July 16th, 2009 Categories: Selling
Less than two years ago we listed our home for sale with an area “Top Producer”. Just 13 months earlier, they sold a home in our neighborhood that was very similar to ours’ — same floor plan, same builder, 2 acres, 3 car side-load garage, 2 fireplaces, big bright basement, etc. They implemented a great marketing plan and were able to sell “Home A” for $1,125,000 in only 67 days. So for us, having these guys sell our home – “Home B” – was a no brainer. We soon discovered that our experience would be quite a bit different. Did we make the right choice?
We were the perfect sellers
I have to admit, we were great sellers. We did everything needed to make the house shine. Everything was mulched, we threw out tons of stuff (how much plastic can two kids collect?), put in a new front walk, added granite counters to the bathrooms, etc. And, even more important, we realistically priced it for $1.1M. Home A was nice, but ours had a better lot, more landscaping and awesome floor-to-ceiling built-ins in the family room. So although comparable, I can objectively say that ours was just a little better. Honestly, it was.
Our real estate agents weren’t delivering
When our home entered the market, initial interest was OK, but we didn’t get the same interest as Home A. After about a month our showing activity really slowed down. Our agents were doing all of the same things as for Home A, so what was the problem? Our house looked great and it was priced right, so why weren’t buyers coming through?
To get to the heart of the matter, our agents reviewed the details of our competing homes. These were others on the market that our buyers would also likely consider. Our challenge, according to them, was that competing homes were priced about the same or lower. And these homes were also not selling. The solution – lower the price to better compete.
Do these guys make this stuff up? If the house is in great condition and priced ‘right’, why unnecessarily reduce the price? Isn’t that just giving money away?
Price is really important
When we reviewed competing homes we agreed that our price was too high. Our neighbor’s sale the previous year really didn’t matter. At that moment in time, a buyer had quite a selection of homes with attractive attributes. Some had better locations, one was all brick and one had an amazing kitchen. With this insight we brought the price just below $1M which helped increase traffic and interest. We did get a contract that fell apart when the buyer got cold feet, but we were definitely closer to the right price.
Still, after a couple more months, inventory for homes like ours was climbing with no end in sight. And we still didn’t have a contract. To be more competitive, our agents recommended that we reduce the price further, so we aggressively priced it at $938,500. We got even more interest at this price. After very tough negotiations, we were able to sell it for $916,000. Our home had been on the market for six months.
Morals of this tale
OK, it’s time to confess. We were the real estate agents “hired” to sell our own home. Of course we know the importance of a home’s price and condition. Still, this was an important process for us that reiterated some universal truths of real estate.
- The current real estate market determines your home’s value. Buyers look at your home in the context of other homes on the market. Past sales do matter, but only to a point. In a market with a lot of inventory, a buyer will be attracted to the best values — the homes in the best condition with the best price.
- Testing the market has risks. Just like with our sale, our goal is to get the very best price for our clients. Often we support our clients desire to ‘test’ the market with a higher, reasonable price to help get the highest sale. As our case showed, this can be risky in a buyers market. Could we have done better by listing our home for $950,000 right out of the gate? Very possibly, but our market was changing a lot at the time. We didn’t want to leave $100,000 on the table by initially pricing too low since we didn’t have an immediate need to sell. This was a risk we were willing to take.
- Home improvements are important, but price is still King. Buyers are attracted to the best homes. In any market, a seller should make improvements that remove buyer objections and give a home a new and fresh feeling. In a strong buyer’s market, understand that it’s much harder to get a return on more expensive improvements. At the end of the day, you’ll still be negotiating on price. In our case, some expensive improvements ultimately had no affect on our net proceeds. Were we to do it over again, we wouldn’t have done as much and saved some money.
Even though we sold our home significantly lower than our neighbor’s home, we believe that we got a great price and have absolutely no regrets. On the surface, it may appear that we gave our home away, but we didn’t. We got a fair price in market at that time. Do we ever think “if only we had sold a year earlier”? Never. We didn’t have a need to sell then, so it didn’t matter. Worrying about “what could have been” is not a productive exercise. Do the best with cards you are dealt and always move forward. This has also been one of our key philosophies which was also reconfirmed by this experience.
Are you thinking about selling? Call us at 301-527-9079 or send an email to schedule a complementary home valuation and to discuss the real estate market in your area.