How to price your house in a Seller’s Market

I have always said a house is gonna sell for what it is worth. I said it when it was a Buyer’s Market. I’m saying it now. Overpricing your house is the surest way to make the process take longer and likely sell for less than it could have. Price it right and buyer’s all rush to see it when it is a new listing, regardless of the market conditions. They are afraid of losing the house if they like it. You want that sense of urgency.

Back in a Buyer’s Market, the goal was to drop the listing on the market at the right price and hope to get multiple offers. It is the same today, only with a few tweaks.

Today the list price is more like when an auctioneer begins the auction with a number low enough that they know they will get that first person to raise their hand. Then the price keeps going up until nobody else raises their hand. The list price is more like a suggestion these days. You still do not want to start off with too high of a list price. I often suggest a list price to sellers. They will tell me how strong the market is and want it to be higher. Then when a house sells for more than the list price, they feel like they left money on the table and undersold it. That is not the case. If you had several buyer’s bidding up your house, that means you got every penny out of it.

What I like to do is examine the most recent comparable sales in the neighborhood. I figure out what the house is worth compared to what other buyer’s have recently paid for houses around my listing. Then I put it on for that price since we know 100% that number will work. The worst thing that could happen is you sell it for full price. Then I drop it on the market late on a Friday. That way everybody sees the listing and starts scheduling showings for the weekend. It is good when buyers see other buyers coming and going. It shows them it is a hot listing and they better decide fast. Once I get one offer, I let all other realtors who have shown it know. You don’t tell them before they show it. You wait until after they have shown it so they don’t assume they won’t get it and cancel the showing. Even if the offer sucks and is not one I can suggest my seller accept, just having one enables me to leverage any other offers up as high as any buyer can go.

I recently put on a listing for $360k. We got 6 offers on it. Five had escalation clauses and we ended up selling it for $384k……and that must be the market value since that is what a ready, willing and able buyer agreed to pay. My seller is a good friend who was very happy with the results. If I had put the house on the market for $384k, do you know what would have happened? Since there was only one buyer willing to pay that much, I probably would have only gotten one offer. It would have been full price or less. I wouldn’t have been able to leverage the terms towards the interest of my sellers without the presence of more than one offer any more than an auctioneer could drive up the price with only one bidder in the room.

They need us now more than ever

A buddy of mine is a realtor in Oklahoma. He posted something on facebook about the market there. Somebody made a comment. He replied to their comment basically saying that a lot of sellers think it is easy to sell their house right now without a realtor, but they need realtors now more than ever to sort through the chaos of getting so many offers.

It got me thinking.

Back when the market was bad and houses were taking forever to sell, I would sometimes have a seller joke that I am making too much money when their house sold immediately.

The public thinks being a realtor is easy money. When it’s a sellers market like it is now, they think they can do the same tasks we do and save the money. But here is the thing, you are really paying a realtor for what they know and to use their knowledge. You are not paying them to just perform tasks. That is why most for sale by owner houses take longer to sell, usually don’t get as many offers, and tend to fall apart more often than those listed by a good realtor……and I will not even get into the quality of pictures that for sale by owner people take, lol.

Even in this market when selling a house is so easy, you need somebody who can tell you which offers are most likely to get to the closing table. There are many variables within an offer besides just the price. Most sellers just think “This buyer is willing to pay the most so let’s go with that one!

How you do a price reduction in a Seller’s Market

Okay, so you have made a mistake and overpriced your house. No worries. The market is strong enough that you haven’t shot yourself in the foot, you’ve just wasted a little time.

Back when the market was bad, it was even more critical to get the price right from the get go. The reason was because there were so few buyers entering the market. If they came to see your house and didn’t like it, a small price reduction wasn’t much motivation to come back and see it. About all you could do was made a big price reduction or wait for new buyers to emerge into the market.

Today, there are new buyers out every day. I don’t think in this environment that you need a huge price reduction to get your house sold. While it is true a lot of the same buyers who saw your house probably haven’t bought anything because there is literally nothing else to buy, your best bet is to catch a buyer who just started looking.

I think right now, I would suggest a small price reduction. That could serve two purposes. The first is that it might just cause a buyer who is tired of losing out in multiple offers to come back to you. It also makes it attractive to those brand new buyers. Every buyer loves a price reduction.

If your house makes it past the first day on the market and you didn’t get an offer, something is wrong. Whatever the issue is, a lower price always helps. If you reduce the price a bit and it still doesn’t sell, keep reducing the price a little until it does.

Of course, the best way to prevent needing to drop your price is to start out with the right list price from the beginning. Pricing it correctly usually means a faster sale and a far greater likelihood of getting multiples offers.

How a Seller can protect themselves in a Seller’s Market

What?

It’s their market. Why would they need to do anything? Aren’t they the ones holding all the cards?

Yes, they are. However just because it is their time right now doesn’t mean they don’t need to do things to ensure they got the best terms possible and had a smooth transaction.

So here we go!

