The Cost Of Waiting For The Market
Introduction
It is not uncommon for some homeowners/sellers to over ambitiously price their home and choose to stick with their asking price without wishing to reduce it at any time, believing that the ‘right’ buyer and offer will eventually appear. Those sellers are essentially waiting for the market to catch up to their asking price. Here I discuss the very probable consequences of waiting for the market.
Believing that the ‘right’ buyer and offer will eventually appear
In the previous section, I explained that inevitably there are occasions when some sellers will disagree with the determined value of their property despite the evidence supporting such value, particularly if the value doesn’t quite match up to their own expectations. In such circumstances, those sellers may decide to not go with the determined value or the supporting evidence; opting instead to price their property closer to their own expectations, which in many cases, means pricing it above the market value; in other words, over ambitiously pricing or overpricing their property!
Of those sellers, some may choose to stick with their overly ambitious asking price without wishing to reduce it at any time, believing that the ‘right’ buyer and offer will eventually appear.
Those sellers opting for such an approach may be thinking, ‘I’m not desperate, I can wait for the right price’, as a reason to keep their property priced above the market value indefinitely. They may have a certain price in mind that they want to achieve and see no reason to accept nor consider a lower figure. Those sellers are essentially waiting for the market to catch up to their overly ambitious asking price.
Any seller who believes this approach to be a sound pricing strategy ought to be aware of the following: the time value of their home on the market, social proof affirmation working against them, as well as the cost of waiting for the market itself!
So before diving into the main discussion concerning the cost of waiting for the market, I must bring to attention the following points below:
As stated in the previous section - time is an ally of the buyer and an enemy of the seller!
Factors that influence the seller (e.g. the seller’s financial commitments, gut feeling of the value, or sentimental value etc) to determine an asking price that’s above the market value rarely succeed in selling for that price. Only factors that are relevant to the buyers, in particular, the comparables, and the value that they get out of the property, can realistically be reflected in the asking price, as those factors can be supported by clear and attainable evidence.
What is the cost of waiting for the market?
Any seller wanting to keep their property priced above the market value indefinitely is, as already stated, essentially waiting for the market to catch up to their asking price, which can possibly happen in a rising market.
But please be aware that in a rising market, although it’s possible that we can achieve a higher price for our home, we may end up paying a higher price for the next home that we intend to purchase, especially if we are planning to upsize our home! Because in a rising market, property values/prices will increase in many areas (with values/prices in some areas increasing more than in other areas). Therefore, any increase in value we gain from waiting for the market before selling our home can be partially or even entirely lost in the higher price we pay for our next home! This is of course assuming that the market does eventually catch up to our asking price!
RISING MARKET
Are there any merits to waiting for the market?
Rising market vs. falling market
In order to answer the question on whether there are any merits to waiting for the market, let’s take a look at a few scenarios in the images below, and assume for the purposes of those examples (and for simplicity) that the market rises or falls at the same rate of 5% across the country.
Indeed there are potentially partial merits to waiting for the market. According to the above scenarios (assuming that the market rises or falls at the same rate across the country), it may be beneficial to wait if we are downsizing our home in a rising market, or upsizing our home in a falling market.
There are of course further scenarios and factors to consider when weighing the merits of waiting for the market. For example, we can potentially gain if:
In a rising market, the property values/prices in our current area have risen more than the property values/prices in the area that we intend to move to.
In a falling market, the property values/prices in our current area have fallen less than the property values/prices in the area that we intend to move to.
Gaining from a rising market
If we are wanting to gain from a rising market, we need to be aware that:
A rising market can be caused by certain economic or political influences, but this is too unpredictable to rely on or time.
We can try to rely on a more predictable fundamental property cycle to reach the recovery or boom period before deciding to sell. However, depending on what stage we are at in the cycle, we may still have to wait several years for the market to eventually catch up to our asking price, even during a boom period!
We are allowing our home to become stagnant and grow stale on the market while we are waiting for the market to catch up. A rising market isn’t guaranteed to overcome diminishing buyer confidence due to the diminishing time value of our home and social proof affirmation working against us!
Although one does indeed acknowledge that waiting for the market has potentially partial merits, I must stress that all of the above scenarios that we’ve looked at are simplified examples and we cannot feasibly account for all of the real world variables and intricacies of the market!
Personally, I would recommend against waiting for the market altogether, as I do not believe this approach to be a worthwhile endeavour. Waiting for the market would involve too many variables within the market, as well as require unnecessary risk, patience, and precision of timing - all for a potential reward that I am not of the belief is worth the risk and the wait. In general, waiting for the market rarely pays off!
The diminishing desirability, visibility and exposure of our home
One crucial aspect that any seller ought to know when choosing to wait for the market, is the diminishing desirability, visibility and exposure of their home.
What do I mean by this?
Generally speaking, buyers tend to largely favour and prioritise newer and fresher properties on the market over older properties. The longer our home remains on the market while we wait, the less desirable it becomes in the eyes of the buyers, especially among the constant flow of new competition entering the market, due to diminishing buyer confidence from social proof affirmation!
Even if our home does tick the boxes for the buyers who come across it; diminishing buyer confidence from social proof affirmation, especially the stigma cycle, can come into play and work against our home when viewed alongside new competition that equally ticks those boxes!
This problem is certainly not helped by the fact that some of those buyers may prefer to prioritise and view the most recent properties on the market and will sort their search results by ‘most recent’ or ‘newest listed’, pushing the newest and freshest properties to the top of their results. But more crucially, portals such as Zoopla will sort the search results by ‘most recent’ as the default sort order - meaning that all of the buyers who are actively searching on the portal will see, as the default, the most recent properties first.
