Is the First Offer the Best Offer?

There has long been an argument on how best to handle the first 30 days of a listing, and that is whether or not to speculate a bit at a slightly higher price, or to enter the market at a more aggressive number in the hope of a knockout punch. Some sellers, when they get an early offer, express an interest in holding out for a higher number; after all, they’ve only been on the market a week or a month. Many licensees I know believe that the best offer typically comes early. 

What is the truth? Every listing is different, and some early offers do in fact turn out to be hopeless lowballers. But overall, the data does seem to point out that early offers are higher than offers that come once the listing has been around the block a few times. 

In the first quarter of 2010, the Westchester -Putnam MLS has the following data for percentage of list price that homes sold for in 30 day increments. 

0-30 days:     97.5%

31-60 days:   95.7%

61-90 days:   95.1%

91-120 days: 94.7%

121+ days:    92%

Clearly, sale prices in the first 30 days on market are the highest percentage of asking price, but the first 90 days overall are fairly strong. Since less than 1% of sold homes even close in the first 30 days (30 days is almost ridiculously fast in New York), the most significant statistic in my view is the fact that even up to 90 days, the percentage of asking price is above 95%. Once you go past 4 months, it drops to 92%, and that is probably after a price reduction, which really makes it less than 90% of original asking price in most cases.  

Here’s an illustration that occured last spring of two virtually identical homes next to each other. 

Listing 1: Listed for $525,000 goes under contract in 44 days, sells for over 95% of asking price on day 82.

Listing 2: Listed for $549,000, undergoes 3 price reductions, is vacant at day 90, and finally closes at less than 92% of original asking price after 240 days, 150 of them vacant.  

The MLS statistics on the 2nd one are misleading, because the asking price by the end was reduced such that the final sales price was over 98% of asking. But it took 8 months! And overall the statistics are not promising. 

Here is the most telling statistic of all: 73% of all closed sales occurred after 120 days on market. Stale listings, that is, listings that have been on the market a longer time, sell for less. Unfortunately, most listings do take longer, and that is because most licensees are failing to educate sellers of this fact. 

Speculation at higher prices is, overall, incredibly costly in time, effort, stress, and overall costs. Sellers should be wise to this fact. Price it right, price it early, and you’ll sell for more, faster.