From my over three decades of real
estate experience, I can tell you that
the single most
important concept in getting the highest possible sales price
for a home is understanding "price-point" and
the "freshness window."
“Price-point” is the list price at which the
property will draw 7-10 showings per week, and a serious offer from a
qualified purchaser.
It is essential that the property be priced
at the correct price point during the freshness window.
“Freshness
window” is the period of time that it currently takes for a high quality,
well priced
listing to sell.
In red-hot markets, the typical freshness window is 7-14
days. In a very good market, the typical freshness window is 14-30 days. In a medium
market, the freshness window is 30-45 days. In a bad market, the freshness window can be
45-60
days.
Think of a loaf of bread – it is “fresh” for
only a certain period of time. After the freshness window ends, it becomes stale, and its value declines.
It’s the same with homes. When it takes longer to sell a home than the
typical time that properties are selling in (the freshness window), the real
estate agents conclude that it is priced incorrectly, the number of showings
drop dramatically, and
the seller
almost always ends up receiving less for the home than they should have
obtained!!
How do we know if
the list price that has been chosen is at the correct price-point?
We are at the correct
price-point if the list price chosen is generating 7-10 showings per
week. If the property is receiving 7-10 showings per week, it is
moving toward a serious offer from a qualified purchaser.
If the property is not generating 7-10 showings per
week, the list price is not correct, and it will not be correct until 7-10 showings occur each week.
Price-point is one of the most counter-intuitive
aspects of pricing a property. I cannot tell you the number of times in my
career that I have seen this concept ignored or misunderstood, leading to
failure, and loss of tens of thousands of dollars to the seller.
Key point: Get the price to "price-point" during the
freshness window, while agents are still showing it!
Doing so will get you the highest
price in the end, by far, and maximize the odds for success!!!
Here is some scenarios of getting
a great sales price, versus a not-so-great sales price . . .
High Price Scenario:
Let’s say that it is a fairly good market, and
therefore, the period of time that the listing stays fresh is 14–30 days.
We calculate that the fair market value of the home
is $500,000. The seller decides that since it is a very good market, she
will “fish” for a higher price. If unsuccessful, she will quickly adjust the
price to conservative fair market value within the freshness window, in
order to avoid having the listing go stale.
She lists it at $515,000 for 17 days. It averages
only 2 showings/week during this period (at least 7 showings per week must
occur to sell a property).
On day 18, while still in the
freshness window, to avoid going stale she promptly
adjusts to fair market value of $500,000.
On day 20, she receives six
offers, the highest of which is $525,000, which she promptly accepts. She is
asked to do little work on the home relating to termite and contractor
inspections, due to the competition from the multiple offers.
Note that because she did this properly,
she
achieved a final price that was considerably higher than the home’s actual
true market value! This excellent result did not occur accidentally, and
occurred only because of the conscious application of the principles
mentioned in this briefing!
Low Price Scenario:
By contrast, we see frequent
examples of sellers doing exactly the opposite of these optimum high price practices.
As an example, here is a typical
low price scenario:
The seller agrees that the fair
market value of the home is $500,000. She decides to list it higher than
its real value, at $515,000.
The home averages only 2 showings/week during the first three weeks (at least 7
showings per week must occur to sell a property).
Unlike the optimal high-price scenario
described above, this seller does not change the list price in spite of
receiving less than 7 showings per week. She stays with the a list price
that is not generating at least 7 showings per week.
The home gets stale very quickly,
and the number of showings drops to one every other week, or less (this
happens all the time once a listing gets stale).
She receives one offer several
months later. There is no competition from other offers generating a high
sales price. She ultimately receives $470,000 for the home, because the
listing got stale.
In addition, she is asked, and
agrees to, an additional credit to the buyer of $7,000 for work in the
termite and contractor inspections on the home.
Contrast this with the optimal
high-price scenario described above, in which the seller received a final price
much higher than the list price, and in which the seller was asked
only for minimal credits for work in the termite and contractor inspections,
all due
to the competition resulting from the multiple offers.
