The decision to sell a home is challenging in the best of times, both because of the financial and emotional investment involved, and because of the practical issues associated with finding another place to live and getting a property ready for market.
In our current environment, which is roiled by so many factors outside our control—high interest rates, inflation, bank failures, lingering supply chain issues, geopolitical perils, low housing inventory, higher tax rates for high earners—the calculus required of a prospective seller can feel overwhelming.
Are there still buyers out there for my home? How much do I need to do to my house to make it stand out? Can I still get what my neighbor down the street got for his house last year? Is it worth giving up my low-interest loan to cash out and buy another house at a high price with a higher rate? What about the new millionaire’s tax?
Each of these questions should be worked through carefully with an experienced realtor, who can answer some questions based on hard market data and engage experts to help with more complicated financial questions.
The single most important question facing a homeowner in this market, however, is what figure to use in listing the home on MLS. Get this wrong on the high end and you risk squandering buyer interest, wasting days on market, and triggering a spiral of price reductions; get it wrong on the low end and you fail to monetize the full value of your home, an error compounded when you pay full price for the next house you are buying.
A simple definition of price is the cost required to gain possession of something. In practice, defining that cost is based on what others are paying to possess something similar—and defining what is similar takes into consideration such things as size, style, location, condition, amenities, etc. Supply and demand come into play: if there are other homes like yours for sale in your neighborhood, that will shape price more than if yours is the only one available, and if your location is highly desirable due to schools, proximity to water or recreation or other attractions, then buyer demand will be higher than in another neighborhood without those assets.
Fortunately, the most successful realtors have formulas that factor all these variables and generate recommended list prices that, combined with detailed strategies for preparing a property for market and marketing it effectively, can help ensure it will maximize buyer interest and sell quickly, often at or above list price.
Here at Amanda Armstrong Group (AAG), accurate pricing combined with careful property preparation and comprehensive marketing strategies helped drive exceptionally high list-to-sale price ratios in 2022 and, just as importantly, fewer days on market. This dynamic can be seen in the graph below:
The relationship between list price, final sales price, and days on market is illustrated clearly by the AAG sales results: 20 of 30 total home sales, or 67%, sold above list price in 2022 after an median of 7 days on market until accepted offer.
For homeowners, the lessons are obvious. By setting a list price calibrated to maximize buyer interest—that is, a price that drives a perception among buyers that the property is at or slightly below the expected price for a home in that condition and location and offering the amenities and intangibles that make it desirable—it will set in motion a host of positive effects.
Buyers and agents pounce on what they see as a favorable deal in an environment of low inventory and high prices; multiple offers come in quickly within days of the property appearing on MLS; competition fuels final offers that are above ask; and an accepted offer comes in over the list price and within a week to ten days from original list date. For homeowners, this scenario could not be more ideal: their property can be taken off the market, sparing them the hassle of further showings; they exceed their expected price point; and they can move to their next home and get on with their lives.
This dynamic is vitally important for sellers to understand, because very often in our experience a seller may start with a higher list price in mind and will find no shortage of agents willing to go along with that price even if they don’t truly believe the property will support it. That is why here at AAG we work so hard from the outset to ensure that our sellers understand how important list price is to their final goal, and why getting it right can allow them to exceed that goal and overperform in the market, while getting it wrong can risk a property becoming stigmatized and missing the market entirely.
Encouragingly, we are seeing that the North Shore, and Cape Ann in particular, continues to see strong sales activity through the first quarter of 2023, particularly for properties on the coast, as can be seen in recent sale prices. We are still seeing bidding wars and sale prices over ask for homes that tick all the right boxes, but only when a list price is set to outperform in the context of the current market, not the market driven by the pandemic.
Which brings us back to the point of this article. We are likely to be in a tricky market for the next 12-18 months as the Fed’s efforts to tame inflation play out against the tensions of the war in Ukraine, the lingering impact of the pandemic on the labor market and supply chains, and a turbulent domestic political environment leading up to the 2024 presidential election. There is simply much less margin for error now in bringing a home to market, and the channel available for sellers to navigate is comparatively narrow.
That is why our guidance for sellers in our region is to accept the requirements of the current market—invest in careful preparation and marketing of the property, and work with your agent to establish a realistic price that hits the sweet spot for you and also respects the extraordinary challenges facing today’s buyers. A market in flux can also work to your advantage as a seller because it may keep others on the sideline while you work with your agent to choose a course that will avoid hazards and reach safe harbor in the shortest time. And remember, fortune always favors the brave and the well-prepared.
Preparation and pluck have always been hallmarks of the Amanda Armstrong Group (AAG) at Compass, which is why we ended 2022 as the #1 real estate agency in Rockport, the #1 Agent/team in Rockport and Gloucester in total sales volume, and the #1 Agent/team on Cape Ann, a position Amanda has held for the past five years.