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Things a seller should know about pricing and buyers

July 5, 2019
By BOB & GERI QUINN - Homing In , Cape Coral Daily Breeze

One of the topics we discuss periodically is the fact that coming up with a "reasonable" or sellable price on a home is not always as easy as many people think. This is largely due to the fact that real estate is an opaque market that does not have a valid "real time" pricing mechanism in place to accurately determine the value of a home. Instead, buyers and sellers have to rely upon a patchwork of inexact pricing comparisons and estimates, blended together with the opinions of market participants with widely varying degrees of experience, market knowledge and expertise. The margin of error in trying to determine the likely sales price of a home in advance of putting it on the market becomes evident when we track and research various listings in Cape Coral, only to find that a lot of homes and condos end up selling for 10 to 15 percent below their initial list prices, with a surprising number of listings selling for 15 to 25 percent, or more below their initial listing prices. Many of these overpriced homes also end up requiring at least one fairly significant price reduction before attracting an offer from a buyer. This has created a situation in our current market where we continue to have an oversupply of overpriced homes that just sit on the market unsold for lengthy periods of time, and a much smaller supply of reasonably-priced homes listed for sale on the market.

This limited supply of reasonably priced homes comes from two primary sources. The first source is created when a seller with an overpriced home that has been sitting on the market unsold finally makes a substantial enough price reduction to bring the price of their home down to a level where it is priced reasonably to the market. At this point it will begin attracting more showing activity from the pool of potential buyers who are out there monitoring the pricing activity of homes in their price range, and it will finally stand a chance of receiving a competitive offer.

The second source of reasonably priced homes in our market is from the relatively small number of new active listings that come onto the market from sellers who set their initial list price within a reasonable, sellable price range on day one of their listing. These properly priced homes attract multiple showing appointments almost immediately upon going active in the Multiple Listing Service, and they will typically attract initial offers from qualified buyers that are within 5 to 8 percent of their list price. These offers will usually be negotiated to within 5 percent of the initial list price, and sometimes the offers will be at full price, or a bit higher. Almost every reasonably priced, newly active home listed for sale in Cape Coral from around $325,000 and under, and especially those listed at $250,000 and below, will go under contract with a buyer within days, or weeks, of coming onto the market. If they are not under contract with a buyer within the first 30 days, it is very likely that these homes are overpriced.

To help drive home this point about the speed at which reasonably priced new listings will go under contract with a buyer, our fastest was on a condo in the Cape that had been on the market for less than 30 minutes. We had spent several weeks showing condos to an eager and qualified buyer, and we had gone in and out of a number of overpriced units, so the buyer had seen what was available in their price range. We just happened to be out looking at more overpriced condos that the buyer wanted to see when we got an alert that a new condo listing had just come on the market about a mile away from where we were located. We immediately scheduled a showing appointment with the listing agent and we were inside of that condo for a look only 15 minutes after seeing it on the MLS. As soon as we walked in the front door, the buyer said something to the effect of, "This is the one. Let's get it under contract right now before anyone else has a chance to see it." Compared to everything else we had seen, it was obvious that this unit was priced correctly. This is how it works.

We have had other buyers who bought newly active listings within the first several days and weeks that a home was listed for sale, but they all had one thing in common. We had spent time going in and out of a number of homes with them and we were able to show them why a lot of homes they wanted to see were overpriced. They also saw homes that were priced right to the market and they would see how quickly these homes went under contract with another buyer. Sometimes our buyers would put in lower offers than we recommended on a reasonably priced home, only to be out-bid by another buyer. In going out to see homes in person, they also quickly learned that they could not always trust the accuracy of the listing photos or many of the overly embellished agent descriptions about various homes and neighborhoods. This type of hands-on educational process allowed them to build up a comfortable knowledge base about the available homes in our area, so they were prepared to act quickly when the right home came onto the market.

It should be noted that the time frames from the initial listing date to going under contract with a buyer will likely be somewhat longer for higher priced homes because the pool of potential buyers is smaller than it is for lower priced homes. However, many of the same lessons about the home search process outlined above from the buyer's point of view still hold true through all price ranges in the Cape. A home priced reasonably, or correctly, to the market will find a buyer, while an overpriced home will sit on the market unsold until price reductions bring it down into its reasonable price range.

For someone looking to sell their home in our current market, having a good understanding about the rational process that buyers are going through in their search for a reasonably priced home can help in developing and implementing a disciplined, market-based pricing and sales strategy.

(The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of July 1, 2019. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral single-family homes, and does not include condominiums, short sales or foreclosures. The data and statistics are believed to be reliable, however, they could be updated and revised periodically, and are subject to change without notice. The Quinns are a husband and wife real estate team with the RE/MAX Realty Team office in Cape Coral. They have lived in Cape Coral for over 39 years. Geri has been a full-time Realtor since 2005, and Bob joined with Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.)



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