Are Sellers Getting Too Aggressive?
September 29, 2020 | CHR WEEKLY
These numbers are staggering:
And yet, looking at the remaining 31-40% of the Denver market transactions helps us understand the mindset of sellers, the competence of agents, the importance of property preparation and how to think about reading the market when selling a home.
9% of the homes sold at or above their final list price, but not their original list price. This means, very objectively, these sellers overpriced their home. This could be a combination of factors including poor analysis by the agent, “giving the price a shot” or poor property preparation.
What these sellers did well however, was read the market and make an adjustment.
A good agent reads the market through a price assessment, talks to a seller about their goals and risk tolerance, arrives at a conclusion with a seller about price to market relative to time and condition of the property. Then together, the agent and the seller read what the market tells them.
9% of these agents and sellers did that well.
This doesn’t mean the remaining 31.5% got it wrong. Some of these sellers may have willingly accepted an offer within the first week of listing, below the asking price. If the seller was aggressive on price, accepting an offer below the asking price is potentially a smart business decision.
But, we can see from the chart below that if a home is on the market for more than 14 days, 70% of those homes will sell below the original list price. 28 days = 82% of those homes will sell below the original list price. Two months after the original list date = 91% of homes will sell below the original list price.
This does not mean the agent failed in properly marketing the home. It simply means the market is telling the seller, relative to location and condition, the home is overpriced and they need to make an adjustment. Not that they are getting a price below what the home is worth.
For both sellers and agents, particularly in hard markets or hyper local areas where home sales are slow, they must look at their relationship as a partnership. Their job together is to review what the market is doing, arrive at conclusions on what that means for the seller and week by week, make the best decision possible given the information available.
A good agent will help a seller properly prepare a home for sale and price it aggressively to maximize its value. If the home doesn’t sell, that agent will read the market conditions weekly and help a seller make adjustments. Sellers should push the price on their home if the goal is to maximize value.
Over the last 8 weeks in particular, we’ve been sharing meteoric price increases. Those price increases have been historic and contributed to by the ongoing supply and demand issue. None of that has changed. Last week alone the number of properties under contract was more 40% higher than the same time last year at 1,474 properties and 100 greater than the number of new homes that hit the market.
However, we had bad data we were analyzing and sharing over the last 8 weeks that caused the appreciation to appear slightly more substantial than actual. Fortunately, we caught this error relatively quickly and are making the correction here.
The average sales price of a single-family home in the Denver metro market is $588,475 and up 16.7% over the same time last year. Four weeks ago, that number peaked at $609,767 or 17.5% higher than a year ago.
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