So you decided to put your home on the market.
You did everything you were supposed to in order to get it ready:
- you pre-inspected it and fixed everything you should have
- you decluttered and staged
- you painted
- you steam cleaned carpets
- you planted annuals and put down a ton of fresh mulch
- you put away that vase your mother gave you that (quite frankly) is just ugly
- and you even priced it below Zillow’s estimate…
And 60 days later, your house is still on the market.
You Are Looking at Comps Incorrectly
So what, exactly, is a comp?
A comp, in real estate vernacular, is a ‘comparable’ sale — and the primary way that housing values are determined.
When attempting to determine the most likely value of a home, buyers, sellers, appraisers and just about everyone else looks at sales of the most similar houses, in the most similar locations, with the most similar features, that occurred most recently.
But what is it, really? A comp is nothing more than a data point that gives you an indication of where the market was, and not where it necessarily is currently. Just because a buyer acted in a certain way in the recent past does not mean that the next buyer will act similarly. All buyers have different motivations and constraints, and are faced with a different set of choices when it comes to making a decision (i.e. — different houses to choose from, different commute, different familial status, different down payment amount, etc).
So comps are nothing more than data that can be used to help determine a price, but in no way do they set the market.
One Comp vs All of the Comps
One comp is a data point. Numerous comps show a trend.
If I had to pinpoint the most common mistake that sellers make when they look at comps, is that they pick out the one comp that makes their home seem the most valuable — and use that single high comp as the entire logic for their pricing strategy.
Let me let you in on a secret, the buyer is doing the exact opposite.
And let me let you in on another secret, both are wrong.
At the end of the day, the market value for the home will depend not on the comps, but on the current market conditions. If there are more buyers than there are sellers, then the higher comp is probably closer to the truth. When there are more sellers than buyers, then the opposite is true.
Seasonality. Seasonality. Seasonality.
The seasonality of the market is a huge input to values.
The recent spring seasons have become increasingly insane and the buying public comes out in force and buys up everything from early March through May. By summer, things slow a bit and the inventory conditions tend to either level out or invert as we head into the second half of the year.
The chart below shows the way absorption ebbs and flows over the course of a year. Do you notice a pattern? We have written ad nauseam about the seasonality of sales. If you want to read more, you can here
So when a house is marketed, will have as much, if not more, to do with its price than what the comps say. Don’t expect a spring comparable sale to accurately predict fall values.
Quantifying the Unquantifiable
So the comps are telling one story, but you have been on the market 60 days and no offers.
What to do?
Obviously, a change needs to be made. It might be a price change — or it might be a change is the overall offering.
A good agent can read tea leaves and essentially make recommendations based on the overall number of showings, the frequency of repeat showings and the feedback received after the showings.
Furthermore, a good agent will take a look at available inventory, as well as historical absorption in your price point and geography, and combine it with the anecdotal data (feedback) to recommend the correct strategy. Sometimes the strategy is a price cut, and other times it might a tweak to the offering such as a allowance for new carpet, granite tops or other improvement that the feedback has indicated is an issue in the mind of the market.
Sellers tend to look at comps and expect the past to perfectly predict the future. I’m sorry, it doesn’t work that way.
Remember, the market is incapable of lying — it objectively tells you everything you need to know. Just because the comps indicate one thing, the market’s willingness to pay you a certain price is based on far more inputs than just past sales.
If you are not getting the offers you feel you should, it is not necessarily your agent’s fault — it is the market telling you that there are better values in the marketplace than yours and that your potential buyers are electing to pursue other (better) values.
The market is never kind, but it is always correct, and will tell you everything you need to know — provided you are willing to listen. Those who maximize value from housing fully understand that statement.