We just finished discussing stale listings – what they are, why you don’t want your listing to go stale and what you can do to avoid that from happening. Now let’s look at a simulated real life example to see what happened when Jim and Jen’s home was on the market because this’ll give you an even better understanding of how things work.

First thing to remember is that every situation is different. Sure, you can pick any old list price, throw a sign up on your lawn and hope for the best, but doing your due diligence to make sure you select the right list price and best overall strategy will go a long way towards helping you maximize your results. Second thing to remember as you look at this example is that what worked for Jim and Jen may not work for you if your situation is different, but you can still learn some things from their experience that will help you.

Jim and Jen were motivated to sell, but weren’t under a strict deadline to do so because they didn’t buy a new home first. They were prepared to accept a reasonable price (although they wouldn’t have refused a ridiculously high price if someone offered it to them). When they put their home on the market, similar homes in their neighbourhood weren’t receiving multiple offers, were taking some time to sell and were selling for less than list price. In addition, their home wasn’t the standard neighbourhood home and this made it hard to estimate how long it would take to sell. It could have sold in a day or it might have taken 6 months or more to sell.

With the help of their Realtor, Jim and Jen determined that the fair market value of their home was in the range of $1,800,000 to $1,900,000. Being reasonable people, they were prepared to accept something in that range. They chose an initial list price of $1,950,000 because it wasn’t too much above fair market value to dissuade buyers from coming to see their home, but was sufficiently above fair market value that a highly motivated or uneducated buyer might pay them a premium price i.e. over $1,900,000.

As is usually the case, there was a flurry of activity when their home first hit the market. (The first 4 to 7 days after a home hits the market are normally the busiest.)  There were 3 or 4 buyers who seemed interested in making offers and who were asking “offer type” questions, but only 1 of these buyers decided to put pen to paper and make an actual offer.

After several rounds of negotiations, it became apparent that this buyer wanted a very long closing and was only willing to pay slightly more than $1,800,000 (the bottom end of fair market value). Jim and Jen weren’t prepared to settle so early in the game. With all the activity, they felt they could do better and hoped that one of the other very interested buyers would soon come forth with a more attractive offer. They decided to roll the dice and refused the first offer.  They knew it might be months before they saw another offer, but Jim and Jen loved their home, as most sellers do, and believed that the right buyer would eventually come along.

Unfortunately, none of the other interested buyers liked their home enough to make an offer. After the first week, the number of showings settled down to between 1 and 3 per week, which was average for similar homes. (Note: Similar homes refers to homes that are of a similar price range, home style and neighbourhood. We always look to similar homes for comparisons because what’s normal for one price range, home style or neighbourhood may not be normal for another.) After about a month, Jim and Jen reduced their list price to $1,895,000 to more accurately reflect its fair market value. They figured that the chance of receiving a premium price by that time had evaporated and wanted to indicate more strongly to buyers that they were willing to accept a price in the range of $1,800,000 to $1,900,000. They didn’t want buyers to think they were expecting a price above $1,900,000 which is what some buyers might have thought when they saw the initial list price of $1,950,000.

The feedback from the showings was often that the husband loved their home, but the wife wasn’t so keen on it or vice versa. Most of the Realtors who showed their home thought that it was a fantastic home.  But still it didn’t sell. And still the days and weeks clicked by.

While their home was on the market, Jim and Jen’s Realtor continued to keep them up to date with the market by sending them the listings for any similar homes that came on the market and letting them know about any price reductions or sold prices. She also went to view these homes in person to see how they compared to Jim and Jen’s home. The point of doing all this was to keep abreast of the competition and make sure that Jim and Jen’s list price was in tune with the market. If it was in tune with the market, then the reason their home hadn’t sold was because the right buyer hadn’t come along yet and not because it was priced too high.

A few months passed and buyers kept coming to see their home. It seemed that every couple of weeks a buyer or a Realtor would call Jim and Jen’s Realtor, tell her that the reason the home hadn’t sold was because it was so obviously overpriced and ask her if Jim and Jen would accept a price of somewhere between $1,600,000 and $1,700,000 because that was all their home was worth. In other words, they saw a listing they considered to be stale and tried to take advantage of the situation. When Jim and Jen’s Realtor asked these buyers and Realtors to support their low price based on the sale prices of similar homes, they were unable to do so because the comparable sales continued to support Jim and Jen’s price.

Jim and Jen calculated that it was costing them about $10,000 a month to carry their home. They had a choice to make: sell for $1,700,000 or keep holding out for $1,800,000 or more and pay $10,000 a month to do so. If they sold for $1,800,000 after ten months, the $100,000 they paid in carrying costs would be offset by the $100,000 higher price. If they sold for $1,800,000 or more in less than 10 months, they’d come out ahead. If it took longer to sell or if they sold for less than $1,800,000, they’d have lost out. They figured the chances of getting $1,800,000 in less than 10 months were pretty good so that’s the route they took. They weren’t desperate to sell and were still prepared to wait for the right buyer to come along.

About a month or so later, the right buyer came along and agreed to pay Jim and Jen $1,850,000 and close on an acceptable date. Deal done. Their gamble paid off. It took them a little longer than they had hoped, but Jim and Jen understood the market, knew what to expect from it and weren’t willing to sell for less than fair market value.

Now, your situation may be different from Jim and Jen’s, especially if you have a deadline by when you need to sell your home, but the most important thing to learn from them is that being prepared and educated will help you make the best decisions possible.

Next up, keep an eye out for the third part of this series, When to Reduce Your List Price, because there will be times when that’s what you really need to do.

As always, if you know of anyone who’s looking for an honest realtor who really knows his stuff and won’t pressure them, Please Don’t Keep Me a Secret. I really appreciate your referrals. Thanks for reading and don’t be shy if you have any questions or comments!