You don’t have the luxury of using the days-on-market statistic to support your suspicion that the price might be too high – and you’d have to let it sit for a week or two to know for sure.
Let’s face it, today’s market conditions are ripe for over-pricing.
It is irresistible for sellers to use active listings to help determine their list price, without considering why those aren’t selling. But if an active listing has been on the market for a week or two, buyers think that it’s over-priced, because there are NO barriers to sale. Rates are ultra-low, mortgages are readily available, and buyers are out in droves.
So when you see a new listing pop on the market, and you are wondering if the price is right – compare it to the active listings. What do they tell us?
If similar homes haven’t been selling at that price, this house won’t either.
But there are caveats:
1. Determine if those active listings aren’t selling because they are hammered, or have a bad location/other defect – a special feature or two at the new listing could turn it into a barnburner.
2. Check the price reductions of the stale listings – they might be getting closer on price, but not able to generate a sale due to lengthy time on market. A new listing that’s priced about the same, but has more urgency, could garner immediate activity.
3. Are the other actives easy to show? Buyers want a hefty discount to make offers on homes they can’t see, or ignore them altogether.
4. Have the competing active listings been getting offers? Just because it is active, doesn’t mean it’s not hot. Bank-owned listings and short-sales are particularly notorious for staying active, even though they have several offers in hand – check to find out before assuming their price is wrong.
In today’s market, it is difficult for buyers and sellers to rely on solds only – there aren’t enough of them. Sellers have always been quick to discard any bad evidence, so if there are only a couple of recent sales and 5-10 active listings, they will use whatever is available to justify their price.
But you can use the active listings as a gauge because of the hyper-intensity of a pure marketplace. All participants have every data point at their fingertips, and buyers are doing their homework – if a house isn’t selling, there has to be a reason – and it’s usually the price. But consider the caveats too.
It’s up to you, and your agent, to properly evaluate what each home is worth.