What is the worst mistake a seller makes when selling a house? Known as the “kiss of death” this mistake is a trap that many sellers fall into each year. It can cost you thousands upon thousands of dollars annually. Selling a house is expensive. Just any one property can cost you a few thousand dollars. If you’re a big investor that sells hundreds of properties each year, it can cost you hundreds of thousands over your entire career. The problem in this scenario isn’t stupidity; its falling into human nature. It’s the way we’re wired psychologically. What you’re about to read will save you a lot of stress and misfortune down the road, whether you’re a one time seller, or you sell thousands of properties.
The Days on Market (DOM): So, what is this costly mistake that many tend to glaze over? It’s Days on the Market, or, DOM. It’s having a stagnant listing that sits for a long time. It’s as simple as that. You never want to have a stale listing. Ever. There is nothing worse than your listing on the MLS with “Active for 120 days” next to it. The longer the home stays on the market, the less desirable it is. Just how undesirable is in this order; seven to twenty-one days, to sixty, then finally to ninety. With each passing category, the desirability of the property decreases.
Psychology behind the Days on Market (DOM): If you’ve ever seen an article and decided to read it because it had hundreds of likes and comments, then you already can understand why the number of days a house sits on the market is lethal. People want what other people want. We are wired to follow another. Therefore, when a house sits on the market, buyers wonder why it’s been sitting there for so long. Just about the first question a buyer asks their agent is “How long has this house been on the market?” If he answer is “90 days,” the buyer is going to think to themselves, “Is there something wrong with it?” And, even if there’s nothing wrong with it, they aren’t going to want it because it doesn’t seem like anybody else does either. Even if it does get a buyer or two, they’re going to try to drive you down on the price because they know they’ve got an advantage.
It’s normal for a buyer to be worried that there’s something wrong with the house. Buying a house is expensive, and it’s a long-term commitment. One of the biggest fears is buying a house, only to find out there are all sorts of problems with it afterward.
The Combined Days on Market (CDOM): Don’t think you can remove a house from the MLS and re-list it in order to make it appear that it’s a new listing. This used to be possible. But now, there is what is called a CDOM. This means “Combined Days on Market.” The MLS is now taking action on this trick that real estate agents have used in the past. With CDOM, it’s impossible to trick buyers. If anything, it almost makes you look worse.
What causes a home to sit on the market for long periods of time?
What exactly causes a home to sit on the market for a long time? Well, is one primary reason and it has nothing to do with the color of gravel in your front yard, or whether or not the plants in the front yard are pretty enough. Here’s the reason:
It’s priced way too high.
Plain and simple. There’s no beating around the bush on this one. If your house isn’t selling, it’s because it’s overpriced. No if’s and and’s. Just about every seller approaches selling his house with this thought in mind: “I’ll price it too high to see what happens. If anyone offers, I’ll drop the price down.” This is a catastrophe waiting to happen. Why? When you start out with your price too high, you’re taking a gamble as to whether or not anybody will make that offer. If nobody does (likely), the days on the market (DOM) rises. The longer it sits, the more nobody wants it.
The first or the second week that the house is listed is when the house will get the most response. This rings true whether you’re trying to sell a house to the average buyer, or to another investor. It’s still true if it’s a rental property that you’re trying to lease. In the first week or so, nobody questions it because it’s still new. This is when most homes get sold. The first two weeks.
You’ve got to start the purchase price out low. Start the listing at where it should be at; meaning the actual price you want to sell it at. What if you’re scared to price it way too low? There’s really not any need to worry about the house selling below value. If you price it below value, a multiple offer situation will generate. The market is going to bring the house to where it should be. Don’t think you can put different prices on different websites. Search engines often don’t update at the same time. It will be a little bit awkward when a buyer says “But the listing said $150,000 not $200,000.” Also, it’s obvious. If you want the house to sell, start it at the price it should actually be at. No exceptions.
Figuring Out The Price:
So how do you figure out the actual price? A lot of time should be spent on this question, because of the difference it makes. You always want to sell at a tiny bit lower of a price than somebody else. You’ll almost always get exactly what it’s worth by doing it that way. If you want to have to take less than what the house is worth in the end, go ahead and list it too high. Just don’t be surprised when it takes longer to sell, and you also lose money on it.
