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Marketability and the pool of potential home buyers

May 19, 2017
By BOB and GERI QUINN - Homing In , Cape Coral Daily Breeze

When a person decides they are going to sell their home, there are a number of factors that go into determining the price of the home. As we have discussed in the past, there is no single perfect way to determine ahead of time the actual price at which a home will be sold. The primary reason for this, is because the housing market is an "opaque market," in that there is no published, actively traded daily market for a home, such as there is with the stock market. So determining the value of a home involves sorting through a number of different factors, and combining them all together to come up with a price estimate, or opinion, of what a home might sell for, which is not necessarily what it will sell for.

The process of pricing a home is made even more difficult by the fact no two properties are exactly alike in their location, condition, age, features, quality, improvements, upgrades, etc. Then throw the human influences on pricing into the mix, such as the seller's emotional ties to their home, or their "need" to get a certain price, which may or may not be aligned with the reality of the current market for their home.

Real estate agents also influence the pricing process, as there are more than 7,000 hungry, licensed agents in Lee County, all with varying backgrounds, levels of experience and market knowledge, competing against each other to make a living. Because of this, a seller will have no problem finding someone who will tell them exactly what they want to hear about the value of their home in a convincing, yet sometimes unrealistic fashion.

All of this leaves the process of determining an expected sales price on a home pretty much wide open to interpretation based on an individual's opinion. This creates a potentially large margin for pricing errors and when we track various homes listed for sale on the market, we consistently see some pretty wide gaps between the typically overpriced initial list price and what the home eventually sells for.

As you prepare to put your home on the market and meet with a Realtor, you will most likely be presented with a Comparative Market Analysis in an attempt to compare your home with recently sold homes, pending sales and currently active listings in your neighborhood. This should be just one of several different pricing metrics utilized in trying to estimate the likely sales price range of your home in the current market. But there are other important factors which can influence the home pricing equation and they often have a big impact on the ultimate sales price you receive for your home.

Two of these factors, the marketability of your home and anticipating how the pool of potential buyers will react to your home, need to be properly analyzed, because they can play critical roles in setting realistic price expectations. By receiving an honest assessment of their home and how these factors can impact the sales price, a seller is more likely to avoid the disappointment of getting a much lower sales price than anticipated. Or, even worse, not getting their home sold at all, preventing them from moving on to the next phase of their life.

Here are some examples of what we mean by marketability and how it can impact the price and the pool of potential buyers of a home.

We recently came across a 30-year-old, dry lot home, which was across the street from more expensive gulf access canal homes in a nice neighborhood. The owners had put a nice room addition on the home, so they had an appraisal done on the home prior to listing it for sale, hoping to maximize the value they received. In this scenario, one might expect the home to sell fairly quickly near the appraised value. But despite having what they thought was an accurate price estimate in the form of the appraisal, the home sat on the market for about 165 days without a single nibble, indicating the home was overpriced.

As soon as we walked through the front door, we discovered one major marketability issue with the home, as this home had a very uniquely distinct and unusual type of flooring in the main living area. Despite being anything but neutral, the flooring was actually attractive in its own way, but a buyer was either going to love it, or hate it, the moment they walked in the front door. So from the standpoint of marketability, this home was going to lose at least half of its pool of potential buyers almost immediately because of the flooring.

To top it off, there was a vacant three lot site behind this home with a large sign advertising plans to build a two-story luxury condominium in that location. So whatever remained of the buyer pool after seeing the unusual flooring, it was likely all but eliminated after a quick drive around the neighborhood. When issues with the marketability of a home shrinks the buyer pool, it becomes more difficult for a seller to get their home sold, never mind trying to command top dollar.

A marketability issue is often something we can't see until we come out to your home in person to tour the inside and outside of it with you, along with looking at the surrounding neighborhood. And sometimes the severity of the marketability issues with a home do not become apparent until after a home is put on the market and we start receiving feedback from buyers and agents who have toured the home.

However, in a lot of cases, these issues should be obvious to an agent, but because it may lead to having to have an uncomfortable conversation with the seller, the agent may not point out the issues and the negative impact it will have on the sales price. Things such as strong food or pet odors, too much clutter or the cleanliness of a home can be difficult to discuss with a seller because an agent does not want to risk offending them, but it is always better to help a seller try to address these issues upfront.

Other marketability issues, such as, the proximity of a home to busy roads, apartment buildings or condos, shopping centers, schools, ballfields, large tracts of vacant land, etc.; or having poorly maintained homes, or a lot of rental properties in or around the neighborhood; can all impact the pool of potential home buyers and negatively affect the sales price.

(The views and opinions expressed in this article are those of Bob and Geri Quinn. The information provided is believed to be accurate and reliable, however, it could be updated and revised periodically, and it is subject to change without notice. The Quinn's are a husband and wife real estate team with Century 21 Birchwood Realty, Inc., in Cape Coral. They have lived in Cape Coral for over 37 years. Geri has been a full-time Realtor since 2005, and Bob, who also holds a Certified Financial Planner designation, 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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