Speculative selling comes up when discussing selling investments. While this can apply to beach homes, it also means more. Glenn Phillips, CEO of Beach Homes Realty, discusses what speculative selling means for beach homes and the risks it brings.
- Two Types of Sellers: Two types of sellers prevail in discretionary property markets.
- Motivated: Motivated sellers have a life event pushing them to sell a home. This could be a job change, an increase or decrease in household size, or more. They want the maximum amount of return in the shortest amount of time possible.
- Speculative: These sellers wait for a high offer before selling. They may not need or even want to sell it, but they would consider it for a high price. Most people haven’t experienced this type of seller, especially if you’re new to the beach market.
- Speculative Selling Risks: Attempting to be a speculative seller can cost you money.
- Increased Time on Market: Overpriced homes tend to stay on the market longer. Informed buyers will look over your house if it’s overpriced. If your home sits on the market for a while, buyers may start believing there is something wrong with the house itself. This increased time on the market can cost you if you aren’t living at the house and have to pay maintenance, HOA, or utility fees.
- Lack of Urgency: Speculative selling also leads to a lack of urgency. Waiting around for the highest possible offer can make you feel unmotivated to sell, even if you have offers and showings scheduled.
- Consequences:
- Increased Time-on-Market Creates Buyer Doubt: When a house stays on the market too long, buyers begin to wonder why it hasn’t sold. It also makes deals more likely to fall through.
- Repeated Price Cuts Teach Buyers to Offer Low: Continuously cutting the price by small increments tells buyers to offer lower than the listing price. Even if you’ve already cut it several times, you’ve trained the buyer to expect price cuts.
- Eventual Sale Price Often Less Than Market: Long time on the market and multiple price cuts lead to lower-than-market sale prices. Even if the house sells for market price, the extra time spent on the market has likely cost the seller money.
When selling your beach home, it’s important to understand if you’re a motivated seller or a speculative seller. Speculative selling comes with risks and consequences not found in motivated selling. Visit beach-homes.com to see what the market is like right now and find agents who will help you understand the selling process.