Pricing is only a portion of the marketing mix, but without proper pricing there will be no sale. In today's market, the average days on market has gone up over 10% in most areas, and this coincidentally results in a much lower price. Sellers place their home on the market with the ambitious goal of a quick sale. However, sellers tend to forget all the negative press releases for the previous two years proclaiming the horrible market. There are many reasons the dream of a quick sale becomes an impossibility in today's market:
- Pricing
- Competition
- Lacking sense of urgency
- Stubbornness
- Financial Difficulty
Pricing
As is the title of the article, pricing is most important in selling a home. The increase in average days on market has resulted in too many houses for sale. In Long Branch, there is currently over a year of inventory in the single family housing market. The number of houses for sale gives buyer's many options for a decision that is already difficult to make. In properly pricing a house, the decision for buyer's is made much easier. If the numbers make sense, so does the purchase. A buyer in a buyer's market has been educated by the media to realize buyer's have the upper-hand in negotiations, and should not settle for anything less then perfection. With that being said, if the price is higher then competition, then the condition of the house must be exquisite to receive offers. An abnormally high price will draw poor publicity. If the subject property is priced highly, what kind of buyer is going to be making an offer? Most likely a high priced home will receive "low-ball" offers, or attract contracts that will ultimately fall through.
Competition
Another important factor in the sale of a home is the competition. Although many properties are not comparable, the most important factor, price, makes them a comparison. Although a single-family home and condominium are not normally comparable, this is competition. For example, if a prospective buyer is looking to spend $400,000, it would not make much sense to buy an over-priced condominium when the same money could be spent for a single-family home that is properly priced. There are pros and cons for each type of property, but the monthly expense is a factor many buyers address when considering different properties. With this in mind, competition drastically increases. Buyers in todays market are extremely reluctant to make a decision because there is a feeling of buyer's remorse. Everyone wants to feel they are getting a deal. Buyer's remorse leads to the next factor of a lacking sense of urgency.
Lacking Sense of Urgency
Media, media, and more media! Flipping through channels on television there are a number of messages being delivered. The primary message is the housing market is going down. The repetition and truth of this message is slowing the housing market down. Why would a buyer want to purchase a home if prices are going to continue to drop? The honest answer is, a buyer would not buy unless there was a necessity for the move such as financial difficulty or job-related moves. Although it is impossible to time the market perfectly, the level of competition is an indication that prices must go down in order for the inventory of houses to decrease to a normal level. Currently there is approximately two or three times more houses on the market then there are in a normal market. These factors create a lacking sense of urgency which is understandable, but also another reason to properly price your home.
Stubbornness
It would be nice to come in contact with sellers that actually want to sell their home. Many homes on the market today are, in my opinion, not really for sale. There are many home-owners who purchased their homes in the boom of the market in 2005, and are now trying to cash out their "investment." However, are these sellers paying attention to all the news media I mentioned earlier? Definitely not! Common sense would tell everyone if they bought their home in a booming market, and it has only gone down since, that the value of the house would be less the what they paid. This is true, however, financial difficulties are causing FOR SALE signs to go up everywhere. This domino effect from amateur investors is one of the reasons there is so much competition in today's market. These "stubborn" sellers need to realize the importance of pricing their home, and if there is no ability to take a loss on their investment, the rental market might be a good option to weather the storm until the market recovers.
Financial Difficulty
Stubbornness is a result of financial difficulty in many situations. I am sure all realtor's are very familiar with hearing the statement "I need to get (PRICE) for my house, or I cannot sell." This statement, although true, is not a determining factor for pricing a home. The only factors that determine the price of a home are the comparable properties that have sold recently. Unfortunately as good as realtor's might be, we cannot perform miracles. The market dictates price, not the seller's financial predicament.
These five factors are all contributing reasons of why the market is the way it is today. Sellers should certainly consider these factors before placing their home in today's marketplace and receiving poor exposure. This "bad publicity" tremendously affects the market as a whole, and also the value of the individual homes. Pricing a home properly will decrease the average days on market and also increase the average sales price.
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