Recently, I met the mom of one of my daughter’s friends for the first time. We chatted for a while and then she asked me what I did for a living. I told her and immediately she hit me with the following statement.
Woman I just met: “My agent told me that houses sell in 4 months but mine took over a year to sell. Why?”
This is one of those loaded questions. My gut response is, (You had a lousy agent, you should have hired me.) Or more appropriately, (That’s what you get for not hiring me.) but I’ll play nice and instead ask,
Me: “How much were you selling it for?”
Almost new friend: “$1.4 million”
Me: “Well that helps explain a lot.” (I’m really not liking her right now.)
Woman who will never be my friend: “Why? We listed it for less than it was worth.”
Me: “Because basically not a lot of people have $1.4 million to spend buying a house as well as keep up with all the monthly expenses, so your buyer pool is a lot smaller than the average priced home would have.”
Woman who is staring at me intently: “That’s what I was thinking but my agent said that if I priced it low it would sell quickly because we’re in a sellers market. She said from the time a house goes up for sale until it closes it’s about 4 months.”
This is actually a two-part situation.
First – Even if a home is priced low but it is still way above the average home sale prices for an area (In this case about 10 times higher), then it will still take longer to sell than the average priced homes. So technically using the 4 month average doesn’t apply in this case.
Secondly – Working with averages is great but when it comes to selling your home then you need to make sure that your agent is working with the right set of averages. In other words comparing apples to apples. Not $1.4 million dollar homes to $150,000 home sales.
Making a broad statement, like saying, this is a sellers market and houses are selling in 4 months, is misleading when it comes to any houses whose list prices fall beyond the average price sales for the entire market.
Me: “Generally that’s true when you’re comparing apples to apples in the average price bracket.”
How we compare apples to apples is by taking a price bracket, say $150k to $200K and dividing the number of houses that sold in that price bracket during the previous month into the number of houses currently listed for sale in that price bracket.
For example 185 houses sold between $100k and $200k last month and there are still 688 houses listed for sale in the same range. Dividing sold houses into for sale houses and you get 3.72 months. That is the average length of time it would take to sell a house in that price range.
The following is a very simple hypothetical spreadsheet that shows why working within price brackets or at least comparing apples to apples, can make a big difference when determining how long on average it would take to sell a house.
In the above example you can see that it would take on average 17 months for a home in the $1 million plus range to sell. That’s an extreme buyers market.
Whereas the overall market shows that homes sell in 4.96 months which falls into the Normal Sellers Market.
Woman who’s looking at me like I just spoke Swahili: “So she just made it up and lied to me.”
Me: “Well technically she didn’t. However what she did not do was factor in the actual price bracket that your home is in. The price range and so many other variables need to be considered before any sweeping statements about average months to sell a house can be made.”
Woman who’s now smiling at me: “Next time I sell a house, I’m calling you.”
Me with my new BFF: “Sure give me a call anytime, I’d love to help you out.”
And there it goes. Lessons to be learned?
Don’t bank on broad generalizations of information unless you can be sure that apples to apples are being compared, otherwise just treat it with a grain of salt. Or if this seller wanted to sell her house quickly, I’ve got a $140 that I can give her for it……….
Let me know if you have any questions about your estimated time to sell your home.