Why Price Matters: Montgomery County PA Homes for Sale, Original List Price versus Days On Market

By
Real Estate Agent with Keller Williams Real Estate - Montgomeryville AB066108

Now more than ever, buyers are looking first and foremost for "a deal."  The longer a home sits on the market, the greater the tendency for buyers to offer lower prices.  It’s only logical.  Even on Day 1, most buyers will want to offer less than the asking price.  But if a house has been on the market for months, there is no doubt buyers will tend to offer prices at much steeper discounts.

The real question is, “Does a longer time on market effect the ultimate selling price of a home and, if so, by how much?”

The attached graph shows data collected from Montgomery County home sales in 2011 and how selling prices decline with increasing “Days on Market”

Why Price Matters, Montgomery County PA Homes for Sale, Original List Price versus Days On MarketHomes that sell within the first week to the first month sell on average for 97% of the original listed price.  But as a home lingers on the market, that percentage drops.

For example, a house that is properly listed at $300,000 and sells within 30 days will Why Price Matters, Montgomery County PA Homes for Sale, Original List Price versus Days On Marketlikely sell for about $290,000.  But if that same house is listed a bit too high (say at $310,000) and sits on the market for 90 days, it will likely sell for $282,000.  If that home is overpriced even further (say at $320,000) which causes it to sit on the market for 6 – 12 months, that home is likely to sell around $270,000. 

This decline is partially due to the fact we are in a market where values have been falling over time.  In Montgomery county, housing values declined a by about 5% percent in 2011 vs. 2010 and forecasts are similar for 2011 vs. 2012. 

But the larger portion of the decline is attributed to sellers overpricing their home at the outset and then also having to overcome the negative stigma associated with a house that sits on the market. 

Buyers love to ask how long a house has been on the market and, if it’s been awhile, their next question is automatically, “What’s wrong with it?”

Sellers need to understand the three main factors that need to be in order for a house to sell:

1.        Price

2.        Features/Condition

3.        Marketing

While the features/condition and marketing are key elements to a sale, Price Is King.  Even with poor condition and poor marketing, an attractive price can still get a home sold. However, a pristine home with excellent marketing can languish on the market due simply to an overinflated price.

Price is king in the sale of a house and setting your price very close to market value is critical these days.  No matter what the condition or how well a home is marketed, todays buyers need to see value in your home compared to the many others that they have already seen and will see.  Otherwise, those buyers will quickly move on to some of those other options. 

Also, don’t forget about the buyer’s mortgage lender.  Even if the buyers were willing to pay an above market price, unless they were paying cash, their mortgage company will have an appraisal done to ensure the price is supported by current market data.  In the present mortgage climate, appraisers and lenders are tending to be very conservative with these appraisals.

Overpricing a home even by what seems like a small amount can have a significant negative impact on a seller’s bottom line if the home sits on the market too long.  Overpriced homes do deter buyers.  Take the following example of a home where the market value is $190,000 to $200,000 and the recommended list price is $199,900.  A seller might be tempted to price the property higher but could “shoot themselves in the foot” and the condition and marketing can’t compensate.

Why Price Matters, Montgomery County PA Homes for Sale, Original List Price versus Days On Market

Could House 2 get an offer within 30 days and net a price of $195,000 or $198,000?  Yes, it is possible.   It is possible that House 2 could sit for 60 days on the market but still fetch a selling price above the “estimated” $190,147?  Absolutely, it is possible.  Will House 3 necessarily sit on the market for six months and not get an offer of $190,000 or $195,000?  Maybe… maybe not. 

However, as tempting it is to test the market, the real data demonstrates that a seller is far more likely to achieve a higher final price and sell in less time (and with less anguish) by pricing very close to market value at the beginning of the listing.

The problem is the law of averages will work against a seller who overprices a house and they are likely to end up disappointed with the sale and hurt their bottom line.  Pricing a home appropriately is critical at the onset of listing it for sale.

Another important factor to consider is the carrying costs of the house if the seller has already moved and the house is vacant.  For example, if the mortgage, taxes, and utilities cost $1,500 per month, after six months, the seller has lost $9,000 holding the property.

The keys to a successful home sale are:

1) Do a great job preparing your home for sale.

2) Work with a Realtor you trust who will do a great job marketing your property.

3) Be honest and realistic in setting the listing price for your home.

 

 

Why the Pricing of a Home Matters originally appeared in the Montgomeryville-Lansdale Patch.

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County of Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

Why Price Matters: Montgomery County PA Homes for Sale, Original List Price versus Days On Market - Copyright © 2012, The Scott Loper Team, All rights reserved.

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Show All Comments
Rainmaker
2,571,423
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Sellers often forget that the buyer wants something too....Finding "happy" takes all of us wanting to. Pricing remains on point

Jan 12, 2012 02:41 AM #1
Rainmaker
601,542
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Lisa - "Buyers love to ask how long a house has been on the market and, if it’s been awhile, their next question is automatically, “What’s wrong with it?”  LMAO!!!   OMG!!!  That is so true!  What a great analysis Lisa!  I think I need to be adding something into my local market reports about the relation to DOM and sales price vs list price % because there is definitely a correlation - regardless of what kind of market you may be in. 

Jan 12, 2012 08:25 AM #2
Rainmaker
507,232
Cal Yoder
Keller Williams Elite - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Exceptional information Lisa. This is exactly what needs to be presented to folks who somehow think listing higher will help them get the most out their house. DOM is extremely important. Hope 2012 is shaping up very well for you.

Cal

Jan 12, 2012 09:01 AM #3
Rainer
423,083
Peggy Chirico
Prudential CT Realty - Manchester, CT
REALTOR® 860-748-8900, Hartford & Tolland County Real Estate

Hi Lisa - Great post on pricing!  I can't tell you how many times sellers want to overprice their homes "to leave some room for negotiating!"  If you don't get an offer, you can't negotiate!

Jan 12, 2012 10:02 AM #4
Rainmaker
883,926
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Lisa, I like these monthly market reports, good to get a snap shot of the local real estate activity.

Jan 12, 2012 10:12 PM #5
Rainmaker
638,067
Don Sabinske
Don Sabinske, Sabinske & Associates Inc. - Zimmerman, MN
Sabinske & Associates Inc.

YES! YES! YES! Your quote The problem is the law of averages will work against a seller who overprices a house  says it all!

Jan 18, 2012 07:51 AM #6
Rainmaker
552,457
The Scott Loper Team Bux-Mont Premier Properties
Keller Williams Real Estate - Montgomeryville - Lansdale, PA

Thanks everyone for stopping by.  I think really examining the data should be very eye-opening for any seller. 

Lisa

Jan 19, 2012 01:33 AM #7
Anonymous
Iwona
Bravo TV's reality sieres are a total guilty pleasure of mine, especially the whole Housewives franchise. Sadly, the latest seasons of New York and Orange County have left me feeling a meh, and the tragedy surrounding the Beverly Hills cast has cast a bit of a pall over the franchise. Still, I am left with all of the Top Chef spin-offs, and whatever else they come up with.I have to admit that I've been ridiculously obsessed with Britney Spears' latest album, too, which is a little terrible given that I have been ranting and raving about how horrid her music is for years. But sometimes all I want to do is blast cheesy pop songs and dance around my living room, y'know?
Apr 08, 2012 05:49 PM #8
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Rainmaker
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The Scott Loper Team Bux-Mont Premier Properties

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