Be Wise, Know Your Numbers
Want to know one of the most challenging hurdles when buying or selling a home? Accepting that it’s truly a numbers game. When I first heard this many years ago, I actually bristled at the notion. Then I saw it played out over and over. It’s the secret to understanding the real estate marketplace wherever you may live.
Like it or not, buying decisions are based on competitive points or numbers — not on other qualities that may seem to be more important to us. Home buyers continually reinforce it.
Whether you’re buying or selling a home, in addition to interest rates, I believe there are 4 key numbers to continually be mindful of:
- absorption rate
- days on market
1) PRICE. First and foremost, selecting a fair and reasonable price point is essential, right from the start. This can be a difficult thing to accept. It’s a common perception for home sellers to think, “I’ll price it significantly higher to start off, and come down later or maybe when we are negotiating the price.” That strategy can backfire, unfortunately.
It’s important to look for the ‘market echo’ — how agents and buyers respond to a home’s list price. I’ve found the best agents always watch list-to-sold price ratios, and the resulting price adjustments.
Indeed, price is THE number one motivating factor, when buyers select one property over another. Every time. Today’s home buyers and their agents have access to sophisticated tools and data, all geared to help them pinpoint a home’s range of value. Buyers remorse is very real, especially after the real estate crisis. Afraid of making a financial mistake, buyers risk the pain of splinters by staying on the fence (decision-wise) or worse, waiting for the mythical perfect house.
Keep in mind there are many opinions of value — yours, mine, prospective buyers, their agents, assessors, appraisers, and even a debatable per-square-foot valuation. Which number is right? Learn what your home is presently worth before you put it on the market, either through a comparative market analysis and/or an appraisal. Call, text or email me, so that I can help guide you through this process.
Fair-market value is what a buyer is willing to pay and a seller is willing to accept — or what a lender is willing to lend, whichever is less. Lenders has tougher qualifying standards now, and they’ll require appraisals to help underwrite a loan. If the sales price is greater than the appraisal, you’ve got a problem. In 2014, I’ve found that very few buyers will be willing to pay the difference with cash out of their pocket, to help supplement their loan’s shortfall. More likely, the deal gets renegotiated to be a win-win for all involved — or unfortunately, it falls through and the buyer walks away, leaving the seller feeling frustrated. Skip the stress: know what your home is worth, well before you put it on the market.
2) ABSORPTION RATE. The rate at which available homes are sold in a specific real estate market during a given time period determines its absorption rate. Once a home is priced right, we may think “the sign went in the yard yesterday, I guess it will be sold today!” In rare cases, it does happen. More often than not, that’s purely wishful thinking.
Although we’ve entered in a lower-inventory market, it’s important to stay realistic about the estimated selling times for your particular price tier and location. Now and during negotiations, my insights into market inventory — the supply and demand, the absorption rate — can help you greatly in terms of positioning your home against its competition. Positioning makes a big difference in getting your home sold within the time frame you desire.
3) EXPOSURE. If you want to move the odds of selling into your favor, share your home with a maximum number of people. Remember, it’s a numbers game, and the marketplace is very competitive in this HGTV and Pottery Barn world.
Buyer expectations have changed drastically over the past 6 years. Before they’ll ever step foot in a home that’s listed for sale, 9 out of 10 prospective buyers will preview it online first. Home buying is a now process of elimination, not of selection.
The more broadly your home is beautifully marketed to brokers, agents and buyers, the better it is for you. Click here to learn about my blueprint for strategically marketing your home. I’ll also bring to our winning game plan the proven benefits of home staging, to help position you for success sooner.
4. DAYS ON MARKET. Smart buyers will look at how long a home as been on the market, when they prepare their offers to purchase. They’ll also look at how often the property was on the market without selling previously. Inwardly, they might wonder why has no one bought it and assume, rightly or wrongly, that there a problem with the home. Then they’ll put a heavy price on problem to offset the perceived risk. Or walk away.
Wise sellers will predetermine in advance the when and how much, for any price adjustments that may be needed down the road. I’ve found this approach can vary greatly due to your unique needs, buyer feedback, opportunity costs, relocation timing, estimated repairs, and motivation level.
For luxury and niche properties, keep in mind that they naturally tend to have longer marketing times, due to fewer and more highly selective buyers.
Remember, it’s a numbers game and it all comes down to what uniquely works best for you. Consider letting the numbers serve as a road map for your success. To learn more, just give me a call at 757.876.5328.
Tammy Thrift, Realtor
Serving Your Real Estate Needs, From Colonial Williamsburg To The Chesapeake Bay!
Actively licensed with Long & Foster in the Commonwealth of Virginia (USA)