Even in a market where the Expected Market Time (the time between the signed listing contract to the opening escrow) is shorter than normal, some homes still seem to incur a larger DOM (days on market) number than others. Why is this?
The logical conclusion is simply pricing.
Price a home too high and it simply does not sell. In most cases, that is only part of the problem.
There has been an evolution in home buying. Back in the 1970s, 1980s, and 1990s, buyers were able to visualize the potential in a home and were willing to apply a bit of “elbow grease” to fix and update a residence if necessary. That is just not the case anymore. Chip and Joanna Gaines’ popular television show “Fixer Upper” revolutionized the real estate industry, along with the countless other real estate shows from flipping to fixing. As a result, there is an expectation and desire for buyers to purchase a home that looks like a model.
There is a definite allure to anything that is brand new, and homes are no different. Brand new homes have all the latest bells and whistles, the latest trends, the “new car smell.” Buyers gravitate to anything that has a model home look and feel. Homes that have been totally redone are very appealing. As long as the price is right, the closer a home looks to model perfect, the faster the home will fly off the market. Unfortunately, not every home shows like a model.
So many homes are dated and need cosmetic repairs. From scuffed walls, scratched floors, carpet stains, popcorn ceilings, original door and bathroom hardware, outdated light fixtures, ceramic tile kitchens, etcetera, all contribute to a home that feels used and worn out. Even a 10-year old remodel may have a lot of wear and tear. Throw in a pet with all of its odors, hair, and damage, and is no wonder that many sellers are sitting on the market and having a hard time selling.
When a home does not have the look and feel of a model home, it must be reflected in arriving at the Fair Market Value.
A home’s Fair Market Value is determined by its location, age, condition, and improvements. Homeowners can do nothing to change the location and age of a home, that’s a given; however, they can address the condition and amenities.
To obtain top dollar, a homeowner who has lived in their house for years must be willing to make an investment in their home. Updating and taking care of deferred maintenance will afford buyers the ability to visualize moving in right away. They will not have to address cosmetic issues after closing. Buyers are willing to pay a premium for homes that are turnkey and have that model feel. The sellers will net more money by addressing the deferred maintenance and their home will sell more quickly.
If a seller does not address any deferred maintenance, then the price must be adjusted accordingly. Buyers subtract a lot more than it costs to take care of the deferred maintenance. It is very inconvenient and time consuming for buyers to tackle repairs after the close of escrow. In most cases, a seller will ultimately net less money in the sale of their home if the home is not in good condition.
WARNING TO SELLERS: Price is the most important factor in successfully selling. Overpricing a home in most markets sellers will not find success. Instead, they will simply sit and waste valuable market time. Most buyers prefer to finance their home purchase rather than deplete their cash savings, especially during peak markets or unstable times.
If you would like to have a price evaluation on your current home or would like current market updates, please give us a call today and get a free consultation. Learn more about one of your more important access, your home!
Quantitative Economics and Decision Sciences