The most obvious problem that will never go away – because it perpetuated the incurable human conditions of greed and ineptitude – is the valuation and pricing of a real estate asset. It is unfortunate and difficult to address the fact that most sellers place a much higher value on their preferences than the preferences of potential buyers. The difference between the value expectations of the seller and what a ready, willing, and able buyer is willing to pay for a specific property is commonly referred to as price resistance. Value is largely a perception built on aesthetics, utility and function, attitude and emotion. When this foundation is quantified, a number – usually a number sufficiently high enough so no money will be left on the table – is agreed upon and the asking price is arranged.
In most cases, the next step is a process of justifying the price so that when it is questioned, a defense of the price can be presented with the aim of persuading the buyer that, they too, can justify the price to whomever it may concern in their lives.
It is during this price justification period that the opportunity to get real about selling presents itself. If efficacy is the true goal, the broker and seller should consider carefully the question, “Why does this price make sense?” To me, this question implies more objectivity than basing an asking price on future needs of the sale proceeds, or the sum of an itemized list of monies spent on the property. Seriously, what buyer is concerned about the seller’s needs or spending preferences? Buyers want information to justify an emotional attraction, functional need, and/or investment opportunity to whomever it may concern in their lives. The price needs to make sense in the buyer’s terms, not the seller’s terms.
Pricing a property to sell involves an acute awareness and understanding of the time frame in which the property is intended to sell. If a seller wants to “test the market” on an exploratory mission to determine how much cash they can yield from their asset, time is given little consideration. On the other hand, a home owner who just received a Notice of Default is likely to gear his or her asking price to eventuate in a sale while s/he still owns the home – a time sensitive pricing approach. One seller has a stronger motivation to sell than the other. The seller who has a greater motivation to sell considers time to formulate a reasonable asking price. Pricing and real estate marketing time have an inextricable relationship.
Another consideration within the control of the seller and listing broker is to avoid lengthy active market time. Avoiding long periods of active market time can deleverage the buyer’s negotiating power. Stigmatizing a property can be averted by not allowing active market time to noticeably exceed the average or median market time for the local competing marketplace. Providing a fresh look with new photos and updated descriptions can further deter the possible stigmatization of a particular property.
As previously mentioned – and worth mentioning again, market time is a major consideration in the marketing of a property. Market time influences price. Price represents everything about a property that attracts potential buyers. Assuming that a listing broker utilizes a marketing approach that identifies, profiles, and targets potential buyers; creates a presentation illustrating why the price makes sense for the property; distributes the presentation to the targeted market(s); has in place the metrics to measure consumer inquiries; possess the wherewithal to make necessary marketing adjustments; and a cooperating seller, the joint effort will, more often than not, result in a sale. When a property is adequately exposed, inquiries will result, suggesting that the broker is earning his/her money. If inquiring buyers are not pursuing their initial interest in a specific property, it is likely that these buyers do not perceive the value as being fair relative to the local real estate market. In other words, the property exceeds fair market value, or is overpriced.
In real estate, as in life, everything begins with time and ends with timing.