Acting Like a Seller
Pricing your home to sell is not easy, in part because you don’t really know what the market will bear.
I’ve been counseling some friends who are preparing to sell, but their house is unique in their neighborhood and thereby very hard to compare to anything nearby.
They deferred to the judgment of their real estate agent. In their meeting, he suggested a start price which, in his opinion, was very close to its likely market value.
My friends agreed, but shortly thereafter they were asking me:
- It seems low, what if we could get more?
- Shouldn’t we price it higher and come down only if we need to?
- If we get a lot of interest, won’t that just mean we under-priced it and left money on the table?
My personal advice was this: Look at the calendar. It’s summer. There might be 10 to 12 good weeks left to sell this year, then we’re nearing the holidays, when there will be far fewer buyers.
Price it right now, and you should draw interest and have a real chance to sell. Price it high now, and you might be correcting the mistake in September or October. That’s when potential buyers start packing it in for the winter, maybe planning to come back next spring to search again.
For now, my friends are sticking with their agent’s recommendation for their list price. But it’s easy to see why many sellers listen to a market value assessment and then add 5 to 15 percent to their start price. Or if they don’t exactly “add” to the suggested price, they might pick the highest possible list price their agent suggests.
The calculation sellers make is that buyers who like the house will just offer what they think it’s worth, and a negotiation can take place with the sellers keeping the “high ground,” if you will. You can’t leave money on the table if you’ve added a fat cushion to your start price, right?
In reality, buyers tend to brush off overpriced listings and wait for the owners to show they are realistic — to show that they’re really sellers. Buyers often fear that offering 10 percent or more off the list price will just waste everyone’s time.
This is how standoffs are born, and listings wind up lingering for three months, six months or more.
So if you’re setting your list price, ask yourself: How long do we want to have this house on the market? Price accordingly.
As to all those listings getting stale nowadays, I have to say the same thing as I said to my friends: Look at the calendar. Time is not your friend. If you really mean to sell this year, make a move, make it bold, make it soon. If waiting around for people to drop in, fall in love and make an offer hasn’t worked, act like a seller.
How to Linger and Lose
In Manhattan Beach, the market I track most closely, we’ve had a good first half of 2010, but there are plenty of listings that are getting long in the tooth.
I’m thinking of one smallish, nicely remodeled East Manhattan Beach home in particular where the owners are relocating out of state. The sellers began too high in April. Immediately, verbal offers came in at about 9-10 percent below the start price, but these were deflected at first. The owners were feeling bold.
At this point, nearly three months into the listing, they haven’t made a price cut or a deal. I’d bet the home eventually trades for about 15 percent off their start price, partly because it’s hung around so long now.
If I’m right, overpricing and holding fast when that first flood of interest came in could cost the sellers $50,000 or more in the end.
To my mind, you’re more likely to leave money on the table by overpricing than by “under-pricing.”
The real estate market isn’t perfectly efficient, but buyers seem to recognize “deals” and move on them quickly. Listings that get old become shark bait, and sellers often settle for less.