However, our market is still trying to work out a lot of the problems of 2008 and I’ve been seeing a trend over the past couple of years that makes me think that the prime selling time is creeping up into earlier months of the year. In my opinion, the best time to get your home on the market is March, maybe even February. And in some cases, you may do best avoiding the peak markets all together.
When the market collapsed, it left a lot of homeowners stuck. Many owners were inclined to sell but they didn’t want to sell in a down market or they were underwater and couldn’t sell. Those owners waited and watched as the market slowly recovered. Then, in about 2013, it seems like many of these stuck owners were finally in a position to sell and they all listed their homes in the spring. So the market has been trying to work out this imbalance in this manner every spring over the past couple of years.
I remember riding through the neighborhood a few springs back and I was really surprised by the large number of for-sale signs I saw posted in yards. I was really optimistic about the year. Homes were hitting the market and sales were strong. But as the spring progressed, my optimism faded. The problem was that there were suddenly too many homes on the market. The supply, or actually over-supply, was having a chilling effect on prices.
This has been the trend and here’s how the scenario seems to play out: Everyone who wants to sell their home plans and prepares to list in April or May. The first seller — Seller A — does his market analysis, looks at the comparable sales and sees that the average sales price for a home in his neighborhood is a certain price.
Let’s say he determines his home to be worth $500,000. So Seller A lists his home at $500,000. The next seller — Seller B —looks at the comparable sales data and she also thinks her home is worth $500,000. However, Seller B is in the military or government service and has orders to move in June, a common moving time. She is on a hard deadline and must close by June.
Seller B sees seller A has listed his home for $500,000. Seller B decides to list her home at $490,000 to ensure she gets a contract before seller A. Seller C then prepares to list their home and they absolutely need a contract in two weeks if they’re going to hit their moving date so they list their home at $485,000 and this process repeats.
This process is often accelerated toward the middle of May or June when inventory peaks and people become desperate to make their moving schedule or at least avoid the mid-summer market slowdown. No one wants to be on the market in July or August. So sellers either get really aggressive on their price or pull their home off the market until the following year, if they have that option.
I experienced this phenomenon first hand last spring when I took one of my renovated homes to market. It was late March when the home was nearing completion. I looked at the recent sales activity in the subdivision and noticed that similar homes in remodeled condition had sold in February and March for an average of around $430,000. I listed my home at $419,000 thinking it would move quickly.
My home hit the market in early April. Soon after my home went active, a similar home popped up for $399,000. Then another home came up at $395,000. I knew my home was worth more but I had a dilemma; I could either wait for the two lower homes to sell and hope no more cheap homes hit the market or lower my price to be competitive. I had an offer come in at $390,000. I countered at $399,000 and got the home under contract. Soon thereafter another home came onto the market at $390,000. I felt I’d made the right decision.
As a home flipper, I’m in the camp that must sell. My holding costs and opportunity costs are high so moving homes quickly is important.
The spring real estate market can be particularly cruel to homes that are less than perfect. Sure, spring brings out the buyers. But lately, it has certainly brought out even more sellers. This means you’ll have more competition. It also means the buyers will have more homes to compare yours against. This means that a home’s flaws are accentuated in comparison.
A large percentage of sellers are conditioned to list their homes in the spring, but buyers start looking for a new home whenever they feel ready. Some are even incentivized to look in the off season thinking they can get a deal. Sometimes the supply and demand curve actually swings to the sellers’ favor in the off seasons of mid-summer and the dead of winter.
I listed a home for a client last fall in my other role as a real estate agent. We listed the home at $535,000, which was a bit high given the home’s condition, but that’s what the sellers wanted and they’re the boss. So we chased the market down and all the while buyers and their agents would call and point out all the repairs the home needed. They would go on to tell me about other homes in the neighborhood and how they were priced just a bit higher than my listing but they were in immaculate condition.
When I got an offer, the buyers beat me up on the home’s condition and even tried to get all the seller’s furniture thrown into the deal. They clearly felt they had us over a barrel. Luckily, another offer came along in the middle of that nonsense and we got under contract at $495,000. But the deal failed a couple days before closing because of some title issues.
At this point, we had slipped into December, the time that most real estate agents consider the market dead. We pulled the home off of the market to figure out the title issues. I started getting calls on the home when it wasn’t even actively listed. In fact, I got more serious calls on the home when it was off the market than I did when it was active. I pulled the neighborhood listings and found there was only one other active listing in the 1,000-home subdivision. With no competition, my listing looked much more attractive to buyers who had very little to choose from. With high demand, I relisted the home at $510,000; because of the title issues, we determined it would have to be a short sale. To my amazement, we immediately received multiple offers.
There is no way we would have gotten that much interest for a short sale home during the fall market. In fact, there had been a short sale home of the same model in similar condition that sat on the market for months in the preceding fall and finally sold at $475,000 just a month or so before.
I was getting so much interest for homes in the subdivision in December that I put out letters to the neighbors telling them there was no competition and I had buyers. I begged them to list their homes if they were interested in selling. I got no takers. But I assure you, they’ll be a dozen homes listed in that subdivision come May.
Granted, this is certainly not the standard or rule. I would never plan to pursue the above as a strategy. I cringe to think about my homes or listings slipping into the off season with a high days-on-market number on the listing. But it does illustrate the point that real estate requires research and flexibility.
Here are some selling strategies to help you whether you decide to list in prime time or the off season:
• Instead of being determined to list your home in spring or fall it might be a better strategy to watch the market. It is not always going to pay off to list your home in the winter but if you see that there is very little competition in your subdivision in the winter then it may be worth listing your home to test the market.
• As a general rule I like the strategy of listing a home in February if I’m trying to hit the spring market. It gets me in the market before the competition ramps up and it gives me more time to take advantage of the increased activity period. I also have the advantage that my homes are in the very top condition and I typically benefit from being compared to a greater number of homes.
• If you are determined to go after that spring market, make sure your home shows well. It is rarely cost affective to do big ticket remodeling to your home. New kitchens and bathrooms rarely pay for themselves. However, in the spring market it is typically advisable to get your home freshened up with new paint and carpet. Most important, go through your home and take care of all the little maintenance issues you’ve neglected over the years and declutter.
• The rule with selling real estate is there are no rules. National and even regional real estate statistics are meaningless. What really matters is your subdivision and the competition therein at a specific time. Do a little extra research, remain open minded and flexible and the real estate market might reward you.
Catch up with some of Justin’s previous columns: