes that appear in their search, how the heck are they going to see your home when it doesn't appear in the search? So the buyer in the example above will not see your home, and yet he's willing to pay you top dollar!
But here's another sad thing you might not have considered. Your "overpriced" home at $276K is being seen. It is one of the "top 11 homes" in someone else's search. Unfortunately, they are looking for a home for which they truly plan to spend $276K, and your home does not compare favorably.
Why Real Estate Is Always A Seller's Market
In the modern real estate property search, we like to say that for the prudent seller, real estate is always a seller's market. Why? Because they get to set the asking price for their home, thus determining how many buyers will want it! We like to say that ...
Buyers choose a price range, but Sellers choose the competition.
Be wise, price your home so that your competition is less favorable than you, and you will get the right buyers seeing your home.
This means that your selection of a listing agent is the singular most-critical element of the home selling process. If you hire one that can show you the "right price" to ask for your home, you will get top dollar, and you will be able to sell it during your optimal time schedule.
If you would like to know more about setting your asking price to get top dollar for your home, just drop me a note and we can schedule a time to view your home and show you how to get the absolute most amount of money when you sell.