Some of my buyers are in no hurry to purchase their home. They say something like, "We are willing to wait until a great deal comes along", or "The sellers will get desperate to sell after the home has been on the market for a long time". What does "a long time" mean? Until now, the answer to this question has been some agent’s made-up statistic or vague answer. You will often hear real estate agents saying something like, "well, Mr. and Mrs. Buyer, it really depends. Yeah, the longer a home has been on the market, the less it will usually sell for. But the market has a lot to do with it, too… and then interest rates, etc… when you find a home you like, I’ll ‘run the numbers’ and tell you what it’s worth". That is actually not a bad answer, since many agents don’t even ‘run the numbers’ (look at what comparable homes have recently been selling for) and let their client alone decide what they want to offer!
It is also true that each specific situation varies. However, there is a reason why I got that economics degree: I love to know the numbers. Numbers show trends! After compiling data from tens of thousands of homes that have sold in Champaign County, there is an obvious pattern of a decrease in the sell/list price ratio based on how long a home has been on the market. Below is a graph depicting the sell-to-list price ratio on the vertical/Y-axis and ever-increasing days on market (DOM) on the horizontal/X-axis. (Due to high demand for such information by other agents, and since I provide much specialized information to my clients, I have blurred the values of the axes) Contact me to find out the complete data:
The green line is the average sell to list price ratio for a specific DOM. For buying, you can see that there are diminishing returns if you are just waiting for a home to drop in price. Some sellers feel that they must get a certain amount for their house and are willing to wait for it. After a certain point, some sellers just start to believe that their home won’t sell. The sad part is that they’re not completely wrong; 50% of homes don’t sell the first time they’re listed!
If you are planning to ever sell a home someday, make sure you come back and read my next post. I will discuss all of the ways to avoid the potential problems I have listed above (getting desperate, having to drop the price, and stressing about why no one wants to buy your stale, high-DOM home). Subscribe to my blog, and that post will come to you!