What do Expired Listings Teach?

I checked the expired listing count in Stamford this week. Since January there were 254 expired listings and 827 listings that closed. These numbers include single family homes and condos. If you just look at single family homes, 432 homes have closed and 151 have expired. I check these number from time to time and they tend to be consistent over the years. Roughly 30% to 40% of homes expire without selling in their first listing term, year after year after year.

Many people think that the primary reason expired listings don’t sell is price and that is technically true. However, to leave it at that does not tell the whole story. If expired properties were listed at a higher price per square foot on average, the story would be that simple. However, expired listings are generally not listed at a much higher price per square foot. In fact, since January the median sold price per square foot was about $230 in Stamford and the median price per square foot for expired properties was $225. The average agent is looking at homes of similar size and pricing “soon-to-be expired” listings accordingly.

If the initial list price per square foot of expired listings is not generally outrageous, why do so many agents miss the mark on pricing them each year? My observation is that they have a great deal of trouble adjusting for home factors that have nothing to do with size. These factors include awkward or unexpected floor plans, poor light flow, and deferred maintenance projects that buyers are not interested in taking on. The difficulty in explaining the impact of these factors can’t be overestimated, so many agents avoid talking about them with their sellers. Other agents choose to address these factors weeks later after they have priced the property incorrectly, conducted weeks of marketing that target the wrong buyers, and let the initial excitement about the new listing die down, never to be recovered.

My approach to this topic entails full disclosure before listing a home. By offering to tour similarly sized properties with my seller clients I provide them with a context for pricing that can take into account differences in floor plan, design, lot condition and maintenance. I also explain the real risks involved with pricing that does not reflect what buyers and appraisers are actually evaluating beyond size. The best buyers for your home (those that can and will pay the most) will not get exposed to it and your home will be constantly competing with homes that show better. Finally, I encourage discussions about challenging floor plans and maintenance issues, since it is a good opportunity to put many heads together and address everything that impacts a showing before the home is listed. I have seen ways that furniture can be added and rearranged to improve the flow of an awkward floor plan. I have had architects and contractors offer alternative designs and pricing that help buyers see more potential. I have also worked with sellers to get on top of the maintenance issues that buyers fear most.  These solutions can keep buyers interested in a home that they might have otherwise overlooked.

We know real estate value is about so much more than size, so it is important to address the bigger picture. Ignoring the myriad of factors that impact perceived value is not wise, unless your goal is an expired listing. Since every buyer eventually becomes a seller, I make sure my buyer and seller clients tour enough homes to see the correlations between price and factors unrelated to size for themselves.

Ensuring my clients are well-informed before they make important, irreversible decisions is a priority. Some sellers might still want to price too high, wish for luck and accept the negative consequences of being in the wrong price category. Others might price to generate the most traffic and excitement among agents, which usually brings the highest possible sales price. Unless a property is in the extreme luxury or custom designed category (in which none of the above applies), I encourage sellers to go in the later direction.  In the end, a list price is the seller’s decision, but it should never be misguided because important and challenging conversations are avoided.

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