I originally wrote this article many years ago (about 2010), but have filtered and updated it with a fresh 2019 lens and perspective making it relevant today in 2019.
I have long believed that every property has a RIGHT buyer, and in EVERY market there should be able to find a buyer in a reasonable time-frame. That is still the case!
What is a reasonable timeframe?- I believe 90 days on the market is plenty of time to find the right buyer in any market.
While this article refers to factors that cause a sale, I will also add this;
By definition, a sale requires written offers. NO OFFERS equals no sale. In the current market (Prices steady or falling in some instances) asking price needs to be right spot on at most recent sales evidence or spot on with current market value.
So we can extend the logic of this article to include offers received. No offers received has the same factors, perhaps only magnified more than the levels being indicate below.
COMPETITION- Sellers that come onto the market are not operating in isolation but in competition, to every other property plus or minus 10-20% of theirs on the market. They are also in competition to the alternative to buying an established home, that being building or renting. That competition extends to nearby, surrounding locations as well.
Every property has a RIGHT BUYER in ANY market!
The following are the 9 variables that cause or affect a sale.
1. SELLER MOTIVATION
I have added this one to the article, as especially in this market, at this time, really if a seller doesn’t score 8/10 on motivation, the outcome is actually very predictable. By that, I mean having definitely decided to move, in a reasonable timeframe, for a reasonable market price.
They say start with the end in mind, and I believe only sellers committed to the outcome in mindset, allocation of resources, having a pragmatic outlook and appropriate expectations will a sale result. Buyers can sense when a seller is nonchalant, or indifferent about the sale.
There are lots of ways that this can be determined, from asking price strategy, response to various offers, the level of investment into a marketing campaign and a willingness to accept market feedback all reflect a level of seller motivation.
I truly believe the seller gets a higher price when on day one the market is aware, or senses the seller is totally committed to the outcome of finding a willing buyer, who is prepared to pay a fair price, and that the seller is prepared to try get sold and moved.
Buyers tend to avoid situations and properties perceived to be “not really for sale”, or only for sale if someone pays a way over market price. Most genuine buyers want to buy nice properties, realistically priced, presented in good condition, from nice people.
Testing the market in most cases can and usually does damage the reputation of the property and thereby jinxes the chance of getting the premium price, as most often the premium prices occur when the property is relatively fresh to market. It is hard to argue with the logic, “if it were good value/priced right it would have sold by now”.
When the seller decides to sell, it is as if magic occurs, the planets align and buyers gravitate to the property. Multiple interest and offers usually occurs, and the premium price is very often achieved. In any case, the seller is always better having genuine buyers making offers on, and trying to buy their property rather than the alternative, that being no interest, no offers and no sale.
2. SELLER EXPECTATIONS
Often if and only when a seller has realistic expectations, can a sale occur. Many sellers have a pre-determined “wish for” price before the property hits the market. In some instances there are financial reasons why a seller wants or needs a certain figure, sometimes it may be to do with a mortgage payout. It may because the seller had an appraisal performed a while ago, and that figure sticks in their mind. It may be a pride thing too. It may be because a certain price was paid. It also may be based on erroneous data or factors that have little to do with current market conditions.
If the market engages a property, has opportunities to view it, check it out online and compare it to what else is available on the market, and the market value is way less than what a seller wants, expects or needs, in most cases it is unlikely a sale will occur.
In a market where prices are not running away in a hurry, there is little fear of missing out from buyers. With a first class marketing campaign, there is the ability to create competition and this can have a positive effect on the sales price, within reason, but the most predictable measure of likelihood of outcome is a realistic, pragmatic expectation by the seller. Even with the best property, the best agent and the best marketing, the market always has a say in the outcome.
There are many ways realistic expectations can be established.
- Bank valuation– Many sellers are today using this as an excellent reference as a baseline to establish possible values.
- Real Estate agents– Good to get a few opinions, please remember these may not be as impartial as other methods described here and there may be a conflict of interest.
- Own due diligence– Check actual sales prices and make sure you are comparing like for like.
- Market based feedback– Listen to what actual buyers are saying once on the market and assess actual offers made on merit, and interpret various benchmark indicators during the campaign, such as numbers of inspections, numbers of offers made, days on market and so on. A good agent can explain these key performance indicators (KPI’s).
- Focus on changeover- Depending on the destination a seller is moving to, often if the one you are selling has fallen 5-10%, if the one you are buying has too, in real terms the market is negated and the right thing to do is sell for as much as you can get, then buy well in a strong negotiating position, once sold.
All of the other parameters, such as want, need, price paid are all irrelevant to market value. Sellers are strongly recommended to take independent, market based factors into account to assess current fair market value and use these figures to assess their expectations when starting to go to market.
All other factors being equal, homes in better locations will be preferred unless there is a significant price incentive.
