The five factors in the marketing position of your home are the price, condition, location, terms and the agent you select to market your home. In most cases, if the home is in a poor location, there isn’t a remedy. Short of moving the home, adjustments must be made in other areas. Improving the condition of a home is a frequently overlooked strategy in selling. The seller may rationalize why he is willing to give the buyer an allowance to make his own personal choices for paint, carpet and the like. However, it takes a trained eye and considerable imagination to see a finished home in its present condition. The discount that the buyer imposes on the price is usually greater than the cost of the seller actually doing the work. Favorable terms can also cause a home to sell for a higher price.
The majority of the time that a home fails to sell in its initial market period is due to one or more of the first four factors. On occasion, the agent listing a home may not know or understand what it takes to sell a particular property in a specific area.
Price is without a doubt the easiest of the factors to control. Adjustments in price can take care of deficiencies in the other categories. The key to a successful sale is knowing which of the factors to focus on to maximize the sales price while minimizing the marketing period.
Competition in the market place affects the sale price of a home. If the demand is constant and the supply is low, the price can increase. On the other hand, if demand is declining and the supply is constant or increasing, the price will go down.
90 to 120 days of market time is considered to support a healthy inventory of property. If the market time is less than that, the shortage of properties can cause the price to go up. If it is more than that, the oversupply of properties can cause prices to go down.
Another uncertainty that occurs when the market time is extended is that the economic conditions may continue to deteriorate. This could lead to lower values and possibly longer market times. One strategy would be to price the home in today’s market so that it would sell within 30 to 60 days. Experience has taught the industry that if a home sells in the first 30 days that it is on the market, it will usually sell for its highest price.
An explanation for this is that there are people in the market who have seen everything that is for sale currently and are waiting for something new to come on the market. They rush to see the home immediately and these seasoned buyers can tell if it compares to other homes in price, location, condition and terms. They know they might be competing with other buyers and have a tendency to make their best offer first.
Contrasted with a home that has been on the market for a long time, the buyers in the market place begin to think that something is wrong with the home because it hasn’t sold. If they are willing to take a chance on it, they think that they deserve to get it at a bargain price.
Positioning Your Home to Sell
In any given market, only a specific number of homes can sell in a period of time. In order to get your home sold in that period of time, it must be positioned competitively in price, condition, and terms. Price is the most strategic and flexible of these factors.
Overpricing
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Reduces sales activity because agents know the listing is over-priced and don’t want to waste their time showing it because the seller is unrealistic. Not to mention the fact that increasingly more often, selling agents are representing the buyer and have a responsibility to find the best values for their clients.
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Reduces advertising response because buyers as well as agents looking for a particular type of home in a certain area become familiar with what is available.
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Loses interested buyers who might have looked at it but didn’t think the seller would consider what they thought it was worth. Not all buyers are willing to go to the effort to write an offer, put up earnest money, and take the time it takes to find out if the seller will take less.
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Attracts the wrong prospects because they are expecting more amenities in the home based on the price and once they see it, it won’t compare to the other homes in that price range.
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Eliminates offers for the same reason because the wrong prospects are looking at the property.
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Helps sell the competition by making the other homes in that price range look like they have more to offer.
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Can cause appraisal problems even if you were to find a buyer who was willing to pay more than market value. The lender would require an appraisal which would demand factual, objective proof that the home was indeed worth what the buyer was willing to pay for it. The lender does this so that if they have to take the home back because the buyer defaults, the loan would be covered by the sale of the property.
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Extends market time because of all the reasons listed above.
Things that Don’t Affect Value
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Your original cost is irrelevant to market value.
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Your basis in a home which is the price you paid plus any capital improvements made while owning the property is not related to market value.
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The cost to rebuild it today is important to know for insurance purposes but doesn’t affect market value. Appraisers use the cost approach as one method to help focus on the value buy they also depreciate the property for economic and functional defects.
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Your investment in certain improvements was made for personal enjoyment and need to be treated as such. It is unrealistic to think that you can locate the buyer who would value those particular improvements the way that you do.
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Personal attachment to the home, setting, or other sentimental reasons does not have tangible effects on market value.
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