Home sellers in the Portland metro have had a great run the past few years. They have become accustomed to hearing about bidding wars* and buyers desperately offering creative incentives like free pizza for a year. But, every party comes to an end, and many local real estate professionals and forecasters predict that the Portland-area real estate market is set to stabilize in the coming months. I agree. (Note I used the word “stabilize, not crash)
But are sellers ready for that?
Your list price is the single most important piece of marketing you have. Photos and descriptions and open houses play their part, but nothing puts your house in front of the eyes of buyers more than your list price. As the market changes and more homes hit the market, price will become even more important.
So, how will you know if your home is overpriced?
The first indicator is going to be buyer traffic at your home. If the buyer traffic is slow and less than you expected, your home is most likely overpriced. No matter how nice your home is, if it is priced higher than it should be, buyers simply aren’t going to come look at it. And, do not underestimate buyers. Buyers, and their agents, are knowledgable about pricing, so, even if a house is within their price range, they will know if it is overpriced. And, they will skip your house and look elsewhere for a well-priced house.
The second indicator is going to be feedback from any buyers or agents who tour the home. Your listing agent should be following up with buyer agents who show the home for their feedback about the home, especially price.
The third, and possibly most important, indicator is going to be your thought process. Are you placing a heavier emotional weight on the price than the market data can support?
Some sellers have an emotional need to sell at a certain price. They have put a lot of time and energy and money into their home, and feel the need for a certain number or for a bidding war*. They have a fear of “leaving money on the table” so they price higher than the market suggests so they can bargain downwards. The longer a property sits on the market, going through price reductions to get attention, the more tainted it becomes in the eyes of buyers and it becomes a prime target for a lowball offer.
The market always speaks, and the right price is only going to be what a buyer is willing to pay and what a seller is willing to accept. Ask yourself if you are listening to your emotions over the market data. The proven best strategy is to price it right to begin with.
Also, keep in mind the appraisal process. Even if you get the higher price you feel the need to get, will it appraise at that value? Appraisals must be supported by market data. Appraisers look at nearby homes of similar vintage, size and condition. Having multiple offers* can help a lot in justifying a higher price (especially if your listing agent is like me and meets the appraiser during his or her visit.) Sellers have even been getting away with asking buyers to waive the appraisal contingency, but that trick is starting to backfire.
So, if you suspect your home may be overpriced, look at the other nearby homes in your price range (if there aren’t any, that should be a red flag!) Look at their stats: are they of a similar size, condition and vintage? Then, look at their marketing and compare it to your listing. If their photos and descriptions are more vibrant and alluring, they may get more buyers. If your home is on the higher end of the range, you need eye-grabbing photos and enticing detailed descriptions to sell the house.
Keep in mind that the majority of the buyer pool is looking for a good deal that they can be comfortable with, just like you are looking to make a good sale on your home. Pricing a home smartly will excite a buyer, but they can smell an overpriced home from a mile away and will swipe to the next one before you can say “But I put a lot into the home!” Buyers know when a home is overpriced, and they will skip your overpriced house and look elsewhere.
*About bidding wars. Bidding wars happen on homes that are priced correctly. They do not happen on overpriced homes. That is because overpriced homes attract less traffic and savvy buyers know they are overpriced. Overpriced homes sit on the market for a longer time and encourage lowball offers.
PS. You may notice that I did not mention the Z word. That is because Z’s price estimates are mostly useless.
PPS. Why am I writing this blog, and why now? Because the market is starting to shift, and because I’ve had this conversation with a half-dozen home sellers in the past couple of weeks. And, because I care about you!!!!