Why Some Houses Don’t Sellon May 29, 2018 5:59 pm under Real Estate Investment Tips
Some houses stay on the market way too long. Why don’t these houses sell?!
This question is something you can ask yourself retrospectively in desperation, or you can ask it in a proactive manner as you plan the details of your house flip. Some small factors that are under your control can make the difference between selling your house in a quick two days or seeing it stagnate for six months. You can expect more holding costs and more money to be subtracted from your bottom line when your house’s ‘days-on-market’ metric keeps rising. Here are some of the top reasons why homes don’t sell:
1. The Home is Not Priced to Sell
Elizabeth Weintraub, a Broker-Associate at Lion Real Estate, wrote quite candidly in her article about why homes don’t sell. She says overpricing is the worst mistake a home seller can make. This is especially true for investors. Investors need to be completely objective when selling (and pricing!) a house. Be sure to use SOLD comparables when valuing the house and not houses that are still on the market. This mistake is common when evaluating comps.
Keep in mind, your comps can be exactly the same square footage or on the same block, but something that seems as trivial as the property’s layout can influence the buyer’s decision. Keep style, livability, and upgrades in mind when deciding how to price the home. If the house is not priced correctly, it can delay the sale of even the highest quality rehab.
2. The Home was Not Rehabbed Well
Cost efficiency is extremely important in the house flipping business. Be careful not to take this frugality too far though, or you’ll have plenty of reasons why your house isn’t selling. There is a fine line between cost efficiency and cutting corners. Investors typically make a concerted effort to bring costs down, possibly through doing the work themselves, buying material in bulk, etc. Low quality work will not sell in today’s highly competitive housing market. Not only will it not be attractive to buyers, but poor quality work will cost you even more to rectify. It is important to be mindful of expenses and to try and save when you can, but paying a little extra for high quality work can save you money (and headaches) in the long run.
3. The Home Does Not Match the Target Buyers
Here is an opportunity to look at sold comps and current market comps. Sold comps can be used to understand what has worked and current market comps to understand what other investors/sellers believe the local buyer wants. Cross referencing the two can tell an investor what their priorities should be.
“All buying decisions are ultimately emotional,” says Joshua Ellison from The Denver Real Estate Investment Club. A property not selling indicates a failure to identify a buyer who will get sufficiently emotional about it. Joshua touches on a larger point; the inability of an investor to sympathize or put themselves in the shoes of the buyer. Be sure to understand the target market. In doing so you can easily research the qualities of a property the buyer feels are essential.
4. The Home Makes a Bad First Impression
It’s said that a person has seven seconds to make a first impression — the same goes for a house: 90% of buyers start their search online and make a decision about whether to come visit a proeprty based on a quick skim of your listing photos (Agandoni, Trulia.com, 2017). Anyone who’s searched online for a new home recently, knows this to be accurate.
Look at the display pictures of two properties currently (at the time this article was written) for sale below. Note the difference in click appeal between the two properties. Which inspires you more to go take a look?
Of course, having low quality photos is better than having no photos at all, which surprisingly happens, but not much better. It speaks to the current owner or investor’s diligence. If they aren’t willing to spend money on a decent photo or find someone who can, how could they competently rehab the house? What other corners did they cut? It may be an excellent rehab, but this question would certainly be raised right off the bat. Want to add a special touch when showing off your work? Consider staging your flip to give it a welcoming, aspirational feel.
5. The Home is Being Sold by an Incompetent Realtor
Amit Bhuta, a real estate specialist, says more than ninety percent of all Realtors do the same thing – put up a FOR SALE sign, submit the homes information on the MLS, promote the home on a bunch of websites, hold an open house, advertise ineffectively on social media, and make a brochure for the home (Bhuta, Compass.com). This is called “listing and praying.” Bhuta goes on to say that you MUST interview realtors before hiring them as your agent. Find out what their strategies are, how effectively they use online services/social media, and what else they are going to do to help sell your house as quickly as possible.