Comparables vs Competition
If you are a home seller you are usually going to look for the three most recent home sale comparables, make adjustments, and determine the value of your home. This works like a charm in a seller’s market, especially whenever sellers tend to be wrong and overvalue their homes. When the market is going up, which it will in a seller’s market, you can be wrong but be right eventually. Comparable home sales help you make sense of what you are gonna ask for your home.
Whenever we move to a more balanced or maybe even a buyer’s market, however, the comparison isn’t as important as the competition.
Case in point. We just listed one of our Airbnbs in Nashville. I being a typical seller and also a relator looked at what is the most advantageous to us. I looked at the three most recent sales and then I priced it there. Since then, as we are shifting to a more balanced market, three new homes have come on the market at a significantly lesser price than where we had ours listed.
I have two options. I can wait for a long period to try to get my money or I can understand it's all about beating the competition and reducing mine to get lower. I am undecided about what I will do, but if I had to sell at this point I would probably need to make a price correction.
When the market is shifting, that means we are moving from a seller’s market to a balanced market. If you think about a see-saw where one person is on the bottom and the other person is on the top, to get to the middle there has to be some kind of movement. Right now the shift is looking like a temporary buyer’s market, which means that eventually there will probably be six to seven months’ supply of homes on the market. We aren’t quite there yet. We are probably more realistically at two months’ supply right now, but we are likely headed in that direction. In our immediate market, we have gone from 198 homes for sale to over a thousand in about the last seven months and that is extreme.
So as we are shifting you have to have a forward outlook. Where is the market heading? The market has been up this year, but as we are going towards the end of the year starting in May we have probably peeked on our pricing. I anticipate we will probably have reduced pricing throughout the end of the year. I just don’t know how fast it's gonna go down.
If you are going to sell your home you have got to be able to look into the future at the trend of where things are going. If you are going to use comparable sales it's probably going to lead you to bad decisions because those sales have already happened. Moving forward you have got to be able to predict and out-negotiate your completion.
Key question: How can you show that you are more valuable to your competitor?