There are a number of ways a real estate deal can go south. One way to kill a deal is to have it listed for too long and at the wrong price, according to David Howell, executive vice president and chief information officer at McNearney Associates.
“In the old days, if a potential buyer was interested, they might arrange a showing to go see the property,” McNearney wrote in “Why time kills a good real estate deal,” published April 12 in The Washington Post.
“Today, that showing is online and immediate. Based on its price, condition and location, a home communicates value to that consumer — and if it doesn’t, they move on and look elsewhere. Bringing them back to that property means changing the value equation — which usually means changing the price,” he wrote.
To illustrate the importance of listing a home at the correct time and price, Howell used an example two property listings — home No. 1 that listed in September and home No. 2 listed in March — in the same neighborhood and listed by the same agent at very similar list prices. Both properties spiked at initial listing, but home No.1 lowered its price once the number of online views waned, lowered it a second time, and then again until it finally went to contract at a price of 14% lower than initial asking. It also took 150 days before selling.
Contrarily, home No. 2 sold after being on the market for just seven days.
“The difference is that buyers perceived value at the initial list price, and in a week, a contract was successfully negotiated,” Howell wrote. “The sellers came on at a compelling price, rode the online traffic wave and got their home sold at almost full list price.”
Howell said he isn’t suggesting that this would happen in all scenarios. However, he said there is a definite correlation between timing and price.
“…time after time, listing after listing, in good markets and bad, we see the consequences of pricing strategy,” Howell wrote. “Far more often than not, the wrong initial price means a longer time on the market, and time kills.”