I’ve been thinking….
Between the New Year, and last weeks snowpocalypse, a lot of day to day real estate work was frozen in its tracks; it forces me to think.
One thing that didn’t change was the steady stream of other people thinking about selling their homes, “When the weather is better.” In the process, I’ve spoken with a lot of people who’ve had less than stellar experiences with agents. We’ve heard stories from buyers and sellers about attempts to engage in real estate, but not having appropriate, experienced representation. There’s always a wide variety of issues that can come up, but my observation is that inability to accurately price a home is an area that can affect any client, whether buying or selling.
Pricing to Sell
Experienced professional Realtors know what happens when a home is overpriced.
• Serious buyers don’t look.
• “Looker’s won’t like.
• Agents that show are less experienced.
• Deals (in the event they happen) are more likely to fall apart.
Even if a skilled Realtor is involved, pricing can be less black and white and more grey. In any case, there should be an underlying strategy based upon the level of seller motivation and their concerns. When presented with a price range, a motivated seller typically chooses a lower price and is hoping for a quick sale. The less motivated seller may price the home higher, but if pricing is done correctly, the price range is small 3-5% usually, and the home should still sell.
The unfortunate thing is that home sellers listen to the news. In any market, its important to understand that all real estate is local, and the actual market analysis of similar homes nearby(comparables) may not reflect the overall market that makes the news. Even if the market immediate area is reflective of the overall market, the condition of the property could affect (positively and more often, negatively) the market that the property is in. With years of experience and thousands of deals under our belt, we don’t have a hard time helping home sellers understand that the price of their home is based on area, condition, and what type of buyer is most likely to pull the trigger.
• Stylish and move in ready– Attracts younger, motivated buyers that spend the most.
• Dated, but still move in ready. — Attracts slightly older buyers willing to do work, but spend less.
• Needs extensive rehabilitation– Attracts rehabbers and investors paying pennies on the dollar.
Less Is More…
In some markets, pricing “on the money” excites more buyers and instigates a bidding war. That seems to be extremely prevalent in today’s housing shortage. Getting left brain (analytical types) to understand this strategy can be a challenge. Public opinion sometimes misconstrues this idea by suggesting that offers above list indicate the home is under-priced. While that’s possible, the past year our aim was to price homes exactly where the comparable sales suggested the price should be.
Just like spending hideous amounts of money at a carnival to “win” some cheap stuffed animal or meaningless trinket, many home buyers’ desire to win takes over when they’re bidding on a property they want. They react on emotions. In 2021, we received more than one offer on 93.6% of our listings, and were able to elevate pricing and reduce seller contingencies. We regularly saw between 12-27% above list price. It was so crazy that in over half of the remaining listings, we were able to elevate the price above list.
The Scientific Method
My field of study in college was in science. What has surprised me in my real estate career is how much the skills learned in science classes are applied in real estate. In grade school, high school the scientific method taught leaves off peer-review and is often times broken down to 6 steps.
- Ask a Question (like….’how much is it worth’)
- read and analyze existing content (check out other estimates, starting with the county assessor).
- develop a hypothesis (like come up with a price range)
- experimentation (like put it on the market)
- analyze the data (consider the days on market, sale price, number of offers relative to the market)
- draw conclusions & communicate (determine the ‘ups and downs’ of the strategy and let the world know that YOU DID IT!
Whether they realize it or not, ALL SUCCESSFUL REALTORS DO THIS!
What the public usually doesn’t understand is that the average Realtor makes less than the poverty line. The conversations I’ve had with home buyers and home sellers really has me thinking about what separates successful Realtors from the rest, and there are many things; enough for another blog post.