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Want to Be an Expert? Know How Many “Real Buyers” Are Available

Feb 1, 2012

Posted by

Laurie Moore-Moore

Laurie Moore-Moore is the founder and CEO of The Institute for Luxury Home Marketing, an international training and membership organization for agents who work in the upper tier. The Institute offers Read more

Savvy luxury real estate agents, who want to provide their sellers with a market reality check, turn to a simple, but powerful statistic -- the number of “Real Buyers in the price range where the seller’s home is being marketed. 

 

A “Real Buyer” (what every seller is hoping to find) is defined as someone who not only contracted to purchase a home, but showed up at the closing and walked away owning the home.  The term “Real Buyer” paints a clear picture.  Unfortunately, many real estate professionals use the terms “solds” or “closed transactions” instead of the more descriptive term -- “Real Buyers.”  As a result, the importance of the statistic often gets lost in cloudy terminology.

The “Real Buyer” statistic can be an effective measure of demand for properties in a specific price range for a particular time period.  Most agents know statistics such as how many total sales there have been in their community in the last six months and -- given the inventory of properties currently for sale -- that there’s a nine-month supply of homes on the market.  Averages like these are useful when comparing market conditions city-to-city; however, these market averages don’t actually reflect what’s happening in a particular price range in a local market.  In fact, the averages can often lead you astray.

To Be a Luxury Expert

A luxury agent needs to know the specific statistics for each price range within the luxury market.  For instance, how many “Real Buyers” have there been year-to-date in the $1.25M to just under $1.50M price band as compared to the number of “Real Buyers” in the $1.50M to just under $2M price point?

A good agent can explain that in the specific price range where you are marketing your home (let’s say between $1.25 million and just under  $1.5 million) there have been 48 “Real Buyers” in the last six months, and of those, 27 bought in the past 90 days.  If the seller knows that in the last three months there have been on average nine “Real Buyers” per month in the price range where his home is listed and that his home is competing with 200 other homes currently listed in the same price range, he now has a pretty good understanding of the reality of competitive supply and demand.

Pricing Help

This information is also useful when pricing a property.  If you have a home which might be reasonably listed at just above or just below a particular price, it makes sense to do a supply and demand comparison of the two price ranges.  For example, let’s assume we are in a market where the upper-tier starts as low as $700,000.  If you had a property which could reasonably be listed just below or just above $750,000, you might compare “Real Buyer” statistics for homes priced from $700,000 to just under $750,000 with properties in the $750,000 to just under $800,000 price band to determine which price band has the greatest demand relative to supply.  Understanding such market details is important when determining a pricing strategy for a property.

The number of “Real Buyers” is also a useful negotiating statistic for homebuyers.  It’s pretty powerful when you, as the buyer’s real estate professional, can present your offer to purchase and say, “As you probably know, in the last three months, there have only been 27 “Real Buyers.”  By the way, I’m defining a “Real Buyer” as someone who not only contracted to buy the home, but showed up at closing and walked away owning it.  Twenty seven “Real Buyers” in 90 days, that’s just nine “Real Buyers” per month!  This buyer is serious and qualified.  The price, terms, and conditions are good.  Only nine “Real Buyers” per month … you’ll want to give serious consideration to this offer.  Don’t let this buyer get away.”

In short, the number of “Real Buyers” by price range is an important statistic for you and for sellers and buyers to know.

Other Vital Statistics

There are other key statistics to gather.  These include days-on-market, the sales price as a percentage of list price, number of properties on the market (keep single family homes separate from condos/co-ops and town homes), number of pending sales (buyers who have contracted but not yet closed).  These statistics should not be market averages, but should be gathered for specific price ranges and specific time periods.  It is useful to look back for 12 or six months, but viewing the most recent three months and the past 30 days will give you a more current snapshot of the market.

Market knowledge is powerful and the number of “Real Buyers” is a simple but important statistic to know.