Understanding Your Local Real Estate Market - Know These 4 Things
Sellers deserve to understand what the term "real estate is local" really means. Realtors will tell you that no two markets are alike, and that is true. This is why Realtors have to work and research market data, prices, sales, amenities of active, competitive listings, days on market and months of inventory stats before pricing a home for sale. It is critical to the success of the sale not just for price, but for days on market and for even acquiring showings during crazy fast markets and the slow sales markets as well. If your home is not priced correctly, it will not matter how nice it is, how many updates you have, or that you put more work into your home than the neighbors. It especially does not mean because you saw an article from a National housing research firm talking about how great or how bad national home sales are currently, that you have an understanding on your market in your small corner of the nation - the "local" market. Your home is not located in a national market, it is specific to a local market where the following 4 things are critical to its sale and marketability. Affordability, Supply, Economics and Exposure in a Marketing Plan. Any one of these things can affect your home value at any time. Supply and demand change, and so do values, sometimes even monthly!
Understanding what the next 1-3 years may look like in a local housing market may directly affect a buyer looking at your home, and on a larger scale, the number of buyers buying at any given time or in the future as they evaluate values for the long-term.
Homes that get multiple offers are often sold in an "aggressive pricing" atmosphere. A low listing price gets people excited about the possibility that they may If you think back to the last auction you attended or saw online, you'll remember this basic element of Auctions 101: Prices always start lower and raise as competition increases. No showings at a home is because the home is priced too high, needs too much work, or is offered along with too many other similar homes on market and is being eliminated by price or condition ahead of showings! That is it. Agents and owners have responsibilities to address this with each other.
People will visit a home for sale if it intrigues them, it meets the criteria on their checklist or they become emotionally attached to it and can't bear losing the opportunity to win it and if they can AFFORD it.
There are 3 things that affect peoples' ability to afford a home:
1. Home Price - we've discussed above why pricing is critical. It's the first criterion that 99% of buyers consider but may not be the most important.
2. Household Income - the maximum mortgage someone can afford is directly related to their household income whether qualifying alone or with others. Marketing to the right financial demographic is critical.
3. Interest Rates - rises in interest rates , even a half a point can push a buyer away or attract a buyer depending on which way rates fall. Rates required for fixer-uppers or renovation loans may directly affect offers and showings if a buyer is deliberating on whether or not they can afford your home.
Pricing a home aggressively or affordable to the market demographics most likely to purchase it doesn't mean you have to "give your home away." It simply means, that sellers who are getting multiple showings, offers and interest in their home are pricing their properties at a slight discount - slightly below market value to get buyers' attention and to create a sense of urgency among multiple buyers. Buyers want homes affordable for the long-term, not homes they will lose money on or have to dump more money in after paying high dollar for it at the beginning!
Real estate markets are very specific and directly related to the age of homes, area, and amenities around a home, location, and what is happening to improve or cause a decline in values in nearby neighborhoods.
Your Realtor should use local MLS statistics, should consider buyer concessions, consider economic factors that are driving people to or from neighborhoods or cities, and affecting affordability. This factor alone can vary from back to back neighborhoods and even more from city to city, or state to state!
Examining supply by homes on the market and the number of homes sold in 12, 6, and 3-month periods can tell you a lot about supply. Examining your competition- active listings and also a close examination of why homes are lingering on the market vs why others sell within days is critical to understanding supply. Price range is one way to examine supply in a wider sense, examing trends in these numbers is important to understand driving factors in other areas. Older homes in desirable historic areas priced exactly the same as new construction in another area of town may have a direct conflict on a limited number of buyers with a specific amount to spend on a home. This is another layer to demand as buyers weigh the long-term sustainability of older homes in higher price ranges vs newer homes.
Employment is how people afford their homes, and most people want to live near where they work. Demand for housing is directly related to housing needed near certain places of employment. On the other hand massive layoffs and other economic hardships - like our current COVID-19 pandemic - have a tremendous effect on real estate. If no options are offered for those not employed and who are not able to make current mortgage payments, we may very well experience much more inventory and an extreme drop in values as more and more homes are foreclosed or turned back to bank-owned offerings.
4. Exposure and a Marketing Plan.
An offer the very first day your home goes on the market may sound like a dream come true. But it might also incur opportunity costs. See, many buyers can't get out to see homes that quickly – some are unable to house hunt except on the weekends. Listing agents who get multiple offers often plan from the start to expose the home to the market long enough for target buyers to see it and get their offers on the table.
Some agents expressly include offer presentation deadlines in the comments of the listing. It's not uncommon to see a listing come on the market with a calendar of 1-2 days for intense marketing to other agents to get the word out to their customers. In a tight seller's market, agents will be watching MLS hot sheets for new listings and coming soon properties like hawks. Organized agents will not let their customers miss seeing your home- even if they have to show it to them virtually! Because of all the first-looks and automated emails to buyers for agents, never let your agent put your home on the market before it is ready and with anything less than the maximum number of really good photos you can get on the MLS platform in your area! Would you walk down the aisle as a bride without all the things done and wrapped up beautifully? Go for the WOW of the first look!
The urgency for buyers is created as they see the price, see the photos and tours, and see the home in person. Ask your agent what they are using to get the word out... get copies of links to your home, to photos, videos, social postings, advertisements.
Talk to your agent! Do what they recommend on pricing, and on repairs. Understand your local market conditions and adapt your marketing strategy to capture multiple offers and showings.
Selling is not about being stubborn and holding out for what you think is selling, look at the data with your agent. Selling is about collaborating with your marketing specialist, it is adapting to market conditions, and it is about adjusting to local market conditions as often as needed until your home sells.