When selling, the location is a constant. It should be factored into the pricing strategy
Often buyers will choose a better home in a lesser location, so while location is important, unless the price is reflective of somewhere around market value we can see (and often do) even premier locations, homes can sit there for a long time as buyers prefer lesser locations with better homes, for the right price.
Even the better located homes are part of a supply and demand market. If there are too many high end homes available for sale at one time, the demand will be softer. That does and will affect market value and therefore price.
Even the best locations do have price fluctuations. They tend to be hit harder in tough markets, and as soon as the markets recover, will often lead the charge.
Many buyers don’t have the funds to renovate so may choose a lesser location with a home that is ready just to move in. Location is important, but buyers still want value.
4. CONDITION/ PRESENTATION
- The seller controls the condition and presentation of the property
- The home should be presented in its best possible light
- Homes presented better will usually sell first and normally for a higher price
- There are many proven strategies to enhance a home’s appeal to buyers
Generally, buyers don’t want to fix or renovate an established home, unless there is a significant price advantage to do so. I have found over many years, if a fix is $10,000 buyers will over exaggerate that fix by 2-3 times and want a $30,000 discount. For this reason it is almost always worth it for sellers to do the maintenance and fix ups or risk selling way under what they might fetch for the home which is in top order.
THINGS CHANGE- Styles change, bedroom sizes change, lifestyles change, layouts change. These are the reasons homes depreciate, apart from the obvious deterioration of bathrooms, kitchens, flooring, roofing, gas, electric and plumbing over time, the willingness to live with older styles and designs diminishes the older the home is from build date (Again unless the price reflects that).
Sellers that expect to live in a home, style it in their tastes, use it for 10-20 years and expect buyers to pay replacement value are almost always disappointed. Remember, it is the land that appreciates over time and homes actually depreciate at a rate of about 2.5% per annum. (A house would be expect to have a life of around 40 years depending on the build, quality and scale). Homes that have had significant renovation would be valued differently and higher.
5. THE MARKET
Markets change, they go up, down, sideways, are affected by interest rates, new listings, recent sales, sentiment, the football, new taxes, who is in Government, the weather and supply and demand. The market can change daily depending on all of the above factors. We need to monitor it, interpret it and work with it.
Markets are always affected by supply and demand and recent sales and number of competing properties available at any time.
6. FINANCE (Access to funding)
There is little doubt the changes to the finance and banking sector have affected the ability of many buyers to secure finance. Buyers are having to demonstrate much stricter adherence to the banks criteria and sometimes buyers just can’t get as much as they want to borrow.
Even if a buyer can get finance, the bank will still have a say in the bank valuation (most sales these days are subject to finance). Sellers must be aware that the ability to get finance does have an impact on market value.
Often buyers don’t have the funds to renovate as they may well be borrowing up to their limit to fund a purchase. Hence, more than ever, homes presented “ready to move into” may fetch a premium and will almost certainly sell faster and for more than homes presented to the market in an “as is” condition.
7. MARKETING/ POSITIONING
- The marketing strategy needs to be appropriate and effective
- All reasonable efforts must be used to attract and engage the buyer
- Every home must have a customised strategy
These days, buyers are time poor. It is has been said that we have about ten seconds to catch a buyers attention. We have heard of buyers looking at 100 properties online, dismissing 85-90% without inspecting, and viewing only 10 in person before buying one. We had better make sure quality, first class photography, video, floor plans, home styling and ad copy are utilised or risk being rejected by time poor buyers without ever stepping foot inside.
8. THE AGENT
- Sales do not happen on their own
- The agent needs to be positive and PROACTIVE
- All buyers must be followed up for further action and asked to buy
Buyers these days want to enquire almost 24/7. The proliferation of late night SMS and emails is almost common daily. Agents need to be switched on, engaged and ready to capitalise on ANY AND ALL opportunities.
Agents need to be giving timely, accurate and appropriate feedback to sellers so that sellers can make the best judgements as to their various options, courses of action and move forward strategies.
The seller determines the asking price, the market determines the current fair market value and the buyers determine the price willing to be paid.
A good agent will have input into price and the seller will be getting updates from the agent about buyer feedback, offers, and general happenings in and around the property for sale so as to make informed decisions about the market and the price.
- Buyers ALWAYS compare the competition for value
- Buyers will also compare the alternative cost to build
Buyers will not make offers in many cases where the gap between asking price and what they perceive market value is too big for fear of offending the sellers or wasting their time
A correctly priced property, as seen by the market and the buyers will ALWAYS attract interest and therefore offers. Ultimately the number of offers is a valid, strong indicator of whether a property is at the correct asking price or price guide range. Buyers will always be attracted to well-priced (Meaning the right price) properties.
The good news for sellers is that there is manageable, simple steps to get sold in this market. The good news for buyers is that many sellers do just that and are ready to sell.
I hope you enjoy this article. Thank you and see you in the market place.