Sell in a Sellers’ Market?
That’s a no-brainer, you say.
Not so fast, I say. For starters, pricing a home is more difficult in a sellers’ market. Faced with a low inventory, it is harder to arrive at a price simply by comparing the home to be listed to other homes. Comparable active listings may not exist, and recent sales may be sparse.
The penalty of overpricing
Why do homeowners overprice when they sell in a sellers’ market? Some do because they’ve read the headlines. Others do because a similar home just sold for a boatload of dough. The punishment for overpricing a home can be especially severe in a sellers’ market. With so few homes for sale and sold, buyers know all of them by heart and can spot an overpriced home a mile away. Buyers will wait for a price reduction that brings the home in line with the few others on the market.
Price carefully and at the last minute
How should you price your home in a sellers’ market? Carefully and at the last minute. Sellers are concerned about the listing price. As the seller’s agent, I focus on the selling price. To arrive at the highest selling price, the listing price must attract the greatest number of qualified buyers. I begin by examining the active, pending and sold comparable properties in the immediate neighborhood. If necessary, I expand the search to a larger area.
On pending and sold homes I’m interested in the days on market. That’s the number of days passed from the listing date to the signed contract with the buyer. On sold homes I note the difference between list and sold prices. On pending sales I extract as much information as I can from the listing agents – offers over list price, the number of offers, use of escalation clauses?
With so few homes on the market, some buyers are willing to compromise as to location. For example, a buyer looking to buy in Kirkland may be willing to settle for a home in Bothell. Buyers looking in the Maple Leaf area of Seattle may expand their search to Shoreline. I have to be mindful that buyers have these options and price my listing accordingly.
Comparable properties aside, another aspect of pricing is timing. As we approach the listing date, I keep a close eye on active and pending properties. A new listing may pop up just around the corner. A competitive home has just gone pending or sold. Such last minute events may push the listing price up or down.
List on Friday, sell on Wednesday
All listing preparations – photography, staging, sign, website, and social media are readied for a Friday listing, a Sunday open house, and a Wednesday sale. This approach is conditioned on the home looking its absolute best. The MLS listing data will include a note for agents saying that offers will be reviewed on the following Wednesday. By noon on Saturday, I know the level of interest the home has received by agents and buyers. Statistical data provided by the MLS tells me how many automated emails to buyers my listing has triggered. It also shows how many buyers have declared the home as a favorite or as a possibility. I compare these numbers to my past listings and immediately know the degree of interest. From then on I check the automatic notices I receive through the lock box system. It tells me what agent has been to see the home. I follow up with text messages to get feedback.
On Sunday morning, I check for internet events concerning the listing. How many visits were there to the custom Website I created, and how many visitors gave it a heart or a lightbulb on brokerage sites or real estate portals? If Redfin, a brokerage popular for home searches, labels my listing a “hot home” I use that immediately in social media. At the Sunday afternoon open house, I don’t collect names and email addresses. I’m not there to find potential buying clients but to sell my listing at the highest possible price on Wednesday. My sign-in sheet only asks for the current city of the visitors and how they found out about the open house. The number of parties coming to the open house is another indicator of interest.
On Monday morning, the phone starts ringing. Can we do a pre-inspection? Do you have any offers yet? Do you accept escalation clauses? I answer these questions truthfully and in the seller’s best interest. No, we don’t have any offers yet, but I’m expecting at least two. That was Monday. On Tuesday afternoon: yes, we do have three offers so far. Most offers will arrive in my inbox on Wednesday and some as late as 4:00 pm, only an hour before the offer review. My client has authorized me to reveal offer prices and I will if necessary. I encourage escalation clauses.
At 5 pm Wednesday afternoon, we review offers. My most recent listing had nine offers. We created a spreadsheet to quantify and qualify the offers. All buyers waived the inspection, eight of nine used escalation clauses. In the end, the offer the seller accepted was well over list price. Two other offers with high escalation clauses made that possible.
It’s not sold until the deal closes.
In the sometimes frenzied activity of multiple offer scenarios, it is easy to overlook two obstacles to a successful closing. One potential obstacle is financing, the other is the appraisal. A cash offer is only as good as the certainty of the funds being available in the United States when they are required per contract. In fact, even a financed purchase may warrant verification of available funds and their sources. A gift letter from grandma is nice, but it is not the same as money in the bank.
This is why the reputation of the lender and the agent matters. The seller has the right to decline an offer because the buyer’s lender has a poor reputation. The other possible obstacle is the appraisal, ordered by the lender. If the home does appraise below at the agreed-upon sales price, the buyer may decide to walk away with the earnest money if the seller does not agree to sell at the appraised value. The best measure against this from happening is to have the buyer waive the appraisal clause in the contract.
Will more listings sprout this Spring?
My hope is that the market gets back to normal with a healthy number of homes for sale. The longer this shortage of listings lasts the more the prices will continue to rise. This will make homeownership even less affordable than it already is. It may also result in a severe market correction which will be painful. In the meantime, if you have a good reason to sell, I’m here to help you. Let’s list on Friday and sell by Wednesday.