Luxury Home Market Continues to Suffer from Costly Pricing Missteps
While the majority of Home Sellers throughout the country have seen record sales prices and shorter times on the market, a majority of the luxury home market continues to be plagued by Sellers simply asking more for their homes than buyers are willing to pay.
Today, luxury homes typically spend far more time on market and sell at steeper discounts largely based on unrealistic pricing. While price is just one factor when determining why a stubborn property hasn't sold, much of the issue comes from Sellers ignoring their agent's calculated pricing research and advice.
When bringing a property to market, it is absolutely imperative that the home is priced accurately from the beginning to obtain the most amount of buyer interest. It is a common Seller strategy and misconception to want to list the property at a higher price with the intent to leave room for negotiations or to be able to lower the price later on (price reductions). The first two weeks on the market are the most important as the listing is new and the excitement and demand are high. Taking advantage of this time with accurate pricing is essential to obtaining a strong offer that ultimately leads to a quick close. Conversely, if the pricing is too high, weeks and often months will pass, the listing becomes stale gaining less and less buyer attention all leading to extended time on market and a much lower sales price than they had hoped for.
“Luxury-home sellers have the psychology that they can afford to wait and see,” Compass’ Tomer Fridman told the Los Angeles Times. “I try to explain: every day that goes by, you don’t gain leverage—you lose it.”
According to Open Listing research cited by the L.A. times, homes in Los Angeles county priced above $3M that sold in October of 2017 spent an average of 65 days on market, which is more than twice the 31 day average of homes priced below $3M spent on the market. Additionally, just 8% of luxury homes sold above asking, compared to 30% of homes in lower-priced segments.
Luxury homes that hit the market in L.A.'s priciest neighborhoods tend to play out in one of two ways: either sold rather quickly or left to grow stale on the market. Regardless, luxury sales volume continued to rise in Q3 of 2017 by a whopping 35% YOY, according to Compass. So we can conclude that while a home might eventually sell, it'll be for far less than the hopeful seller thought and more than likely at or below the price their original Listing Agent suggested in the first place. Not to mention, the time and money they continued to spend carrying the property when they could have moved on to the next chapter of their lives.
-Scott Lamoreaux (Licensed R.E. Professional in Beverly Hills, Ca)
Sources: L.A. Times, Compass R.E.