It is not uncommon to entertain in-depth conversations with sellers regarding how to properly price their property. A Comparative Market Analysis (CMA) serves as general tool, whereas experience helps fill the voids.
The subject of a recent exchange was a pond-facing condo unit: whether it should be priced at, or above, similar units facing elsewhere. And if above, whether overpricing could carry some risks.
The CMA showed that twelve similar units were transacted in the last four months: three were pending, and nine sold. Days on market ranged from 0 to 31, with an average of 8 days, suggesting high demand and a quick turnaround. Of the sold properties, three were closed at the same exact price – the highest historically paid for these units based on MLS data – regardless of listing price, and slightly above asking. The others were all sold within a 4.7% range below. Asking price for the three pending units was well within such range, with one unit on the market for 6 days and two for just 2.
The fact that half of these units were facing the pond and half weren’t did not seem to have any particular impact on the purchase price, even if the listing remarks were keen to point at the water view. Of the two units that sold barely below asking, one was pond-facing and the other wasn’t. All other units, equally distributed location wise, sold slightly above asking. As if the market was indifferent to a specific view.
Locations and communities vary, therefore pricing must be considered on a case-by-case. In general, my personal experience seems to confirm that where properties face non-navigable bodies of water, and other units facing elsewhere are also available at a lower price, waterfront units tend to sell at or around that lower price.
This is a situation comparable to a yard effect. Yards are expensive to maintain, and require time and dedication. All residential buyers appreciate a nice-looking yard, but in the end they are only willing to pay for the house. A yard – or a pond – will definitely help sell the unit or make it stand out. Where buyers are given a choice, they prefer the property with pond view or detailed yard work. However, data shows that in a homogeneous landscape – such as a condo or a HOA – these features might not command a premium.
Case in point. Last year I listed a nicer-end waterfront property in my area. Pond was not navigable. Compared to nearby properties without water access, seller was aiming at a significant premium. The only offer ever in the talks in which buyer was willing to pay a small premium for the waterfront was nothing close to seller’s expectations: a gap large enough to purchase a brand new Mercedes. In the end it is buyers who have the last say on property value, which is whatever they are willing to pay for it.
If one’s property is worth X thousand dollars, whether listed at $1 or $10,000,000 it will eventually sell at X thousand dollars. The difference is in how quickly, and how many offers and showings one is willing to entertain. At $1 seller will receive endless showing requests and a similar number of offers. At $10,000,000 seller may not see a showing or offer until price is lowered close to X thousand dollars.
In the real estate market the first few weeks of a listing are critical. Overpricing a unit risks alienating the bulk of potential buyers, that is all buyers currently on the market. After the first weeks, unsold units will be targeted mostly by new buyers coming to the market, which are disproportionately less. The risk of overpricing means that sellers have to chase down these buyers with further price reductions, while fueling that something-must-be-wrong feeling of any property sitting unsold.
Any unsold property carries a cost. Mortgage payments, taxes, insurance, HOA fees, utilities, ground maintenance, general maintenance, and other expenses, continue to be needed. That could add up to a few hundred to a few thousand dollars per month. Non to mention the necessity to keep the property constantly clean and ready for showings or open houses.
The conclusion is obvious. If you believe your property has some unique or special features that in your opinion would translate in a higher listing price, such as a pond or a nicely kept yard, always trust your REALTOR®. Numbers, whether found on internet sites, or computed through algorithms, or comparative market analysis, are only a conversation starting point. The experience of your REALTOR® will provide you with the best possible outcome.
Happy sales everyone!