Anatomy Of A Failed Home Sale. Why Chasing The Market Never Works.

It's inevitable that a certain amount of home won't sell.  In fact it's quite a large number that does not sell and it happens for many reasons: there are dozens into which I won't go into, except for the most common one: price.

I don't know how many times it can be repeated, but the price matters and the price is not a fixed figure because the market is not fixed.  Just as the market changes so should the price, within reason of course.

So the price is important and every seller wants to obtain the highest price possible.  There are ways to help a seller obtain the top possible price, but despite all that is done it will never be beyond what the market will bear, but it can be on the higher spectrum of the range. 

So let's take a look at a property that failed to sell, or actually the sale was stopped because the price reached a level where it was more prudent to keep the property vs. selling it. 

It was placed on the market in the midst of home buyer's tax credit, a good time indeed.  This was a time when some people we willing to pay a little bit more for good properties just to get the tax credit: the tax credit helped smooth out any mispricing in many cases, but the property had to be scarce.

A townhome in Central Phoenix is not scarce.  In fact, demand was lackluster and the future was not bright.  Any mispricing would result in a longer time on the market and probably price reductions: this is called chasing the market and rarely does one win.

When the supply of a product is high and the demand is low your property had better have all the other basis covered.  It should be move-in ready, well located, accessible and marketed well.  If any of these are missing the sale will be hampered.

The properties that did sell were in bad condition, but priced low or priced on the higher end and fully move in ready and remodeled.  Nothing in the middle was selling.  So either the price of the unit has to be reduced or it had to be remodeled. 

Activity from agents that showed the property initially has no qualms about the price, but they did with the condition, so the condition was a major factor.  As time progressed with no sale the price had to be reduced, but the seller was hesitant to reduce the price accordingly to the reduction in market prices.  So despite the reduction the property was still overpriced: chasing the market.

This is a very precarious and uncomfortable situation to be in, but many sellers seem to do it willingly with a hint of hope that the rules of the market will somehow not apply to them.  It is inevitable that when the forces of the market are ignored that the only loser will be the sellers.  In this case the price was reduced twice over a 6 month period and each time the market was lower: had the price been set correctly initially the property would have sold for more then the listing price at the end at which point the days on the market was an additional hindrance.  You cannot ignore the trends and forces of the market.