“Wishin’ and hopin’ and ‘ thinkin’ and prayin,'” the first line of a Dusty Springfield tune sung by numerous artists gives some pertinent advice on how not to find love. This simple advice is also the cornerstone of how not to sell a property.
If you want to sell your home for the most money in the least amount of time you must price it right from the beginning. Pricing a home right from the beginning, at or slightly below market, quickly produces multiple offers along with the prospect of a bidding war: Now isn’t that exactly what every seller should want?
With house prices increasing at various rates across the country, some sellers may think they can list their homes at a higher price and adjust if necessary. That would not be a good strategy. This is a post KeepingCurrentMatters ran several years ago by Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit http://realestate.fiu.edu/.
Are there any negative effects from changing the listing price of a property? This question haunts Brokers/Agents as well as sellers of property every day. At present, there does not seem to be a consensus answer to this question within the professional real estate community. Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.
In Knight’s research, the impact of changing a property’s listing price is investigated. Additionally, the types of property that are most likely to experience a price change are also estimated. The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.
Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts. Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.
Implications for Practice
Sellers as well as Brokers/Agents should therefore be aware of the critical necessity of getting the price correct from the start. Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average, according to Knight. Brokers/Agents’ desire to take a listing and get the price right later will ultimately lead to their working harder according to Knight, and they are not doing their sellers any favors. Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.
Interestingly, I have found in my own research that the direction (up or down) of the listing price change does not matter. A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices.
Therefore, get the price right from the beginning. It is always best for the seller and the listing agent.
An absorption rate is simply the time necessary to sell ALL homes on the market at the current rate of sales. The information compiled here highlights the 12 month, 6 month and 3 month absorption rates, with the 3 month measuring the most active period in yearly real estate sales. A low number is good and would represent a seller’s market. Average absorption rate in an “equal” market is 5 to 6 months. 7 or more months represent a buyer’s market as you can see from the slide below.
While absorption rates in other parts of the country is way down, many locations in both Nassau County and Suffolk County are languishing, most likely due to the fact that New York State is a judicial state. That means that foreclosure proceedings must go through the court system which currently entails about 3 years if the homeowner hires an attorney.
Want to see how your town compares to others? See Absorption Rates Here! Don’t see your town listed and are curious? Send me an email with your town and I’ll add it to the next update toward the end of October. Don’t understand what all this means? Whether you see your town listed or not, drop me a note wioth your return email address and I’ll send you a detailed analysis for your town.
As always, feel free to contact me with any real estate questions or concerns.