I review market statistics regularly,
and since we just passed the halfway point of 2011 I found some very powerful
data on the relationship between percent of asking price that local homes
sell for and how long they have been on the market. As the table from the MLS
below illustrates, the percentage of asking price a home sells for decreases
the longer the home sits on the market, all the way down to a whopping 7%
average loss for older listings.
The sample size, over 1700 closed
single family homes in the first half of 2011, is plenty large enough to draw
accurate conclusions. The longer your house is on the market, the less you
can expect to net.
- 0-30 Days.
There are very few homes on the market 30 days or less. Even in an all
cash transaction, closing in 30 days is not easy. But of the handful that
did close, they averaged above asking price by more than half a percentage
point.
- 31-60 days.
This is also considered a fast closing, and the home would probably have
to sell in the first week or two to close this quickly. Obviously, these
homes were priced right. And in a severe buyer's market, they averaged
well over 97% of asking price.
- 61-90 days.
This is a larger sample, and represents over 12% of the market. These
homes did sell quickly, and just over 96% of asking price was the average
closing result.
- 91-120 days.
There is only a small difference, but still a difference, for the homes
that took up to 4 months to close. This is just under 96% of list price,
and represents almost 18% of the market activity.
Drum roll...
- 120+ days.
This group represents virtually two thirds of the market, over 1100
closings. Homes that were on the market over 4 months averaged only 93% of
asking price. In a county where the median sale price is almost $600,000,
that equals about $40,000. The chief reason a home takes longer to sell is
that it is priced too high. How ironic. The people that tried for more
ended up with less.
Many of these homes were on the
market longer. This simply represents their latest listing contracts with the
broker that sold them, so regardless of how long they were on prior to the data
recorded, once their price was right they sold.
There is another rough fact behind
the numbers that isn't obvious from the table. If overpriced homes take longer
to sell, then it becomes clear that the homes on the market for longer than 120
days may have had price reductions along the way! I've seen homes sold in the
low $500s that started out asking over $700,000! If they had started out
realistically, they very well may have sold for mid or high 500s! Asking for
more and chasing the market cost the sellers upwards of $50,000! How ironic! Regardless
of your zip code is, real estate mistakes are very expensive.
Pigs get fat, hogs get
slaughtered.
Price it right from the start and
you'll net more. Be objective, think like a businessperson, and base your
decisions on market data and not sentiment. The statistics aren't kind if you
don't.
Contributor J. Philip Faranda
