Aim Is Important
What lessons have we learned in 2006 and 2007 about marketing a home for sale?
One very important one is that in a declining market, just like shooting ducks in an arcade, we have to lead the target.
You remember those carnival arcades with the cork or BB rifles? Disney has a great one in the Magic Kingdom in Florida. Little metal ducks move from left to right, and we all know that in order to hit the moving target, you have to aim a bit in front. Aim straight at the target and by the time your cork gets to the target it has passed by and you miss.
Well it seems that as prices decline, buyers are looking at only a small subset of the available listings - the ones priced close to or below the last comparable sales. And unless your home is priced in that group, or standing out below the bunch in price, it’s actually like shooting behind the moving target - almost guaranteed a miss.
And an expensive miss, because by the time you reload and re-aim (or lower the price) the target has moved some more. You’re not just aiming at the spot you should have, you’re aiming even further down the line.
I’ve seen homes priced only 10% above the crowd, only to get ignored. After continued reductions but never being in the lowest group, finally the sellers get real, set a more aggressive price, and wind up selling for much less than they could have sold for if they had priced correctly from the beginning.
One example: a home in Thoroughbred Lakes. Comparable sales were $390,000, they listed at $430,000, and after many reductions and nearly a year, sold for $340,000. Which was what the new market value was after a year’s time. If they had listed at $400,000 they might have sold the home within the first few months. That’s a loss of $50,000 - plus 12 months’ carrying costs (interest, property taxes, HOA fees, and insurance).
Don’t make the mistake… buyers will not check out an overpriced home and “make an offer” because they have plenty to pick from. Pricing is extremely important. Pricing alone won’t just do it, good marketing is also a factor, and I’ll talk about that issue in a future article.