Listening to the Market

I wanted to share a story about a recent listing we had. This article is being written in June 2021 where we are currently experiencing an extreme sellers market with less than 17 days worth of inventory. A balanced market is considered to be 4-6 months worth of inventory for comparison. Given that the market is so intense, buyers are coming in very competitive with their offers. It is not uncommon to see multiple offers, many over the asking price, along with waiving typical contingencies in order for the seller to select their offer and win the contract. Many offers are coming in $25,000+ over asking price.

We had some long time friends reach out to let us know they were wanting to move from their home in Highlands Ranch, CO to a mountain property with some acreage. We began our home search before putting their current home on the market. After searching from Salida to Blackhawk we found a home which we were able to help them negotiate a purchase price under the sellers asking price. The seller for the mountain home had a great agent working with them and addressed our contingency to sell their current property by requiring my clients to have their home under contract by the following Tuesday or the seller reserved the right to terminate the purchase contract and continue to market his property. With that deadline looming we needed to quickly get our clients home on the market and under contract Tuesday was only 6 days away.

The sellers current home was a nice tri-level home with 4 bedrooms, 3 bathrooms, and a finished basement, in a well maintained community. It was 10 minutes or less to get on a major freeway and has great shopping and rec centers in the area as well. My clients had updated their kitchen within the past 2 years, they also replaced the carpet before we went on the market. The home did back to a road which was a major artery for the neighborhood, which is less desirable, although there were plenty of mature trees and landscaping as well as a 6 foot privacy fence to minimize the road. After analyzing comparable sales in the area, we determined that a great starting price would be around $525,000. The sellers were excited about getting that price for their home and it would allow them to achieve their goals of moving to the mountain property.

One benefit to listing with us, is access to an exclusive program called Real Sure. With Real Sure, we can provide an all cash offer for your home at the beginning of the listing. Not every home will qualify for the Real Sure program so give us a call to discuss specifics if you want more details. If you decide to take the cash offer, then you can still continue to market the home and try to beat that offer all the way up to the day of closing without any penalty what-so-ever. I requested an all cash offer and the offer came in at $526,975. Just a little further confirmation that $525,000 was where we wanted to start the listing.

Everything was set to get their home on the market as soon as possible. Ultimately, we love to list properties on Thursdays because other agents plan their weekend showings on Fridays and it would attract the most attention as a brand new listing. In this case, the earliest time we could schedule the photos was on a Thursday and the photographer has a 24-hour turnaround to deliver the finished photos. In addition to professional photos we also scheduled a 3-D digital walkthrough tour. The tour was important because we are still on the tail end of the COVID-19 pandemic and showings were restricted to only one party in the house at a time. The digital tour could allow other prospective buyers to see the property even if they couldn’t get a physical showing. With all of the truncated schedule, the listing went live on Friday instead.

Day 1 on the market and the showings started to come in, although at a much slower pace than anticipated. By the end of the day on Friday, we had 8 scheduled showings on Saturday and a couple on Sunday. Saturday morning I called my clients to check in and they were a little disheartened because all of us were expecting the schedule to black-out quickly. They were thinking they may just want to accept the Real Sure cash offer so we don’t miss out on the mountain property. Over the past 13 years of practicing real estate, I know there is only one reason that things don’t sell and that is price. I’ve written other articles on the importance of pricing it right, see https://bryankurtz-denvermetro.sites.cbmoxi.com/2022/05/20/price-it-right.     When I started to suggest that we drop the price, I was met with opposition. My clients also knew that our price was fair for current market conditions and with the contract on the mountain property, they needed to get as much out of their current house as they could. I double checked the numbers to see if we might have missed anything and we were still amongst the lowest priced properties in all of Highlands Ranch. What was going on here?

Feedback from completed showings started to roll in and people were not as enthusiastic as we had hoped. A few mentioned the road and others just didn’t like the layout. Nothing we can do to improve either of those conditions. I’m thinking to myself :”there has to be something wrong here.” Did all of the buyers decide to take this weekend off from looking? I went to bed on Saturday with a stirring inside me that the market is trying to tell us something, but what was it? Our deadline was only 3 days away and so far no offers had been received except for the all cash offer from Coldwell Bankers Real Sure program.

I didn’t sleep well that night. I kept having thoughts run through my head about what needed to be done. By morning, I felt that I had it figured out. I called my clients and explained that we had to drop the price. I also let them know that they were in control and ultimately didn’t have to accept any offer that they didn’t like. Reluctantly they agreed although I sensed they were a little upset that their hopes of getting more than $525,000 were being crushed. Their next question was, “what should we drop it to?”. “$500,000” I replied. How did I arrive at that number? Without rehashing too much of the other articles I’ve written, I know how people search for homes these days. The first place they go is online. Regardless of which online site they are looking, they typically will filter their search results within a set price range. An even number such as $500,000 will show up in search results for people that are searching for homes from $450,000 – $500,000 as well as for those that are searching for $500,000 – $550,000. We amended our listing agreement and made the change in the MLS.

Almost instantly our showing schedule for the remainder of Sunday filled up after our pricing adjustment. Calls started to come in from agents telling me that their clients loved the house and they would be submitting competitive offers. We had found the solution! When we sat down with our clients on Monday morning to review offers, we had a total of 8. A couple of offers stood out because the buyers were waiving nominal inspection objections, offering additional earnest money, escalation clauses which automatically increased their offer higher than other competing offers, and clauses making earnest money non-refundable in all instances except if the home were destroyed or condemned. Our clients selected an offer that after the escalation clause, the final purchase price was $552,000 with appraisal gap coverage.

So that is the story. Our clients are thrilled. They have closed on their first home and are waiting to close on their dream home in the mountains. The reason I shared this story is to reflect the importance of listening and reacting to what the market is telling you. Buyers are smart. When they saw an asking price of $525,000, in their head, they were automatically adding $25,000 – $50,000 just to win the contract making the home overpriced. The biggest factor in this sale was maximizing exposure and getting enough eyeballs on the property. Once we had that, the competitive nature of the market took over and we had a fantastic sale.