Whether in the stock market, commodities market, currency market, or real estate, chasing a declining market is a bad idea financially and psychologically. If you’ve ever sold a house using the old-fashioned real estate business model, you’re probably quite aware of what we’re talking about. You and the real estate agent (mostly the agent) set a price for your house. It doesn’t sell immediately, though it might be attracting a few lowball bids. Eventually you bite the bullet and lower the price because the market seems determined to not support the asking price.
But you’re still getting lowball offers – maybe even lower now because they seem determined to undermine your price by a certain percentage no matter how low you go. So you cut the price again. And again. And maybe even again. This nerve-wracking process can easily play out over the course of several months or maybe even a year, all the while your mental toughness is taking a beating.
This is what we call chasing a declining market. It seems that no matter how low you go the offers drop in equal measure. The market price is in free fall and you’re trying to catch it. This scenario is but one of the many reasons we call the traditional real estate market dysfunctional. It’s like a silly puppy chasing its tail and doomed to miss it by ‘that’ much every single time around. Physics are working against that hapless canine, and the physics of markets work against you if you fall prey to chasing a declining market.
At Open Door Auctions, we decided to put a stop to this foolishness. Here’s how we avoid it. Our sales process takes only two short weeks. We set an initial listing price based on what you want. If we collect any offers at that level, great. If not, the price is automatically reduced at regular intervals over the next few days to allow interested bidders time to act. When the day of the auction rolls around, buyers gather at the property site to tour the house and decide what they’re willing to spend on it. After all the offers are in, we hand them to you for the final decision. If you see one you like, take it. If not, reject them all. While you might not agree with the consensus opinion of what bidders have offered, you must accept the fact that the free market has spoken and decided that’s what it thinks your house is worth.
This is exactly the price that your old-fashioned real estate agent will arrive at. Problem is, it might take him a year or longer to get there. In the mean time you’re twiddling your thumbs.
The Open Door Auctions Team
Flickr / sanbeiji