It is Seller's Market!
Several days ago I spoke to a seller who was considering using my services for listing his apartment for sale with me. I was delighted that he called me. I am known to work mostly with foreign buyers; therefore, I am not really a “listing agent”, so you can understand my excitement. We met in the apartment and spoke. I toured the property and made some suggestions on how to improve the overall look of the property in order to make it more appealing to potential buyers. The homeowner agreed and he proceeded to the most important question—“How much should we price the apartment for?”
Before I gave him my answer based on statistical data I had carefully collected from different sources, I asked him—“Well, what you think is fair to ask for it?” I wanted to sample the home owner’s expectations.
He named his number. I looked at my comparative analysis report and disagreed. He insisted and said: “It is seller’s market!”
But what does “it is seller’s market” actually mean?
As a Listing agent, I would carry the responsibility for the property and if the property owner has unrealistic expectations, I have to handle the client appropriately. If the client pushes for an unrealistic price, the listing agent should not let that go for fear of losing the listing. At the end of the day, listing the property at an unrealistic price would be a waste of time for me and my client.
My goal is to price the apartment so I can get top dollar for my seller—without overpricing and causing the property to linger on the market for months. The longer the property stays on the market, the less it appeals to potential buyers and the harder it is to sell. If a property takes a couple of months to sell, on average, I would do half as much work than if it sits on the market for four months. In addition, most of this labor would be wasted since I would be showing the overpriced property only to have it used as leverage against other well priced properties in the same neighborhood. I have done it before, showing an overpriced property in order to sell the right product.
How do I deal with “It is seller’s market?”
Setting the right expectations with your customer is very important. Research the market and neighborhood. Find the data. The data never lies!—buyers lie, sellers lie, agents lie but the data always tells the truth.
So I showed my analysis to this potential seller and we both considered the following.
- Price per square foot in similar apartments in the building (this metric is not hard to understand. Look at the most recently sold apartments in the building. Find what they go for, and estimate the price per square foot.)
- Average days on the market in the building (well-priced apartments usually sell within two months. Estimate what is average for an apartment in the building.)
- Average days on the market in the neighborhood (take your research at a larger scale and look at the whole neighborhood)
- Overall condition of the apartment, upgrades and improvements (Consider the following: views, kitchen and bathroom improvements, recent repairs and upgrades. A lot of buyers might actually ask for a rundown of expenses related to those renovations.)
- Particular product Market saturation (Competition and currently listed properties in similar buildings with same type of amenities)
My psychology professor used to say “If you find incongruences between the person’s body language and his words, there is something wrong. Always go with the body language.” On the other hand I say—“If there is incongruences between the market data and the seller’s expectations, always go with the market data.”
It was easy for the client to see the discrepancy between his asking price and the market data. Basically, he realized that his expectations were to get more than $200 on average per square foot without any justification.
That night I walked out of the apartment victoriously. The client did not sign the exclusive agreement but I did not insist either. He wanted to take the night to make sure everything in the legal agreement was sound, and he would get back with me the next day. I took the subway home. Life was beautiful and I started making plans for the marketing campaign for my future listing.
The following day, I received a notification from the homeowner. He has decided to list the apartment with someone else. I looked online and saw the apartment listed for exactly the price the owner wanted to get it listed for... No doubt, it is seller’s market!
In order to make this new market trend more obvious to you, please take a look at this random example. Spot the overpriced listing. Which one is it? Follow the link to see the building on-line here.
#25A - 212 East 47th Street $1,075,000 3 rooms, 1 bed 1 bath 628 ft²
#16A - 212 East 47th Street $950,000 3 rooms, 1 bed 1 bath 628 ft²
#31D - 212 East 47th Street $939,000 IN CONTRACT 1 bed 1 bath 606 ft²
#31B - 212 East 47th Street $1,100,000 3 rooms, 1 bed 1 bath 710 ft²