DO NOT SELL YOUR HOUSE OFF MARKET-I know this is very popular right now and us realtors love it because it is easier. It has become sort of a status symbol. Sellers feel like their house was more exclusive that it was. Buyers feel like they got an invitation to the after party. It isn’t a good idea though. The market is crazy right now. Buyers are tired of making offers that don’t get accepted. They want a house. I have seen numerous times where I will get multiple offers on a house and one buyer will go way over the list price to get it. Let’s say you get five offers. Four of them are pretty much the same and then there’s one that is waaaaay better. Come to find out, they had lost several houses and were just tired of it. Their attitude was that they were not going to lose another one again. Long story short, you never know what your house is going to sell for until you expose it to the market.

DON’T TAKE THE FIRST GOOD OFFER-There is no question that if you have a decent house and don’t overshoot the value with the list price, you are going to get multiple offers. Too often I see sellers in a rush to accept one. They know it is a sellers market but since they don’t buy or sell houses all that often, they are afraid of losing a buyer. It is up to their realtor to let them know that the buyer is not going to suddenly rescind their offer if it is not accepted within a few hours of receiving it. The only time you want to be in a hurry to accept an offer these days is when it is the ONLY offer you got. I think it is best to give the market at least 24 hours to see the house and let everybody know the cutoff for sending offers. That deadline implies you have multiple offers even if you don’t and makes buyers in a rush to decide if they want the house.

DON’T SELL THE HOUSE “BY OWNER’-I know this one sounds self serving. The temptation to save paying real estate commissions is appealing for sure. I see more for sale by owner sellers having deals fall apart or selling for less than they could have gotten for their house. This could be an entire blog series so I will just skim the top. To begin with, few sellers take good pictures of their houses. That makes people less interested in seeing it. Then they can usually only show the house when they are available. That means fewer showings. Then they don’t leave for showings. Buyers ALWAYS feel awkward when a seller doesn’t leave. They think they need to be in a hurry or can’t open closet doors. They feel like they are invading the sellers personal space. Even worse are the sellers who want to lead you around and tell you unimportant details about their home like telling you what the kitchen looked like before remodeling it. Newsflash, painting a picture in the buyer’s head of the old ugly kitchen does not help to sell your house. Then they go with the highest offer, which on the surface sounds good, but the buyer has to sell their old house first and they were preapproved by “By-Pass Mortgage and Bait Shop” which is located somewhere in Arkansas. Then they feel like they shouldn’t do any home inspection repairs since they have been living there and that leaking roof has never bothered them. In the end, few for sale by owner sellers know if the offer they have is the best one and if it is likely to close. They often kill their own sales since they don’t know what they are doing.

ALWAYS ASK FOR THE TERMS YOU WANT, EVEN IF IT WASN’T IN THE OFFER-If you have several offers, try to combine the terms you like from all of them. Sometimes it works. Let’s say you like the price of one offer, the closing date of another, the possession date of another, and the inspection type of another. What you do is pick the one that you think has the best chance of closing (cash or preapproved with a lender your realtor knows is good, bigger down payment, etc.) Then you see if that buyer can match the other terms you like. You might say to the buyer’s agent that you really want to work with their buyer but you also would like to close on such and such date like one of the other offers you got, and that you’d like the buyer to not do a home inspection like one of the other offers you got. It is a friendly way of letting them know that while you like them the best, you might just go with another buyer who has already agreed to those terms. My experience is that most of the time a buyer is more than willing to alter a closing date, possession date and possibly change their inspection type to get the house.

How to buy when you also have to sell

The market is full of people who know they can sell their old house in a heartbeat, but are worried that they won’t be able to find a house to buy…..so they do nothing.

Here are a few options for you:

IF you absolutely have to make an offer contingent on selling your old house, have the old one ready to list as soon as you make an offer.  The listing agent for the house you want to buy will want to see it on the market ASAP.  Many people focus on finding the right house and have done no prep work on their old house.  They often end up losing their new house.  Any decent agent will counter your offer with what is called a “Kick-out Clause.”  That means that if another buyer comes along without a contingency, you either need to step aside or remove your contingency and buy the house.  If your house isn’t ready to list, or isn’t appealing enough to sell immediately, odds are you will lose your new house.  I know it is tough, but the best thing to do right now is focus on getting your old house ready to sell, THEN go look at houses.  And every client I have in this situation is going to think I am talking to them when they read this, but I am talking to ALL my clients in this situation 🙂

The absolute best thing to do when you need to sell first is to…..just sell first.  Yes, I mean sell your old house and find somewhere to live temporarily.  Will it be fun?  Heck no, but you will get top dollar for your old house and be in the best bargaining position on the new one since no seller today really wants to accept a contingency offer.  If a seller accepts one, it is usually a sign that you are paying waaaay more than the next highest bidder and/or that you have selected a house that is having trouble selling in the hottest market ever.  Neither of those are good.

IF you can buy the new one without having to first sell the old one, then do that.  You know you will sell the old one quickly and it is really nice to be able to get the new one ready before moving in.

But what if you can qualify for the new house without having to sell, but you really want or need your equity from the old one for a down payment?  Easy.  Get a home equity line of credit on your old one and use it for the down payment on the new one.  Sell the old one and pay it off.  It’s a simple way of moving the equity you have from the old house to the new one.