Have you ever sold a house? Thinking about selling your house? Maybe it's on the market now. If so, this article may be for you. I'm going to tell you the ugly truth that so many Realtors are afraid to tell to their current clients out fear of making the seller angry and then that agent losing the listing.
First, since I'm a numbers kind of person, I want to take a look at the cold hard data. The following statistics are derived using data provided by the MLS system in use by the Waco Association of Realtors and it's members. I took a sample of over 1,300 homes sold in the last year:
- 36% of home listings needed a price reduction
- Average days to under contract for homes that needed a price reduction: 166
- Average days to under contract for homes that DID NOT need a price reduction: 44
- Sold price to current asking price ratio for homes that didn't need a reduction: 96.12%
- Sold price to current asking price ratio for homes that DID need a price reduction: 95.89%
- Average price reduction amount: $15,532
- Average price reduction as a percentage: 9.78%
Some of those numbers can be a little sobering, especially the difference of "days to under contract". Even the smaller sold price ratio adds up too. If you're selling a home for $200,000, that adds up to a difference of $460. With the increased number of days on the market and the cost of home owners insurance, taxes and interest, you're real cost difference could be more than $4,600!
Am I saying it's not worth a try to get a little more for your house? Nope, as long as you react to the market quick enough. Don't hang onto that inflated asking price for too long or your listing will become stale. The best time for your house to obtain the best price is typically the first 3 weeks it's on the market. That's when it's new and fresh and buyer's are just becoming aware of it. It's really important to get the price right to begin with and not be afraid to react to the changing market.
Okay, so you have your house on the market and you've gotten a "low offer", then what? First we need to determine if it's actually a low offer. "What do you mean IF it's a low offer?!" Well, buyer's are more educated now that ever with respect to home pricing.
With so many resources available on the internet and at their fingertips, buyer's (now more than ever) have a good idea what how much sellers are asking for their homes. True, in Texas, they don't know how much someone actually PAID for their house (since Texas is a non-disclosure state), but they do check on asking prices. With all the photos available on various websites, buyers can also quickly see if the home has a swimming pool, granite counter tops, tiled bathrooms, hardwood floors, stainless steel appliances, etc..... That's why we need to determine IF it's a low offer to begin with.
Let's say a seller is asking $250,000 for his house. Let's say that his agent told him that the comps showed it's roughly worth $200,000. If he gets an offer of $210,000, it may not be as low as he thinks. Sure, it's $40,000 less than what he's asking, but his asking price may be $40,000 too high. It's important for the seller to NOT get offended or angry or disappointed. The most important thing he can do is look at the offer objectively. I know, it's hard! He has probably spent years in the house, he's emotionally tied to it, he has a lot of sweat equity in it, etc... but he needs to look at the big picture - and that's the sale of his house.
As a matter of fact, when I sold my personal home, I got an offer on it (after it was on the market for only 2 days) for $15,000 less than my asking price. Was I over priced? Nah, not really - just a little bit (I wanted to see if I could get it). I wanted to ask more for it, but all the numbers and all the data wouldn't let me! Trust me, I tried to spin every number to my favor, but it didn't work out - the numbers don't lie.
There's often a misconception with sellers. I don't know why, maybe it's emotion talking or maybe many sellers just don't know. Let's go back to my previous example of the guy selling his $200,000 house for $250,000. Let's say he has to drop the price to $225,000. That seller may feel that he "came down $25,000". That's not actually true. How's that?? Well he had to get a little more realistic on the price. Yes, he came down $25,000, but he didn't come down $25,000 from the VALUE of the home, he came down $25,000 from the inflated asking price.
Here's another way to look at it. Let's say you're shopping for a new car and the new BMW that you want is $60,000 (according to BMW's website). You go to the car "stealership" and they have that exact car for $85,000 and the car salesman says they'll come down $15,000 and sell if to you for $70,000! Would you feel like you're getting a good deal on the car since the dealer came down $15,000? Probably not. You'd still be paying $10,000 more than the VALUE.
So, what's the ugly truth?
- 1) Unfortunately, buyers don't see the same value in a home that a seller may see. It's a MUST for sellers to disconnect emotionally from the home they are selling. Trust me, I know, it can be hard! When I recently sold my own home, I had to approach the sale as business transaction - with numbers only. They buyer of my house didn't care that it was the home I brought my newborn daughter to - from the hospital. They didn't care about the trampoline in the backyard where I have memories of squirting my daughter with the water hose while she jumped up and down on a hot day, the memories of Christmas mornings, etc.... Those are MY memories, not those of the buyer who is interested in buying the house.
- 2) In the end, it comes down to the numbers. Yes, for a homebuyer it's an emotional decision. I mean, they "like" a house enough to "want" to buy it, but in the end, it still comes down to the price. I've had many buyers that "fell in love" with a home. They went to make an offer (an offer determined by what comps show it to be worth), only to have the seller be unrealistic and not budge, so my buyers moved on and found another home they "loved" - it's happened many times.
- 3) The longer a house sits on the market, the most likely the seller will end up getting less for the home than if they priced it correctly to begin with. I've seen this hundreds of times. The seller will say something like, "Well, I just want to start out high to see if I can get it. If we don't get any showings, then I'll drop the price." I'm sure that sellers mean it when they say that - it's the truth. Unfortunately, a lot of those sellers will start spending that extra money in their head... "Hey, If I can get this much for my house then I'll be able to get a house with a pool" or "I'll be able to buy all the new furniture I want for the new house." When a seller starts mentally buying things with the extra money, it's VERY hard for them to come down off the inflated asking price! Why? Because now that seller has become emotionally tied to the higher price. If they don't sell the house for that amount, then they can't have what they want - the pool, the furniture, etc... It then becomes VERY hard for the to "let go" of the inflated asking price and get the home priced correctly.
- 4) Believe it or not, houses do "compare". I've had sellers tell me that nothing compares to their house - many times. The last time I had a seller who told me, "Nothing in this neighborhood compares to my house", What did I do? I took him to other houses in the neighborhood and showed him that he was "right"... I took him to homes that had granite counter tops (his didn't), a house that had a swimming pool with waterfall (his didn't), a house that had an awesome wood deck and outdoor living area (his didn't). After he looked at those places, I could see the defeated look in his eyes. He honestly thought with his imported Italian tile, bull nose corners and extra half bath - made his house stand out. He quickly realize what his competition was. We got the house priced correctly and got it sold. I did feel sorry for him when I saw the look in his eyes, but sometimes you can't tell people things - you have to show them.
Actually, there are so many ugly truths, I could write a VERY thick book. But the most important things to remember are:
- 1) Disconnect emotionally from the house your selling
- 2) Don't ignore the numbers
- 3) Keep expectations realistic
- 4) Be flexible and willing to change with the market
- 5) Look at every offer objectively and keep angry emotions in check
If you can do those things, you'll find that the home selling experience will be a lot less stressful and you'll be able to move on with your own plans to make new memories in a new place!