Greed is one of the seven deadly sins, and it can ruin a seller’s chance of working with the best buyers the market has to offer. Can I explain?
You see, the best buyers that a seller can work with, especially in a low inventory market, are the ones who come through the door the first few days that a listing goes live. Statistically speaking, it’s likely that these buyers have been looking for a while and know what they want. They have seen everything that the market has to offer and they know what value looks like to them. I call these buyers the “pent up market.” And there is nothing better than pent up demand.
When these buyers see your home and it is priced right and in great condition, they write an offer immediately. Again, this buyer is educated in what the market has to offer. They don’t need time to think, they act. On average, these buyers are your best chance at top market value. They are not afraid to pay full price, or even over full price if there are multiple offers.
Don’t be fooled though. The pent up market is not dumb. Quite the opposite. Again, they know what value looks like and they know your competition. If you put your home on the market at an unrealistic price, the pent up market will view your home and give you what I call the kiss of death feedback. That is, “great home, the buyers really like it, and they are going to keep on looking.” In most cases, if you have heard this feedback on your home, it is a pricing issue.
Not only is the pent up market willing to pay top dollar (within reason, not fantasy land prices) for a home, they are also the easiest to work with as it pertains to inspections. They have seen all of the competition, and maybe missed out on a few homes, and thus they are more reasonable when it comes to negotiating repairs. They don’t want to lose your home. They see the value.
So what if you do start out with a fantasy land price? First, you have to accept that you may lose the pent up market completely. You are only new and exciting once, and that lasts only about one week in today’s fast moving market. In my experience, the only way that you can recapture the excitement is to make a pretty aggressive price adjustment. In most cases, we are talking a 3 to 5 percent adjustment. So on a $200,000 home you are looking at a $6000 to $10,000 adjustment. The new price needs to be a good value. Perhaps almost a deal.
The reason for a price adjustment should be to position a home in front of a whole new buyer pool. These buyers would not have seen the home at its former price because it was out of their reach. This is why an aggressive adjustment is needed. You don’t want to be the seller who slowly and painfully adjusts his price $5000 every 30 days until they finally go under contract. This is what we call chasing the market and relinquishes all control and leverage to the buyers.
My final word of warning to sellers out there is this: The market is shifting. In most areas of town, housing inventory is on the rise and the buyer demand for that housing is not keeping pace. This is causing higher days on market and price adjustments to occur.