Attention Sellers - Overprice Now, Pay Later

This post was inspired by a post written by Brian Block, fellow Active Rain member and Realtor in Northern Virginia and Washington DC. You can read his original post here.

I found this market snapshot that he did of his area really interesting. I wondered how our numbers here in Madison County, Illinois compare. After a few hours of MLS research, here is what I came up with.

From April 2008 til April 2009 2,786 houses in Madison County sold. 174 homes sold in under 30 days, 643 sold in under 60 days, 469 in 90 days, 383 in 120 days, 274 in 150 days, 217 in 180 days, and 626 180+ days.

During this time, there were a total of 6,128 homes for sale. 2,760 of them sold, 1,247 expired or were taken off the market, 1,717 are still active and 404 have a contract pending. This gives us a percentage of 48%... that means 48% of the homes put on the market are not selling.

The number one reason houses don't sell? Price. I can't emphasize it enough. You can hire the best agent in the world, have the best marketing, hold open houses every Sunday - your house will likely still be for sale when your listing contract is up.

Here's the really telling information - if we look at the list to sell percentage of the houses that did sell, you'll see a trend that the longer your house is on the market the farther that number falls. (The list to sell ratio is real estate speak for the percentage of your asking price that you receive. For example, a $100,000 asking price with a 98% list to sell ratio is a closing price of $98,000).

Here's a break down...

30 days or less on the market - list to sell ratio is 98.8%
31 - 60 days on the market - list to sell ratio is 96.3%
61 - 90 days on the market - list to sell ratio is 95.1%
91 - 120 days on the market - list to sell ratio is 94.5%
121 - 150 days on the market - list to sell ratio is 94.4%
151 - 180 days on the market - list to sell ratio is 94.7%
181+ days on the market - list to sell ratio is 93.7%

The average listing price of a home during this time in the MLS was $155,165. If you listed at the right price from the beginning, you could expect to receive 98.8% of this price - or $153,303. If you priced your home too high, and had to chase the market down you would have sold for around $145,385 - a hypothetical loss of $7,918.

The best advice I can give to sellers is this... hire an agent that tells you the truth. Do not chose your listing agent based only on the price in their CMA. Ask them to talk to you about the current market conditions, how long you can expect your home to be on the market at different price points and what the current competition looks like. Remember that the market conditions - not the agent - determine the price of your home.

Don't risk your home becoming stagnant on the market. Price it right from the beginning, and the whole process will be faster, smoother and easier on you and your bottom line.

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About the Author: Kristina Pratt is a Realtor with the Just Ducky Homes team at Coldwell Banker Brown Realtors in Edwardsville, Illinois. She and Nancy Milton help their customers buy and sell homes and investment properties in St. Louis' Illinois suburbs of Madison and St. Clair counties with special emphasis on the communities of Edwardsville, Glen Carbon, Maryville, Collinsville and Troy. For more information, visit their web site at http://www.JustDuckyHomes.com or e-mail Kristina@JustDuckyHomes.com