Is My Home Priced Too High? Why Hasn’t It Sold?
A few months ago I had a conversation with a seller who’s listing with another agency was about to expire and the seller was considering giving me the listing. When we talked about the current price of the property, the seller asked, “Is my home priced too high? I don´t understand why it hasn’t sold or isn’t even receiving much activity. My current agent told me not to lower the price and has assured me that he has done his homework and can easily justify the asking price with his comps.”
Before arriving I had also done my homework and yes I agreed, the current asking price could easily be justified by comparing to previous sales and by calculating replacement value. However, what was not taken into consideration by the seller or the agent was the current inventory specific to the price range the home.
In this case, the home was priced at $1,050,000 USD. Pulling from our excellent database I looked at all sales during the previous year between $900,000 and $1,100,000. Basically $50k (4.5%) above and $150k (14%) below the current listing price. What I discovered was that within this price range only TWO homes had sold within the previous twelve months and there were 63 homes on the market within that price range.
At first this didn’t really register with the seller… until I explained that this represents 31.5 YEARS of inventory within this specific price range.
The point of this article is to explain that when you are pricing your home or property for sale, you have to consider the current inventory. The more inventory the more competition you will have. The more competition you have, then there has to be something compelling that makes your property stand out.
From my experience, a few homes always sell first because of their superior location. A few more sell quickly because they are designer quality homes in mint condition with zero deferred maintenance. The rest probably comes down to the combination of the buyer’s personal preferences and the perceived value for the money. A property that is aggressively priced grabs a lot of attention, will overcome personal preferences, and will have a much higher chance of finding a buyer.
Let’s say for example a buyer was interested in this price range and may see as many as 15-20 homes before they make a decision. First, the agents who sell most of the properties in this price range know which ones are best located, which ones are in top condition, and which ones are well priced. To even make it onto the agent’s list of 15-20 (out of 63) which they will show, there will have to be something about your property that stands out.
Even if you make it onto the winner’s list of 15-20, then the question becomes, is there enough incentive to the buyer to purchase yours versus one of the others? More than likely for most sellers during this current market, this will mean pricing your property more aggressively than you would like if you really want or need to sell. If not, then you will probably be stuck in the group of 43-48 homes that don’t even get shown while you are waiting for the market volume to come back.
If you are thinking of selling or are a current seller with a listing agreement with another agency which will expire soon, one of our agents would be happy to help you evaluate your price and help you come up with the best sales strategy for your specific property.
As of the end of June 2020, obviously we are just easing out of the Covid crisis which has brought the sales volume is down further, so we are now sitting on six to seven years of inventory looking at the SMA market as a whole.