Waiting For The Right Buyer Is A Myth. Here’s Why.
If you’ve sold a home before, you may have had an agent tell you they’ll list your property at the top end of what you expected and “the right buyer” will be willing to pay full price for the home. 60 days later, your home hasn’t sold or even seen a showing in weeks. So where’s that “right buyer?”
Since we collect a lot of transaction data at Properly, we decided to take a deep dive to see whether this mythical “right buyer” exists. More specifically, are there cases where leaving a listing at a higher price for a long time eventually results in a sale at that price. The results were pretty surprising.
The 14 Day Rule
When we took a deep dive into our transaction data, we found something fascinating: 100% of the homes we’ve sold received their offers within 14 days of listing or a price change.Put another way, waiting more than 14 days to reduce the price of a home that hasn’t received any offers hasn’t resulted in any additional offers for our clients. This holds true even after relatively small price reductions (< $10,000).
Why does this happen? It all comes down to math: Let’s say we list a new 3 bed, 2.5 bath home. The pool of potential buyers for that home are people looking:
- In that area
- For that number of bedrooms
- And that number of bathrooms
- At that price point
Sites like Zillow and the MLS make it so that this group of potential buyers will learn about the listing as soon as it enters the market. Based on the photographs, some portion of these buyers will schedule showings quickly and visit the listing. Since this pool of buyers existed before the home was listed, sellers often see a lot of showing activity very quickly when they initially list.
This initial flurry usually takes place over the first 2 weekends that a home is on the market, at which point every interested buyer (interested based on the quality of photos, which is why having professional photos is so important) from this existing pool has already seen the home. So if the seller doesn’t receive an offer, how can he expand the pool of potential buyers without waiting for them to trickle in one by one?
Look again at the four buyer criteria outlined above – of those four, there is only one that the seller has any control over: the price. Lowering the price exposes the listing to another large chunk of buyers who had the same wish list at a lower price point. The 2 week cycle begins anew, with a flurry of showings right after the reduction goes into effect.
In a lot of cases, a price reduction doesn’t even mean the seller will walk away with less money. Remember, the list price is a starting point for negotiations, not a price tag. Here’s an example:
Let’s say our home seller from above lists at $509,000, and expects an offer in the high $490s. Meanwhile, the perfect buyer for that home happens to be looking, and even has a budget of $500,000. The home should sell instantly, right?
Unfortunately not. Most agents search in ranges like $400,000 – $499,999 for their buyers who are looking for a home up to $500,000. This means that this perfect buyer, who would be willing to pay $499,000 for the perfect home, would never even know that this listing existed unless the list price dropped below $500,000.
In this scenario, the seller would sell more quickly without losing any expected value just by reducing their price and exposing their home to a new pool of potential buyers.
What Does This Mean For Sellers?
The most important take away from this study is that there is no benefit to “waiting for the right buyer” who will be willing to pay a higher price for your home if your home hasn’t received offers in 2 weeks.
Think about when you were buying your last home – if it had been on the market for a month at the same price and didn’t have any offers, would your agent have recommended you make a full price offer just because you liked it a lot? A good agent would realize that a home that hasn’t moved in a month and doesn’t have offers won’t require a full price offer with lots of concessions to attract the seller.
Instead, sellers should always have a price management plan in place before ever listing their home on the market (we do these for every client and bake them into the listing agreement). This plan should outline not just the initial list price, but also the amount the list price will be reduced and when based on the activity on the home. Having a defined timeline eliminates reconsidering the issue every few weeks and putting sellers through an emotionally challenging decision multiple times.
Shameless Plug: If you’re thinking about selling your home, get a free home valuation online in just a few clicks. Not only will you be able to instantly view the activity of comparable homes in your market in real time, but you’ll also learn we’ use amazing service and advanced technology to save our clients an average of $10,000 in commissions and sell our listings twice as fast as the market.