Let me paint the picture of how a typical market analysis takes place.
A seller considering placing their property on the market will typically call two to three local agents to perform a market analysis. The real estate community likes to call them a Current Market Analysis (CMA). All three agents will come over and see the property and all three agents will usually come back with differing figures. The particular agent that the sellers happen to like, based on personality, experience and energy (great traits in a salesperson) does not have the highest estimate of value. In fact, the sellers disagree with all three current market analysis and on top of that, the sellers want to test the market!
Let’s look at this even further. The next step will usually be that the sellers express their disappointment to their favorite candidate because they feel all the CMA’s are too low in price. In fact, this agent was the lowest in estimate of value but the sellers want to go with this agent because they like this agent. What happens next is that agent will almost always agree to take the overpriced listing at the seller’s desired price and try it out “for awhile.” He or she might even agree to follow the seller’s desire and test the market even further by going up even higher in the original pricing.
Notice that the seller set the price by pushing it up higher than all the estimates of value and the realtor agreed and let the seller do so.
So what’s the harm in this? Plenty!
Properties that are priced accurately sell quicker and for a greater amount of the asking price.
If the property stays on the market for any length of time it will cost the seller real money.
Every day you own and carry your property, it costs you money that you will never get back. I have never seen a transaction in which the sale price was added to the carrying costs that were accumulated while the property was for sale and then added together for a new price that was adjusted higher at the closing.
Daily expenses such as taxes, insurance, mortgage principle and interest are adding up.
As an example, let’s say your home is worth $300,000 and you place this property on the market for $375,000 to “test the market.” After 8 months and 3 listing price reductions later and it finally sells for the $300,000 that it was always worth.
The figures breakdown like this;
$300,000 Sales price
- 9,600 minus 8 mortgage payments (consisting of almost all interest)
- 4,666 minus 8 months of real estate taxes ($7000/year)
- 400 minus 8 months of insurance ($600/year)
$285,334 Net amount after expenses
$300,000. Sale price
285,334 net amount after 8 months expenses
_______
$14,666.
It costs almost $15,000 to test the market.
Now let’s look at an efficient sale.
You price the property at $304,900 and accept the same $300,000 as above only this time it sells in 1 month because it was priced accurately.
$300,000 Sale Price
- 1,200 minus 1 mortgage payment
- 583 minus 1 months real estate taxes
50 minus 1 month’s insurance
$298,167
It costs $1,833 to sell in one month.
Compare the two different scenarios with the only difference bring that of time. Both accepted the same $300,000.
$285,334. Net after marketing for 8 months or
$298,167. Net in one just month
$12,833. INCREASE IN MONEY TO THE SELLER BY SELLING THE
PROPERTY MORE EFFIECENTLY AND IN LESS TIME
This is a savings of almost thirteen thousand dollars, simply by not testing the market and selling the property more efficiently. Seven months time and $13,000 more in your pocket by not playing the all too tempting “test the market” game!
I have more than 25 years experience in the Real Estate Industry as a Broker, Builder, Developer and Investor. I have bought and sold many, many properties directly without the use of MLS or listing Realtors. In fact I have sold entire communities with very little involvement from the Realtor community and I can show you how to use the Internet to sell your property without wasting your money on a listing real estate agent.
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My mission is to show people how to easily use the Internet to sell their own property all the while saving tons of money by performing some very simple steps which will get your real estate seen and sold.
James Joseph