Sometimes it feels each new season of selling real estate is like that game show, The Price is Right. The new listings are grouped together with all the ‘old’ listings on stage, and buyers from the audience try to bid what they think should be the closest correct sales price. The person with the best answer gets selected to play the game. “You’re the next contestant on This Sale is Right.”
Believe it or not, there is a happy price medium, it just takes longer for some to find it. Why is that? Because we’re all human. There are some sellers still stuck in the pre-recession pricing strategy: “List high, doesn’t matter how long it takes, eventually it will sell.” There are some buyers still stuck in the height of recession: “offer 20-25% less than asking, if the sellers really want to sell, we will end up with a decent price; they’ll snap up my quick cash closing.”
Take a look at the last decade- these are closings in the Highlands Township:
Closing Period # of closings Avg. Days on Market Avg. Listing Price/Sales Price %
Jan 1- Aug 19 2009 47 4-5 years 86.60%
Jan 1 – Aug 19 2014 91 486 days 88.90%
Jan 1- Aug 19, 2019 124 207 days 92.68%
It’s up to the Realtors to educate the buyer and the seller of the current trends. As new properties are listed, usually a CMA (comparative market analysis) is done by the listing broker to determine the best listing price. Listing prices are derived from comparing the subject property to similar homes, preferably in the same area, and with as many of the same characteristics as possible that have sold within the last year. It is crucial to revisit the process at the listing renewal time to ensure the pricing is still on track.
When a listing broker delivers the suggested listing price to a seller and they come back with “But I need to get more” or “I’ve got more than that in the house” or “Oh, no, you see, this property is in an estate. The proceeds will be divided between X amount, and we each need X amount”. All of these statements may be true, but it still doesn’t change the suggested listing price. When listing prices are adjusted too high, the property is likely to become ‘dead on the market’, and when that happens, there are less showings and hardly any offers.
When a buyer listens to their broker, and has done a little of their own homework, the buying process streamlines into faster closings. These days, most buyers get their pre-shopping experience from Zillow. While Zillow gets their information from public sources, the ‘Zestimate’ may not work in certain areas that hold their own values, or unique homes. Zillow should be treated as a tool and is only one source of information. A Realtor can give a buyer information from the local MLS, along with knowledge of the market in general to help guide them with offering prices.
Which brings us back to The Price is Right. What is the right price to offer for a property? Usually a buyer makes this decision after seeing a few (sometimes a LOT) of other properties, they don’t just buy the first one they see (although that does happen). Obviously, a buyer never expects to pay full price, but that happens too, especially if supply of demand is low. There are many variables in determining an offering price. The buyer’s ability to pay the price, the seller’s motivation to sell, has the price changed since the property was listed? If so, why? Just because there has been a price drop doesn’t mean the seller is desperate to sell. When there has been a considerable price drop, the buyer should consider a closer gap between the asking price and offer. I use the term ‘sharpening their pencils’, and sellers and buyers do this after the process has begun with negotiations, but smart shopping beforehand, and seller’s adjusting prices after the initial listing are other ways of sharpening those pencils.
When buyers and sellers are armed with knowledge of the current market, there’s no need for inflated prices or bottom feeders. If a property is priced in line with the current market, the offering price should be within 3 to 8%, and then may be negotiated to a higher price before settling on a final price. Sometimes, during the due diligence period, the price may be negotiated again. If a listing has the language, or verbally communicated by the seller as ‘as is’, the price is usually non-negotiable after the contract has been fully executed, meaning a buyer can accept the property, knowing of any defects found, or walk away if it’s before the end of the due diligence period.
The buyers armed with knowledge will be the next contestants on The Price is Right, so come on down!
Jeannie and Tucker Chambers are owners/brokers of Chambers Realty & Vacation Rentals at 401 N. Fifth Street. 828-526-3717 or highlandsiscalling.com