Oct
21
Pricing to Sell
Posted by Jay Haugen under For Sellers, Listings, Scottsdale, Market
By HaugenHomes.com 10/21/08
WHAT IS YOUR MOST EXPENSIVE COST OF SALE? It is not closing costs, It is not commission………………………………….IT IS CHASING THE MARKET!
We have discovered that chasing the market can be the highest expense of selling property for owners of lofts, condominiums, single family homes, palatial estates and commercial property. We have sold property in all these configurations and have determined that reducing this expense requires fast and aggressive response to market feedback from the property seller. We all learn from success and failure and since we know how to generate success, let’s examine how sellers are generating failure to sell or failure to generate the highest sale price. The following case studies will help you understand the importance of your pricing strategy. We have seen this pricing issue in all market ranges. The following case study reveals the cost of chasing the market. Both home owners and banks are making strategic pricing mistakes that extend their market time and impact their final net dollar from the sale.
CASE STUDY Price Range $300,000 - $400,000 (home owner)
In October a home owner called and requested our assistance to sell a property. The most recent sale at the time for a similar property in size and features was $368,000. The owner wanted to try an asking price of $385,000 but with no offers by the middle of December the price was reduced to $359,000. By December’s price change the most current sale value for a similar home had slipped to $325,000 (see Chart 1*).
*Chart 1
Date Avg. Value Asking Price Action
October 12 $368,000 $385,000 Listed property for sale
December 15 $325,000 $359,000 Reduced asking price
February 13 $278,000 $339,000 Reduced asking price
Advertising is simply distributing a message, if the message does not generate results the message has to be changed. We have determined, based on our success rate of selling 100% of the properties we listed for several consecutive years, that buyer feedback by itself is an ineffective input to help a seller determine what it will take to generate an offer. Close attention must be paid to the number of showings created from advertising to determine if the pricing is creating buyer interest or resistance. We have found statistics in our marketing data that, on average, a property can generate an offer within 10 showings. As shown below (see chart 2**) the sellers asking price failed in October, November, December and January at creating sufficient showings to generate an offer.
**Chart 2
Month Showings Asking Price
October 1 $385,000
November 5 $385,000
December 6 $359,000
January 3 $359,000
February 7 $339,000
After changing the asking price the middle of February showings increased generating two offers closer to the most recent sale value found in the area instead of the asking price (see chart 3***).
***Chart 3
Number Buyer Net Offer Action
Offer 1 A $280,000 Rejected
Offer 2 B $315,000 Accepted
Based on the offer, deciding to place the property on the market with an aggressive pricing strategy may have generated an offer of $368,000 as the research determined in October. Not pricing the property at market upon listing cost the seller $368,000 – $315,000 = $53,000 based on the highest offer received and the original market value determined in October. Learning from the pricing mistakes of others through market research will help you identify the right pricing strategy so you do not pay the high cost of chasing the market. Jay Haugen at RE/MAX Excalibur Realty 480-355-3552
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