A great quote about higher-end listings from this free WSJ article:
Tomer Fridman, a luxury agent with Compass said the prices on some of the homes were exorbitant in the first place, so the reductions represent a long-overdue correction. “When you do a price adjustment at this level, that seller has to make it impactful,” he said. “You have to show you mean business.”
Once a home is for sale but not selling, how do you know what to do? Just dump on price? Lower in small increments and risk irritating buyers? Isn’t there a guide somewhere?
Both buyers and sellers can apply my List-Price-Accuracy Gauge:
Once on the open market, if you are……
- Getting visitors and offers, you are within 5% of being right on price.
- Getting visitors but no offers, you are 5% to 10% wrong on price.
- Not getting visitors, then you are more than 10% wrong on price.
It’s nothing personal, it’s just a simple guide to know how close you are to selling.
The serious buyers rush out the first week to take a look, but after that it’s crickets, with only an occasional visitor. It is tough for sellers to cope, or make adjustments. But once the initial urgency has expired, you have to do something – don’t just sit there.
How quickly should sellers make adjustments? The DOM clock is ticking!
0-14 days on market – Hot property, sellers have max negotiating power.
15-30 days on market – Buyers get suspicious, want to pay under list.
30+ days on market – The jig is up, and buyers expect deep discounts.
After being unsold for two weeks, sellers will suspect that something is wrong. But it is natural to resist changing the price and instead blame everything else.
Sellers, and agents, need to shake that off and act quickly to keep the urgency higher. The first price reduction should be for at least 5% and happen in the first 15-30 days for maximum effectiveness. If the home doesn’t sell in the next two weeks, then another 5% is in order, and by then the fluff is eliminated.
Where do sellers go wrong? They don’t properly price in the negatives.
Typically sellers just pick apart the comps to convince themselves why their home is the best around, and then settle on a list price that will show everyone who’s the boss. If you don’t have any negatives, then you probably will get your price! But typically sellers are forced to come to grips with the negatives of their house, and adjust accordingly.
Do sellers have to lower their price? No, not neccesarily.
There are other alternatives:
1. Make your house easier to show. Listing agents who insist on buyers jumping several hurdles just to see the home aren’t realistic about today’s market conditions. Make the home easy to see!
2. Fix the problems. New carpet and paint is the best thing you can do: 1) it looks clean, 2) it smells new, 3) you have to clean out your house to install it, and 4) you are managing a business transaction now – it is the logical solution. Utilize staging too.
3. Improve the Internet presence. Have at least a 12-25 hi-res photos and a simple youtube tour.
4. Wait for the market to catch up. If unsold for 60+ days, cancel and try again later – probably next year.
5. Reset the Days-on-Market stat. As long as the MLS allows agents to refresh their listings, then it’s in the best interest of the seller to reset the DOM. It is a gimmick, and instead sellers should concentrate on creating real value for buyers – that’s what will cause them to pay more.
The longer it takes to sell, the more discount the buyers will be expecting – usually about a 1% off for each week on the market. When other homes are flying off the market, the buyers’ obvious conclusion is that your price is wrong, and they load up the lowball offers.
Even if you complete one or all of the five ideas above, don’t be surprised if you need to lower the price too. Keep it attractive!
Now this dude knows how to sell! Sell the sizzle and not the steak with JTR. Love it.
Thanks Old School!