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Read the market to know when to hold and when to fold

May 17, 2018
By BOB and GERI QUINN - Homing In , Cape Coral Daily Breeze

When it comes to a seller determining the listing price for their home when they put it up for sale, the 1978 song, "The Gambler," written by Don Schlitz and made famous by Kenny Rogers, frames how they need to be able to read the market regarding their list price throughout the selling process with the line, "You got to know when to hold 'em, know when to fold 'em" By knowing how to "read" market indicators, a seller will be more likely to get their home sold in a timely manner and for the maximum price possible in the current market.

As we have discussed numerous times in this column, coming up with an accurate estimate on what a buyer will ultimately pay for a home prior to listing it for sale is more difficult to achieve than most people think. We base that statement on the fact we often see the final sales price on a home in Cape Coral coming in somewhere between 10 percent to 25 percent, or more, below a seller's initial listing price. Being able to accurately estimate the true value of a home, or what a willing buyer will pay a willing seller, when first putting a home on the market is more of an art form than a science. This is mainly because pricing in the real estate market is opaque, meaning there is no "real time" pricing information available, which makes coming up with the value of a home subject to "opinion-based" pricing from a wide range of "experts" with varying degrees of knowledge and experience. The initial price determination on a home is also often heavily influenced by the opinion of the seller and a real estate agent who may be all too eager to tell the seller exactly what they want to hear in order to get the listing. All of these factors are why we tend to see such a large margin for error between the initial listing price on a home and its final sales price.

So for the vast majority of people who are trying to sell their home, two of the most difficult things to get right involve being able to accurately and honestly determine the most likely price range at which their home will be sold, along with determining the most optimal listing price at which buyers will most likely be attracted to their home. The third most difficult thing for a seller to determine is to know when to "hold" firm on their list price or when to "fold" on their list price by making a price reduction. The strategy for this pricing process should include a frank discussion about the most likely final sales price and how it compares to the initial list price, along with the market related triggers that will be utilized to determine when a price reduction should be made. This should all be clearly defined between the seller and their agent before the home is put on the market, because the need to make price reductions should never come as a surprise to the seller.

With all home sales, there will be an optimal listing price at which enough showing appointments will be generated with potential buyers to attract a competitive offer on a home. This optimal listing price usually falls somewhere between the initial list price and the final sales price, which means a number of sellers will probably need to make some adjustments to reduce their listing price along the way in order to get their home sold. Here is what a seller can typically expect to have happen and what the market is telling them about their list price.

When an initial listing price on a home is on target with the optimal listing price to attract buyers, showing appointments with interested buyers will be scheduled almost immediately within the first one to three days the home is on the market. For Cape Coral homes priced under about $325,000, and especially for homes priced under $250,000, if the seller is on target with the optimal listing price for their home, the showing activity should be fairly brisk right away, often with multiple showings per day. In this price range, if the showing activity on a home does not begin almost immediately, or if the showing appointments just trickle in occasionally, or are non-existent, then it is the first market indication that the initial listing price is probably too far above the optimal listing price to attract a buyer.

If a home is getting at least some level of showing appointments during the first 30 days on the market without receiving an offer, it is important to analyze the feedback received from potential buyers and their agents. This type of information can help determine if the initial analysis about the value of the home and its marketability was accurate, or if there are negative issues with the home that may be causing buyers to reject the home at its current list price. Sometimes a seller needs to receive this negative feedback from potential buyers to help them understand why nobody is interested in buying their home at the current listing price and come to the realization that they are going to need to lower their price to get their home sold. In other cases, the negative feedback may provide the seller with an opportunity to correct a problem at a minimal cost to make their home more attractive to other buyers.

We also see situations where there is a steady flow of showing appointments for a home and the feedback being received from potential buyers is mostly positive and in line with what we were expecting. But because of a unique floor plan or other unique features with the home, it ends up not being a good fit for most potential buyers. For example, in our market, a lot of buyers do not want to have a home with a second story, or a home on a large, oversized piece of property. In these cases, the feedback responses are usually along the lines of, "Beautiful home. Price seems right, but the floor plan just won't work for us."

These are often the cases where a seller is priced at the optimal point to attract an offer, but needs to have the right, unique buyer walk in the door. By knowing the market and what most buyers are looking for in a home, it is easier to properly identify the marketability of a home and determine if the reason it has not received an offer is more about the uniqueness of the home or the price. This is where advising a seller about their pricing is more of an art form, which often comes down to knowing when to hold and when to fold.

(Market data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County as of April 30, 2018. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral single-family homes, and does not include information based on 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 38 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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