Selling in a Buyer’s Market
These buyer AND seller clients were a joy to help!
Right now, In Columbus, we are in a buyer’s market. Inventory is high, days on market are longer, and sale price as a percent of asking price is dipping. Coming out of the pandemic, there was a fervor around home prices and sellers (and their realtors) were riding the gravy train. When inflation crept up, along with interest rates, prices should have cooled.
They didn’t. But there is mounting evidence that prices will cool in the coming months and into next year.
And what’s more, we now find ourselves back in rate territory over 7% for a 30 year fixed mortgage again, after having enjoyed a rate drop earlier this year. With more houses on the market, buyers have more options and more leverage to negotiate. Given the uncertainty in the economy buyers are rightfully wary. They don’t want to pay as much. And frankly, they don’t have to. They’ve got leverage. Buyers are more frequently asking for more of their out of pocket costs for home purchases to be covered in the form of seller concessions, and they’re offering under asking prices.
The question is, how should sellers adapt and what should they know?
It will probably take longer to find a buyer for your home than it used to. Be mentally and logistically prepared for that. “The showing period is so much fun,” said no seller, ever. You have to keep it clean, corral yourself, kids and pets on short notice to leave for a showing, and keep valuables secured. Pricing will directly impact how long a seller has to endure that stress and anxiety. Overpricing a home will most certainly extend that period of time and pricing higher so that “we have some room to negotiate” might be all for naught if you are unwilling to reduce the price (keep reading.)
Be prepared to discuss price reductions with your realtor. The general rules of thumb go something like this: if you are getting showings but no offers, you are slightly overpriced, perhaps 5%. If you are getting no showings, you are substantially overpriced (10% or more.) These realities should be reviewed and a plan to make the house more affordable to more people should be implemented on a reasonable time line. I would not let a house sit for more that two weeks with no showings before recommending a price reduction.
Anticipate the objections that buyers will have and address them early. If repairs are clearly and obviously needed, do them. Especially if they are safety issues. You’ll probably have to either pay for it now, or pay for it later (because again, it’s a buyer’s market and they can go find another house, so they’ll ask for it after inspections.) If you do want to aggressively price a house on the higher side, have an appraisal. At least then you’ll have a data- backed valuation that you can share. Be aware, though, that it may not matter because in the end, the market decides the price.
Philosophically speaking some realtors will argue that there is no such thing as listing a property too low. If you put forth a real value proposition to the market, buyers will flock, and peck at each other. You’ll have a bidding war and that will drive the price back up, and you will have done it more quickly and efficiently. There is, however, definitely such a thing as pricing a property too high. An overpriced listing will miss the opportunities presented in the early days on market when excitement is (should be) at its highest. As days on market accumulate, buyers will wonder, “what is up with that house? Is there something wrong with it?” When you do end up dropping the price you’ll wonder why you decided to put yourself through all of that.
Trust your realtor. They may not have gotten the price correct either, but they should know better than anyone when it’s time to adapt and adjust. We are neck deep in the market every day, so we see the data about days on market and price adjustments, the feedback from buyers, and the competition that’s out there and how it compares. Don’t bury your head in the sand in denial of reality. Let them work for you towards the common goal of a sale.
It’s no fun when you have a number in mind, either because it sounded good, or because some automatic pricing site on the internet suggested a valuation, or because your realtor set expectations too high. Remember, though, that just because you wish it doesn’t mean it will be. It MIGHT work out, depending on the marketing by your realtor and a proactive approach to handling buyer objections. In the end, it’s always the market that decides and for most of us, we have no control over it whatsoever. So when in doubt, put your trust in a realtor that is riding that wave every day and is ready to help you surf all the way to the closing table.