You start low or at least at the price you want to get rid of the property at. Another concern you might have is that any time someone sees a house that they like, they put it an offer. You might be worried that they’re going to offer less; and the house is already priced at what it’s worth.
This is going to happen. If there’s not an offer yet, it’s rare that somebody is going to call and offer full-price on the spot. What’s going to happen, is that that first offer is probably the buyer. Just because he offers less, doesn’t mean he won’t pay less.
The first person to offer is more often than not, your buyer
Remember that. Why is this the case? Doesn’t matter. All you need to know is that in 99% of cases, the first offer is usually the best. They’re also almost always going to be the easiest buyer to work with (assuming they can afford it financially).
This does not mean that the first offer you get is what you’ll get for the house. What it means is that the first person who makes an offer is generally the one that ends up buying it. Expect to go through counter-offers. That’s normal. The first offer they’ll make it always going to be lower than what they’re actually willing to pay. You may even need to change some of your terms.
Why is the first offerer generally your best bet to sell the house?
The first person to offer is almost always your buyer. Why? There are no certainties to why, but there are some valid theories as to the reasoning behind it. Most people with a real estate agent have filters in place with their realtor. Any time a house similar to what they want comes on the market, they get an e-mail. Sometimes, that buyer has been waiting for ages for a home to come up in that particular area, and they jump on it. They already know they want it. If you ingrain in your head that your first offer is always your best offer, you’ll be far more successful at real estate than you will be if you do not.
Walking away from that offer is very dangerous. Now, does walking away equal losing some profit? Absolutely. However, you’re going to walk away from even more profit if you let the house sit. And, possibly a number of years. The takeaway here is that you always want to work with the first person who makes an offer. You want to treat them as nicely as possible; this may be the only offer that you get. This happens so frequently, and its really a tragedy because it’s so avoidable.
Don’t be a hoarder: It’s not a great idea to get greedy! Being too greedy can cause that offerer to walk. And, as mentioned several times, that is probably your buyer. Work with them. Their first offer is generally not their best offer.
What if they make a low ball offer? Well, if they make you an extremely low offer, ask them to show why they believe the house is worth less. It’s possible that you may not have assessed the property correctly. Don’t immediately decline the offer or get offended. It’s possible that you made a mistake. They’re watching everything that goes on the market, and may actually have validity in their lower offer. Don’t be prideful, it will hurt you in the end.
Be sure to do your homework!
You’re already at a very large disadvantage if you either aren’t a licensed realtor, or you don’t have access to the MLS. There are ways that you can get access to the actual comparable data to get a better idea than you will on Trulia, if you can’t access the MLS. Now, assuming you have a realtor you technically do have access to the MLS. But it works out a lot better if you do have a real estate license.
If you’re not an investor and simply want to sell your house, going through the steps to obtain that isn’t really that necessary. But, if you plan to really be an investor, at some point in the near future you are going to need to buckle down and do what is necessary to get your license. You can’t do anything in real estate without the MLS, and for that, you’ll need a real estate license. You’ll also obviously need it for many other things in order to practice real estate investing, but gaining access to the MLS is one of the biggest ones.
Realtors do work hard to help their clients. But their motivations for helping you buy a house are not because they’re genuinely concerned about the house you buy. Listing agents get about 3% in commission. If the house takes a long time to sell, they really don’t lose all that much money in the grand scheme of things.
Therefore, they don’t really care about the DOM jump from 30 to 60 days. It doesn’t really affect them. But it affects you by tens of thousands. To them, it’s only a couple thousand, if that. See the reasoning? Nobody is picking on real estate agents here; they are wonderful. But you are not their only client.
Their job is to bring you offers. If you keep rejecting them, and turning down buyers, the real estate agent probably is not going to be that inclined to move your property. Not out of resentment, they’ll just spend their time with other sellers where they can actually make a commission. This isn’t to say that you should sell your house at a low price to appease your realtor and you feel bad the house hasn’t sold yet. It’s just important to realize that your first offerer is just about always the best one. Don’t make the mistake of ever flat-out rejecting an offer, even if that offer is offensive.