What does this mean for our home?
If we are waiting for the market, then our home after a certain period of time will no longer be new and fresh on the market, and therefore no longer be close to the top of the search results, at least not for the results sorted by ‘most recent’ or ‘newest listed’. In fact, the longer we wait, the further our home gets pushed down in the search results, becoming less visible to the buyers over time, with each new and fresh property coming onto the market/portal! The less visible our home becomes in the search results, the less exposure it has to the buyers - consequently, our home will lack the buyer engagement, as well as the interest, competition and demand we need to achieve the price that we want!
I discuss this in more detail elsewhere in this guide - click here to jump to that section.
Giving up control and bargaining position to the market
I must crucially point out that waiting for the market means that we are effectively giving up a degree of our control to the market and allowing external forces to have a say in when we decide to sell.
Not only are we allowing our home to become stagnant and grow stale on the market while we are waiting for the ‘right’ moment/buyer/offer/price; but we are also effectively further strengthening or empowering the bargaining position of the buyers who make up the market and who already have the power of determining the market value of our home (see the foundation of price, in particular, buyer sentiment); while simultaneously we are incidentally diminishing our own bargaining position, consequently hampering our own ability to achieve the best price or the market price!
Instead of waiting for the market to catch up, it would be far better for our own bargaining position that we take charge and control of the sale, and aim to achieve the best price in the market that we are currently in!
Our home is susceptible to the ever-changing nature of the market
Another important aspect I must bring to attention is that, the property market is ever-changing, so the longer our home remains on the market while we are waiting for the ‘right’ moment/buyer/offer/price, the more susceptible it is to the shifts and changes in the market.
So far, I have mostly covered the factors that we should consider when waiting for a rising market to catch up to our overly ambitious asking price. And although I have made mentions of a falling market earlier, I have yet to cover this in great detail. And so, I want to now turn our attention to the factors that we should consider when there is a falling market, because of course, the longer we are waiting for the market, the more susceptible our home is to a falling market as much as it is to a rising market!
Reassessing the value/price amidst the shifts and changes in the market
The longer our home remains on the market, the more it needs to be reassessed to ensure that its value and asking price accurately reflects the market that it’s in - perhaps every 8-12 months for as long as it remains on the market. The value and asking price would need to reflect the most recent shifts and changes in the market, especially the most recent sold and available comparables.
Particular attention ought to be given in the event that we wait long enough to find ourselves in a falling market, in which we are very likely to end up selling for less than expected (perhaps for considerably below the market value), assuming we are able to sell at all!
Adjusting the asking price to reflect the falling market
Even if our home wasn’t already overpriced to begin with, but was in fact priced fairly at its initial market value at the time, the asking price would certainly need to be adjusted accordingly, i.e. reduced (or repositioned in the market), to reflect the falling market, if that is where we now find ourselves in!
Otherwise, if we choose not to adjust the asking price; then our home, even though it was priced fairly to begin with, would certainly now be overpriced amidst a falling market! In fact, our home will end up falling far behind the market, especially if the competition decides to adjust their asking prices accordingly (thereby making our home less saleable or not saleable at all)!
If our home was already stagnant and growing stale on the market prior to a falling market, then our inaction to adjust the asking price would certainly exacerbate the problem during a falling market!
FALLING MARKET
Waiting too long before adjusting the asking price
If we wait too long before adjusting the asking price, our home will continue to stagnate and grow increasingly stale on the market as an overpriced property! (Assuming that it was priced fairly at its initial market value at the time and wasn’t already overpriced to begin with prior to the falling market) And the longer we wait, the bigger the price reduction (or market reposition) we may need to make in order to correlate with the falling market!
However, even if we do adjust the asking price, we ought to be aware of the following:
A price reduction can influence negative buyer perception and diminishing buyer confidence from social proof affirmation.
In fact, a price reduction can contribute to the stigma cycle.
Given that our home is likely to be stagnant and perhaps even stale on the market when we do find ourselves in a falling market due to the length of time waiting for the ‘right’ moment/buyer/offer/price; the price reduction is likely to be the first in a line of successive price reductions that may be necessary to correlate with the already declining buyer activity and diminishing buyer confidence for our home!
Avoiding the plethora of problems of waiting
Hopefully, we can now see that if we choose to wait for the market to catch up to our overly ambitious asking price, we stand to face a plethora of problems that can be difficult to overcome or escape from, not to mention burdensome! Not only does waiting for a rising market carry its own set of problems, but we also leave our home susceptible to a falling market!
How can we deal with these problems?
The simple answer is, we shouldn’t have to!
Fortunately, we can stand to avoid such problems if we choose to price our home correctly from the outset, in which we’d only need to concern ourselves with the current market and the immediate upcoming months, where the market conditions and variables are more foreseeable and therefore easier to deal with!
As stated in a previous section, although we cannot control the market, we can certainly control the marketing!
Getting in touch with me
If you would like to discuss any of the above points with me further, or if you need help or have any questions in general, click here to get in touch with me.
Throughout this section, I’ve touched on social proof affirmation, as diminishing buyer confidence can have an adverse impact on the time value of our home on the market, severely hindering our ability to achieve the best price or the market price!
Although social proof affirmation plays an important role in the success or failure of one’s ability to sell their home (and for the best price), it is an often overlooked aspect that should be brought to attention and understood.
And so, I invite you to join me in the next section, where I go over social proof affirmation in more detail.