One day on the market is best.
A lot of sellers feel like if their house sells immediately that their realtor under priced the house. Some of them feel like realtors shouldn’t make that much money when a house sells fast.
Here is the truth from 14 years experience: 1) A house will always sell for market value. If it was under priced, buyers will bid over the list price. 2) The effort between selling a house the first day on the market or it taking 6 months is not that different. Being the listing realtor is a lot like fishing. You bait a hook with your marketing and cast it in the pool of buyers. Then you wait for one to bite.
Enough about the realtor perspective, how about why this is somehow great for the seller?
Statistics tell the story.
A seller is much much much more likely to get their full asking price when it is a new listing.
When a house hits the market, every buyer in that price range comes out to see it. They often see other buyers leaving the house before they see it and/or have other buyers waiting to see it when they leave. Buyers know that they need to act fast if they want the house. They know that other buyers may want it too so they better put out their best offer first. There is a sense of urgency.
If it sells, it will most likely sell for the full list price.
Once all the buyers currently in the market have seen it, a seller will only get showings as new buyers emerge into the market. There is no frenzy. No buyer is afraid of losing the house so they want to see how low they can get the seller to go.
A phenomenon that has been happening since buyers have been able to set up their own saved searches on Zillow is that buyers seem to look at a house online only once when it is a new listing. Few buyers these days will comb through rejected listings. They opt to just wait for new listings to come on the market…..which means a house that did not sell quickly is unlikely to ever have a buyer reconsider viewing the house. It is like it doesn’t even exist to them.
So, how many days on the market are best for the seller?
One day on the market is best.
Ever wonder what all goes into making a good location?
It’s usually a combination of many things. The more of these you have, the more appealing it is:
- Proximity to amenities like shopping/entertainment/dining.
- Easy access to work (Think New Circle, Interstate, airport, etc.)
- Good school district. Even for people who don’t have kids in school, this is important because realtors have convinced everybody it is good for “Resale Value.”
- An absence of major negative things like road noise, smoke stacks, crime, or something smelly like a landfill.
Very few neighborhoods have all of these. The ones that do have always sold quickly and for top dollar. They appreciate the fastest in a hot market and depreciate the least in a bad market.
Want to know a few like this?
- Chilesburg-It’s got the top rated schools in the area, two of which are within walking distance. You can get to two interstate exits easily. If you want to go to Hamburg, its an easy drive down Todds Road. If you don’t want Hamburg, go out the Richmond Road side.
- Willow Bend-This area has really shot up in value this year. It’s got some of the best schools on the south end of town, is close to Fayette Mall, Brannon Crossing and The Summit. Shillito Park is close and it is right off of Man O War.
- Beaumont Enclave-This neighborhood has always been popular, mainly because it is the cheapest way to get into the Rosa Parks Elementary/Beaumont Middle/Dumbar High district. It is a $200-300k neighborhood surrounded by $500k and up houses. That helps too. Besides one of the most desirable school districts in town, you have everything Beaumont has too offer, plus a city park and a library. It is right between New Circle and Man O War, making it easy to get in or out. It is also a short drive to the airport for traveling executives.
I normally encourage my buyers to pick a neighborhood with as many of these location features as possible since we don’t know what the market will be like when they need to sell. The first rule in real estate is ALWAYS have an exit plan.
Two houses on the same street. One is smaller and has been renovated. The other is bigger and has had a few minor updates.
The smaller renovated one sells for more money that the larger one with mild updates is worth.
Which owner would you want to be?
You are probably thinking that the renovated house that sold for more would be the owner who comes out better than the other, but you’d be wrong.
That’s because the cost of a remodeled kitchen with a tiled backsplash and stainless appliances, remodeled bathrooms and new flooring greatly exceed the difference in values.
Back when the market was slow, it could have been harder to sell a house that hadn’t seen any big ticket updates like a new kitchen and/or baths. That’s cause there were more houses for sale than there were buyers. The problem is the opposite today. There are more buyers than houses for sale, especially in the sub $200k range.
Sure, everybody loves a renovated house with all the trendy finishes. Buyers will pay top dollar for that look, but for the person who wrote the check for the work, it is a little bit of a bummer because most of the time a seller is lucky to get half back in the increased value. Great for the buyer. Bad for the seller.
I had to tell a seller not too long ago that her house was worth about the same as she paid for it nearly 10 years ago. On paper, you’d think that wasn’t possible. She hasn’t done anything to the house other than enjoy living there. Everything is nearly 10 years older now. Sure, her house could potentially be worth another $15k, but she would have to spend over $20k to add that value. She is actually coming out ahead by selling for about the same as she paid for verses getting a high sale price that lost money to achieve.
They don’t tell you all this stuff on HGTV.
The best bang for your buck on updates are paint, flooring and lighting.
I showed a house yesterday. Nice place. It was all original except the kitchen.
It wasn’t that old of a house, so it wasn’t what I would call outdated. Since it wasn’t that old, nothing was worn out either. I would call it neutrally nice-not bad and not great at the same time.
But that kitchen was super nice, and that was the problem with this house.
Yeah, you read that right. The remodeled kitchen was a negative.
Because the people who are attracted to the house due to that super nice kitchen will be disappointed that the rest of the house isn’t as nice. They leave thinking they would have to “Finish” the rest of the remodeling.
The people who won’t mind the rest of the house don’t care about that super nice kitchen and won’t want to pay for it through the higher list price. They leave thinking the house is overpriced.
It would have been better for this seller to have spent less on the kitchen and updated all of the house evenly.
That has always been my advice after observing how buyers react to houses. All of your house should be consistently nice if you want your updates to add value. If they aren’t, then you are usually giving away that one space where you spent the most money.
The simplest answer to this is when sellers feel like moving…..so I guess it boils down to what will it take for that to happen?
Many people who have been in their houses for more than 5 years either got a super low interest rate or refinanced to get one. It is hard to give up something like a 3.5% rate and buy your next house at the top of the market and do a 5% mortgage. Right now, all that free equity from appreciation isn’t enough to make somebody want to give that up.
But, eventually there will be a tipping point.
Let’s say you bought a house 5 years ago for $200k. You put down 5% and got a 3.5% rate for 30 years. The principal and interest part of your loan is about $900 a month. Flash forward to today. The house is probably worth $240k. You owe about $173k on it and have about $67k in equity.
You decide you want to buy a $300k house. You finance about $235k after you get the equity out of your last house. You get a 5% rate. The principal and interest part of your loan is now $1200 a month.
Maybe you don’t want to spend $300 more each month?
What will it take to make you list your old house?
Maybe another $40k equity in your old house? Assuming rates stay about the same and the price of the $300k house you want appreciates less than the $240k house you have, this $40k is what it will take to keep your payment about the same each month. It will take about 3 years for that to happen between appreciation and what you are paying down each month in principal.
We all bemoan higher interest rates, but lets keep in mind that the reason we don’t like higher rates is because they make the mortgage payments higher. People have a certain amount they can/will spend each month on housing. People will always try to stuff as much house into that payment as they can. I think the day sellers can move up to a nicer house and not pay that much more will be when we see more for sale signs in yards.