Recently an acquaintance had us check on a home in the neighborhood that had just sold. They wanted to find out what the home had sold for. In checking, we learned the home had sold for cash at a price well above what is the average price in the local market currently. Being a cash sale it would not have needed an appraisal. (As a cash sale no appraisal would be required unless the buyer wanted one as there was no loan involved.)
Upon learning this, the acquaintance asked what marketing strategy we thought would attract all cash/out of state buyers to pay above market price for a home. We had to reply that there is no real answer to that. In the 25 or so years we have sold real estate, we think we can safely say that there is not a strategy for particularly going after cash buyers who are willing to pay above market for a home.
Currently cash buyers in general make up a large portion of the buying market — (See recent article in the Arizona Republic.) But that said, most of the cash buyers want “deals” and are not interested in paying more than a home would appraise for, even if they do not need an appraisal to get the home to close escrow— since they are paying cash.
The people who will pay above market price are often motivated to do so because the house they are buying has some “special something” that meets their needs, that other homes they have seen do not. Someone who has the money to do so may pay more because of a location issue that they have .. i.e. to be close to a family member, near a school, near a medical facility, or other location issues. They may also be motivated to pay more if the home meets their size, spec requirements, etc and there is no other home they are seeing that has those same features and is “move in ready”.
The “move in ready” aspect for homes is something we are seeing get a bit more value attached to it in the market now. With a large portion of the market being littered with dismal run-down, un-maintained homes that are a part of the foreclosure and short-sale inventories a “move-in ready” home stands out. Not every buyer either wants, or is prepared to take on a home where they must do renovation, or even paint.
We have seen a buyer reject a home that was priced better and move on to select a more expensive home to buy, only because the home that was priced better did not have fresh neutral paint tones throughout. The better priced home had a mint green bathroom and one bedroom, that had been a child’s, and was painted lilac. The buyer decided they would rather pay more for the other home that had all fresh neutral beige tone paint throughout than purchase a better priced home that was in respectable condition, and go to Home Depot and buy a few gallons of paint, or hire a painter. Their choice was not rational from a price standpoint. But they had cash to buy the higher priced home, and they did not want to have to do anything to move into their new home. They wanted the home to be completely “move in ready”.
The current market sees this “move in ready” philosophy play out in builder new home models also. We recently wrote a blog post referencing a recent report about spec homes getting an elevated price during the past few months.
From an economic standpoint, paying above market for a new builder spec home makes no sense, but more buyers it seems are motivated to be doing this lately, likely from being “fatigued” at seeing the inventory of resell homes that are tattered, in poor shape and have been mistreated by former owners. Paying above market price for any home is not a smart economic decision on the part of the buyers, for heaven-forbid, should they need to sell the new builder/spec home any time soon, they will take a beating on the price that they paid and not get their money back out of it.
For any seller wanting to sell in this, or any market, one of the best things they can do to help get the best selling price is make their home as “move in ready” as possible.
- Eliminate any painted walls that have been personalized to their own taste – freshly re-painted neutrals are best (like a buyer would find in a new model spec home).
- Tidy up anything and everything. If there is a cracked tile, fix it. If there is an oil stain on the garage floor, clean it up. Clean the grout.. do whatever it takes to make the home “sparkle” and be “move in ready”.
- Get rid of personal photos and memorabilia and make the home look like a model home.
(While clearing out personal items might be difficult to do while the seller is still living in the home, the seller is far better served if the buyers spend their time in the home focusing on the home and how “their” own furnishings may fit and not be looking at the seller’s family photos on the walls, or being turned off by stuffed animal heads hanging on the walls, etc etc.)
- Sellers making the home very accessible to see is also key in getting viewers/would-be-buyers to see a home in any market, but even more so in this market. There are often times nice homes on the market that are not viewed and missed by buyers.
- In this market particularly, having a home that is made available on lock-box and without any special showing criteria gets the most buyers looking at it. In a market where the bulk of the market includes homes that are vacant and on lock box and that do not require calls by the buyers agent to show the home, a home that requires special phone calls and scheduling, or that has animals in the home, security codes to deal with, or other restrictions, etc often miss many showings, regardless of the condition of the home. Regardless of price, marketing strategy, or condition, if a home is not seen it will not sell. This is just a fact of the market.
Often times, however, a seller able to sell at a higher price than the average market price is merely luck. The stars might have been aligned right for them, they had a St Joseph statue planted in their yard, or they had consulted a Ouiji board , or they had good karma come and visit them. There is no marketing strategy for luck, or any of those supernatural things unfortunately. If there was such a marketing strategy everyone would be doing it and we would all be seeing a better market.
Of course, if a home owner is serious about actually selling their home, the best strategy is to get the home in as “move-in ready” condition as possible, and also set the price in the market range. Listing a home at a price that is too high for the market and just hoping for the “magic” cash buyer will come along and plunk down more money than is normal for the market is pretty much wishful thinking. With a real estate market that is continuing to decline in price, pricing a home listing too high, and hoping and hoping usually only leads to an actual sales price lower than one hopes. The home often ends up sitting and sitting on the market and the home owner will likely will have to endure price reductions, as the market continues to decline, or the owner becomes more desperate to sell. Initially pricing a home right is the best pricing strategy always. Don’t price a home too high and plan to wait for the “magic white knight buyer with bags of cash”.
(Real estate data taken from Phoenix Multiple Listing Service. Information is deemed accurate, but not guaranteed.)