The Price is... Wrong?
If your listing isn't selling and the days-on-market numbers are ticking upward, you need to look beyond your CMA to find out the cause. While most agents rely strongly on their CMA, it often doesn't give a big picture account of what is currently happening in the market.
Recently I had two clients ask me my opinion on why their listings weren't selling. Further investigation in both cases made the reason why crystal clear.
Example #1: The Fabulous Home
The first property was a fabulous well-cared-for home in a neighborhood where everything had recently sold for over $500,000. My client was very concerned when her listing which she had just reduced to $499,000 wasn't getting any showings or offers. She couldn't understand why this sharply priced home wasn't selling when there had been a historic trend of houses similar to hers selling above $500,000. She didn't know how to explain this to her seller who already thought her home was better than many of the homes that had sold over $500,000.
When I reviewed the data in the area, I noticed most of the new inventory coming on the market was new construction nearby. It wasn't that the seller's house had suddenly dropped dramatically in value, it was that her main competition was now new construction at the same price point. Many buyers were opting to get something brand new rather than buy her older home. This is a classic example of an inventory shift in the market that warrants research.
Example #2: The Incredible Condo
In second example my client had a incredible condo listed that should have sold many times over at the price it was listed at. However, again, it was sitting on the market getting very stale. My client was baffled as to why this condo wasn't selling when she had sold many similar condos in the same building in the last six months. Again, I did my research and was able to visually show her that inventory in the condo market had soared in the past 60 days which caused a huge shift in the market. Condos that had been selling in 20 days were now sitting at the 60-day mark. It wasn't until I was able to share this visual proof with her by way of an inventory graph that it made sense.
Visual proof is what you need to share with your clients if you want them to understand what is really going on in the market. A seller can't argue with the facts of the market, but they can argue about the benefits and beauty of their home versus the competition. This is an argument that is difficult to win!
If you have a listing that isn't selling you might want to look at the following things to help you be able to present a visual explanation to your sellers.
Listing versus Pendings Trends
This is the most important thing to look at when trying to determine what is really going on in your market. The real estate market is all about supply and demand and listings will show the supply while the pendings will show you what the current “now” demand is. Listings versus Pendings is more accurate for pricing than even Listings versus Solds because Solds represent the past while Pendings represent the “now” market. This is the most accurate way to read any market.
Days on Market Trends
The amount of time a property sits on the market is critical to determine the mindset of the buyers that are currently in the market. The shorter the market time, the more motivated the buyers are. I study days on market trends to see where the mindset of the buyer is.
Price Point Trends
I like to also look at the popularity of each of the price points in an area. Then I like to track whether that price point is trending up or down to get a sense of the trends.
House Style Trends
I like to research the days on market numbers for specific house styles to understand what is popular in each area. For example, many areas find that ramblers or one-level homes sell quicker and for more money. You must factor this in when working with your seller who may own a rambler property. The other homes in their neighborhood may have sold for $400,000 but are ramblers in that area selling for more? Also a seller may own a property that could be less popular. I have seen prices having to be reduced because buyers valued split-level homes lower than a traditional two-story. In either case you should be able to visually prove this to your sellers.
List to Sale Price Ratio Trends
I like to look at the ratio that shows the list price versus the sale price. In a hot multiple-offer market, you will see homes sell for above list price and in a slow market they will sell below list price. Watching this trend is critical to be able to predict the direction of the market.
New Construction versus Resale Trends
You must look for new construction inventory when doing a CMA because this can cause huge shifts in that areas market. Many buyers prefer new construction over resale so it is important to know what you are competing against.
Get visual with your sellers when pricing their property and if you have a listing that isn't selling, dig a little deeper to understand what is really going on.
By Denise Lones CSP, M.I.R.M., CDEI - The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.