Why Real Estate is Like Black Friday Shopping
Can you believe Thanksgiving is next week? This year has just flown by.
Besides hosting a huge dinner for family and friends, one of our Thanksgiving traditions is to go Black Friday shopping. Black Friday is named so because on Friday after Thanksgiving (now it starts much earlier), retailers offer incredible discounts on a limited number of items. But you have to get up early, stay in lines, and strategize properly. If you are an expert Black Friday shopper, you will go home with a good portion of your Christmas presents at very attractive pricing.
But, the downside of these fantastic deals is that the shoppers go a little crazy. The shoppers go into a complete frenzy. There is an immense amount of competition for the same, limited inventory. All because the price is lower than the perceived value of the item. And this creates mayhem, arguments and there's usually one or two altercations reported on the media each year.
This is why real estate is like Black Friday shopping.
Let me give you a real world real estate example:
I had a listing earlier this year where the price of the home was listed at value, according to a comparative market analysis (CMA). It was in a desirable neighborhood, desirable school district, the home was staged well and we marketed this property extremely well. I knew we would have traffic in the open houses - but I didn't know we would have HUNDREDS of people come through on Saturday and Sunday.
I felt like I was in the middle of Target during Black Friday.
You see, this open house had all the same elements of a good Black Friday Sale: We had done our homework. We got a pre-inspection, making offers easier for the buyer's agent. It was the right time of year, the was home priced well, we had abundant marketing, and there was limited inventory - all of which created a lot of buyer traffic.
When you have a large group of people in the same room wanting the SAME thing, there's a mentality shift. There is a psychological change that happens in people. They may want the home, but soon, they want it more than any one else. They agree to escalate their offers to outbid their competitors. This escalation in price increases the price of the home.
In this real world example (there was no physical aggression, thankfully!), but we had a lot of people trying to provide the most attractive offer to get the winning bid and agents asking to submit the bid prior to the review date. We had over 30 offers and the price escalated from about $600K to $850K.
Now this case is an extreme - but a very good example of how well-priced, limited inventory will create interest - a frenzy, if you will.
But, imagine for a moment, the we overpriced the home. When the price of the home is unattractively high, the opposite is true. There is limited interest. The inventory will sit on the shelves longer, until the retailer (home owner) decides to reduce the price to make it more attractive. But the moment has passed, and the build of interest is gone. Then the buyer has a better chance of negotiating a price, and the seller will come to terms with getting less than asked for price.
There are strategic tips here for both the buyer and the seller to learn from. It's about timing, pricing, marketing and inventory. And depending on which side of the deal you are on, you will want to work with your agent to optimize your goals.
And then go take a nap, wake up and eat leftovers. Oh wait, that's what I'll be doing next Friday. I'm skipping the stores this Black Friday and shopping online this year.
Happy Thanksgiving everyone!
Kristin Bushnell is Designated Broker of Bushnell Real Estate Solutions and Co-owner of Bushnell Craft Brewing Company in Redmond, WA. Check out my profile here.
If you are ever interested in chatting about real estate, contact me at firstname.lastname@example.org or call me at 425-559-1355. I'll buy you a beer (or non-alcoholic beverage, if you prefer!), and we can chat about real estate until your heart is content.