Hello, This is Michael Davar with DAVAR & Co.
When a home is initially put on the market it is welcomed by a lot of fanfare of interested parties, the so-called potential buyers. During the first few weeks that any property hits the market, it gets the greatest amount of activity from prospective buyers. This is a golden opportunity for the sellers to take advantage of this large waiting pool of buyers to get offers. The price and the condition of the home are two very important factors. These factors will determine whether a seller will find “SUCCESS” and sell their home quickly or linger on, and be forced to adjust their price downward eventually.
Overpriced homes sit on the market without success. Throwing a price out there just to test the market is not a good strategy. Instead, It is extremely important to methodically and carefully review the market trends as well as comparable sales statistics before putting a price on a home.
To demonstrate the importance of pricing a home accurately, an analysis of the final list price of homes versus the actual sales price was done by the firm “ReportsonHousing.com”. The last list price references the price the property was listed for just before it went into escrow.
In Orange County. this data analysis was done for properties listed and/or sold in the month of September of 2019.
Nearly 63% of all homes sold during this month never reduced their list price before going into escrow. The sales price ratio to the list price for these homes was 98.2%. Meaning that on average these homes sold within approximately 1.8% of the actual list price. So, a home listed at $750,000 sold for $736,500.
In addition, 20% of all homes sold during this period which already had previously made a price reduction between 1% and 4%, sold for 97.6% of the final list price. So, a home listed at$750,000 Sold for $732,000. These sellers received approximately $4,500 less than what they would have received had they originally listed their home more accurately.
For homes sold during this same period that had previously adjusted their price downward by 5% or more, that’s actually 17% of all homes sold, the ratio of the sales price to the final list price was 96%. Doing the math for a home listed at $750,000 the final sales price was $720,000 dollars. Now, we all know that there is a huge difference between selling your home for $720,000 and $736,500. That's a difference of $16,500,
In closing, the pricing strategy is a critical factor in obtaining the highest sales price. Homes that do not have to reduce ultimately sell for a higher sales price. Furthermore, the amount of Market time increases substantially for those who have to reduce. What is so important about the first few weeks after hitting the market, that helps drive success, is the fact that many buyers out there who have not yet isolated their dream home and are well educated on the value of homes in their price range are anxiously waiting for that RIGHT home to come on the market. Every time a home hits the market there is a lot of activity from those types of buyers who have been sitting on the sidelines.
We all know that 95% of the buyers start their search on the internet prior to even contacting an agent. With the internet, pricing a home correctly is even more critical. Most buyers are subscribing to some internet site where they get notified immediately as a property becomes available. Generally, buyers don’t make a buying decision on a WHIM. By the time they reach the point of making that very important decision they have usually already looked at hundreds of homes online and have viewed several in person.
The chances are they've already seen the home down the street that sold two months ago and the chances are that they have already looked at other homes within the same neighborhood or general area, and they have developed expertise about home values in their own price range. Catching those buyers during those first two weeks is extremely important. However, many sellers do not understand the importance of those first two weeks and the importance of pricing their homes correctly. By not pricing their home correctly the sellers are wasting that golden opportunity. Of course, they always have the opportunity of reducing their list price down the road but they're missing out on that golden opportunity to capture that motivated buyer who's been sitting on the sidelines waiting for the right home to come on the market.
The price reduction is never met with the same enthusiasm by the prospective buyer as a home that was well priced, originally. The bottom line for the sellers is to spend time carefully studying and analyzing the list price of their home by selecting the right professional who provides them with accurate and appropriate information. It's very important for the sellers to consider all the pluses and the minuses in their home’s condition, upgrades, features, amenities, and the location before they decide on a list price for their home.
Having the right price on the home will not only reduce the market time but will also increase the activity generated by the prospective buyers, hence resulting in possibly a higher than market value sales price.
I am Michael Davar with DAVAR & Co, and I look forward to providing the critical information needed by YOU so that you can make the right pricing decision.
Thank you!