How To Price Listings in a Torrid Seller's Market
If you've been paying attention to our Collin County real estate market, I don't have to tell you we're in a crazy run on homes right now. I've been through many of these over the past 38 years between both commercial and residential, but none have lasted this long and none were quite as crazy.
The demand is so high and the available inventory and interest rates are so low, we're in a perfect storm of ever escalating home prices. We've been just as amazed as you on some of the sale prices we're seeing (and getting for our sellers) and also how quickly many of these homes are selling.
It only takes two parties to start a bidding war but like many other agents, we've had listings with thirty offers or more within a couple of days of the home hitting the MLS. You know that home is going to sell for top, top dollar. The same thing is happening in the $2 Million to $3 Million price points but we've never seen anything close to 30 offers on those.
We just sold a home at 1601 Goose Lane in Lucas priced at $2.3 Million. We had four excellent offers on it, all above the listed price. Obviously, I can't disclose the sale price publicly, but it sold for hundreds of thousands of dollars over the listed price.
We know this market and I'm convinced if we had listed this home for the price it sold for, it would not have sold that high. We almost certainly wouldn't have four offers with buyers knowing they were in competition for the home.
So What's the Smartest Way to Price a Home in Today's Market?
In my opinion, you price the homes fairly and with the best comparables you have to work with. Don't try to outguess the market with a huge number you can't realistically support. Don't try to set the market, let the market come to you. All you have to do is professionally present the home to the world.
If a home is priced right, chances are all of the offers will be higher than the listed price and in concert they should drive the price up for the seller. As the seller, you don't have to take the first, second, third offer, etc. Give the home time for buyers and agents to find and see it.
Here's the danger of trying to outguess the market by pricing a home way above what you truly believe it can sell for. The home will sit there without showings and no offers. The only fix is to lower the listed price and when buyers and agents see that in a market like we've got, they'll wonder ...
was the home just overpriced by an overzealous listing agent or unrealistic seller,
is there something wrong with the home other than the price preventing it from going under contract,
if it's such a good deal in a market like this, why does no-one want it, or
if the seller had to lower the listing price they must not be getting good showing activity or reasonable offers?
You don't want any of thoughts associated with a home you're trying to sell today.
In markets where supply and demand are fairly even, price reductions really aren't a big a deal. We expect to see them because the market is always fluctuating. Some months might indicate sale prices are rising and other months might show declining sale prices, but there are enough sale comparables to help sellers find the "sweet spot" on pricing their homes. That's just not the case right now.
How Prevalent are Bidding Wars?
I saw a report by Redfin last October stating their buyer agents were competing in bidding wars between 60% and 74% of the time depending on the city and time of year. I'd say that's a pretty good representation of what's happening here in Collin County too.
The Redfin report went on to say ...
“There’s still a housing shortage, which means some homes continue to receive as many as 22 offers and go for $100,000–$150,000 over list price. The best thing buyers can do is act quickly, have a fully underwritten preapproval from a good lender, and consider waiving contingencies.”
In my next blog, I'll be discussing how to handle multiple offer situations. There's a right and wrong way to do it. Of course, the goal is always getting top dollar for your seller but in doing so, you don't want to alienate the buyers who didn't win the bid.
You should always be courteous and fair to the buyers and their agents who took the time to submit the offer. Furthermore, you might have to come back to them if things don't work out with the seller's number one choice.