One Canadian researcher wondered if there was a trade-off between days-on-the-market (dom) and list price with respect to the sale price.
Do you set the list price high and wait for someone to come along,
or does the high list price scare away buyers?
(Dr. Paul Anglin, currently an Associate Professor of Real Estate and Housing in the Department of Marketing and Consumer Studies in the University of Guelph's College of Management and Economics)
There is a trade off between time and money and several parts of my research are trying to come to grips with high selling price versus quick selling time.
Sometimes you just get lucky and sell for a high price in 2 or 3 days.
How much is luck and how much is the listing price strategy?
Distinguishing luck from good choices requires careful analysis of the data, especially in this current real estate market."
(Longer days on market may actually discourage buyers or encourage low ball offers as realtors are often asked upfront "how many days has this property been on the market before placing an offer"... this DOM statistic does not go away - it is published for all Toronto Real Estate Board members and is maintained in a database and a footprint remains.)
Anglin undertook research based on 3 years (1997 to early 2000) of listing information provided by the Windsor Real Estate Board. Through the Board, data for more than 20,000 houses, including those that did not sell, was available for statistical analysis.
The resulting study, entitled "House Prices and Time-till-sale in Windsor," attempted to quantify the trade-off between time on the market and sale price as a reflection of selected list price. Keep in mind today's market is much more competitive and keeping abreast of changing prices is vital.
"The key step in our analysis was that we tried to compare to a benchmark," said Anglin, who used a three-bedroom/two-bathroom bungalow as the standard for comparison.
"An increase in the list price has an effect relative to a benchmark."
Analysis revealed: (based on a average over a 3-year period):
- Smaller houses sold faster versus properties with 5 or more bedrooms which had increased days on market (DOM)
- Bungalows and side-splits sold at the same pace, ranch-style and "rental" properties took more time.
- Descriptive remarks on the listing form had the following effects:
- The words "beautiful" or "gorgeous" reduced DOM by 15 percent and "beautiful" houses sold for more. "Landscaping" reduced DOM by 20 percent and "move-in" condition did so by 12 percent.
However, "must see" and "vacant" houses apparently had no statistically significant effect.
- Houses identified as "Starter" homes sold in 9 percent less time, however, "Handyman Specials" sold approximately 50 percent faster.
-- "Rental" properties were on the market 60 percent longer.
- Seller intent described as "motivated" or "must sell" were associated with a 30 percent increase in the average DOM while "moving" had no statistically significant effect.
- Following the research statistic "Degree of Over Pricing" (DOP), which measures the difference between the list price chosen by the seller and the average list price for that type of house, the DOP of unsold houses was roughly 4.5 per cent higher than those which sold.
According to his research, "Roughly 40 percent of listings in average markets around the world do not sell." The impression in a hot market is that all listings sell, but Anglin stresses that may not be true. You can only imagine how this percentage of unsold properties increases in a slower market.
In an email follow-up to our interview, Anglin added: "I was looking at the website of the Calgary Real Estate Board and, even with the hot market that they have, the number of new listings is about 40 percent above the number of sales for the year to date.
Among owners who select a list price higher than current market data indicates are those who may be "testing the market" -- content to stay in the property rather than sell for less. (that's not the impression a seller should want to project)
Real estate professionals who take on listings at prices that match inflated owner expectations may not fare well either, especially in a declining market. Anglin's research reveals that houses which are listed, but do not sell, use up more of the real estate professional's time and resources.
According to the study, owners setting a list price should bear in mind that wanting more may not result in more: "The single most important message that a seller can send to a buyer is their choice of list price. A high list price encourages potential buyers to inspect similar lower-priced houses, both those that are available currently and those which will become available."
Overpricing may also stigmatize a property - decreasing the number of showings over time. Remember, Days on Market statistics are published on many real estate Board listings.
Real estate sales data often make the news, but significant amounts of real estate knowledge remain tied to anecdotal evidence. Research directed at adding statistical weight to professional observation may prove useful to both real estate practitioners and property owners alike.
When thinking of selling analyse the data carefully. Don't select a realtor based on the highest price given on an evaluation - rather on what that realtor plans to do to help you sell your home. The market has changed, multiple offers are few and far between.
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