You did all the right things.
Before the sign went up and your home hit the market, you pre-inspected and fixed every little defect. You uncluttered—including the garage and every closet; you painted; you cleaned all of the carpets; you landscaped and added a few plantings; and, lastly, you put away all of those ridiculous knick-knacks that your mother-in-law gives you each year (and expects to see every time she visits).
But 60 days later … no sale.
If you did everything else correctly, then chances are you read the comps incorrectly.
What are “comps?”
Comps (which is short for “comparables”) are past sales. They are not pending sales, as we don’t yet know their actual sales prices, nor current listings, because they haven’t shown that they can even pull in an offer—and, ideally, those that are closely comparable to your home in terms of size, area and overall features (thus the name). Chances are, no past listing is going to be exactly like your home, but we have methods for weighing and balancing out the differences to determine what those past sales may tell us about your home’s value. The key word here is: may. And for a few reasons.
First, it’s worth noting that comps only tell us where the market was at a given point in recent history, but not necessarily where it is currently, or where it’s heading. For this reason, comps only tell us about what a listing was actually worth when it went under contract. That’s something that could change as little as two weeks later. The real estate market has a mind of its own — one that’s driven by the behaviors of buyers and sellers, along with other factors. For this reason, in real estate, and especially when formulating price, the present is the only thing that really, truly matters. Along with some Realtor intuitiveness.
Subjectivity
For these reasons, comps are great as mere data points, but it’s important to know that they’re also subjective. Let’s face it, buyers’ decisions are not only based on the attributes and pricing of an individual home; they’re also based on things like other available listings, as well as personal reasons, like life changes and finances. For this reason, in order to get a good measure for value, the more data, the better. At the same time, it’s important to remember that in no way do comps serve as a crystal ball for what comes after them, so it’s important to regard them as one factor that can help us to determine value, but not the factor. The biggest factors should be current and expected market conditions, which are a little harder to determine.
One inevitable trend to bear in mind when selecting and weighing out comps includes buyer and seller subjectivities. In other words, whether they realize it or not, most sellers select the comps that give their home the best value. What’s worse? Once they lock in on that comp, they tend to use it as the only measuring stick. Meanwhile, buyers are doing exactly the same thing on the opposite side of the equation.
Both are wrong.
‘Tis all about the season
In order to generate an accurate estimate of current value, you’ve got to weigh market conditions. When there are more listings than there are buyers (which can be determined partly from things like average days on market), then you can bet that the lower priced comps are closer to accurate. When there are more buyers out there than there are listings? Well, then you can expect to be in steep competition, when homes will often fetch more than their asking prices as more people fight over them. The words “spring fever” mean everything in real estate, so you shouldn’t expect a comp that sold in the height of that fever to accurately reflect what a similar home is worth in fall or winter. These seasonal changes have anything and everything to do with value.
Reading Between the Lines
So back to your dilemma: 60 days on market and you don’t have a contract. At this point, change is inevitable. But, in addition to revisiting your comps and re-weighing how you’ve used them, a good agent can also read between the lines to see what all of the activities surrounding your listing tell us.
By looking at things like number of calls, number of showings, repeat showings and other inquiries, a good agent can get a feel for where the hang-up lies. For instance, if they’re getting a lot of showings, and even some repeat showings, but no offers? The issue may be price. Why? If they liked it enough to schedule the first showing, then liked it enough to see it again, but stopped short of making an offer, then there’s a good chance that they felt their idea of value was far enough apart from yours that they shouldn’t bother making an offer. Your agent also may be able to report on specific feedback provided by those buyers. Maybe there were specific elements that turned them off, like countertops or carpets—things you can change going forward.
Of course, the best agents also know how to dig deeper—like into available inventory and historical absorption rates for your specific area. By combining this information with the feedback mentioned above, you should begin to get a feel for why your home hasn’t elicited an offer.
There are no Shortcuts
As much as I’d like to tell you that you can just look at some recent comps, make a few adjustments and then slap a number on your home, it’s just not that easy. What buyers in a certain market are willing to pay for your home at any given time is a little more complicated than what someone else decided to pay for a similar home in recent history. If your home’s been on the market for 60 days, that doesn’t mean your agent isn’t doing a good job; it could be that the market is shifting. Maybe you’re out of sync with other current listings.
At the beginning of each year, we try to write a piece offering our predictions for the coming season. 2015 was pretty interesting (to say the least) and we expect 2016 to be unique, too, albeit for some different reasons.
