to Portland, Oregon real estate agents about working with appraisers. Last week during a class, an agent brought up an interesting discussion point. She mentioned that some Portland area agents intentionally price properties low in an attempt to start a
bidding war and subsequently sell the property for more than if it had been marketed for a longer period of time.
I have heard of this pricing strategy as well, but studies that I have read lead me to believe that a longer market time will typically lead to exposure to more buyers
and a greater likelihood that a higher sales price can be obtained. In discussing this with the class, the consensus is that benefit from bidding would vary depending on the current market conditions. I decided to gather some data and see if there is any
evidence that a quick sale strategy actually results in a higher price in today’s Portland area market.
To test this hypothesis, I chose Happy Valley, which is a suburban Portland, Oregon market with large samples of homes very similar in size, age, and quality. I selected
to study only sales occurring in the past two years of homes built from years 2000 and 2010, with between 5,000 and 14,999 square feet of land, and having from 2,500 to 3,500 square feet of living space. During this time, Happy Valley inventory has remained
quite low and steady between 2.7 months and 5.2 months, the median days on market have remained stable at under three months, and prices have steadily risen over the two-year period. The following chart shows the price trend for Happy Valley properties selling
in less than one month in relation to days on market (DOM).
The results indicate that properties selling within the first three days (an interval that suggests multiple offers or low price) do not tend to sell at significantly
higher or lower prices than other properties selling in less than thirty days. I expected that properties trading in the first three days would have sold for less than average. The data suggest that the quick sale marketing strategy neither helps nor hurts
the eventual sales price of properties in this sample.
It would be interesting to obtain data on only properties that resulted in bidding wars. Unfortunately, Portland’s RMLS does not have a search function based on the number
of offers. In sample above, I only identified two sales that sold for significantly more than the list price and in fewer than three days. One sold for more than average and the other sold for less than average.
Additional research would be interesting in a community with sufficient quantities of similar properties and more bidding wars, similar to those we are seeing in the older
and more architecturally diverse neighborhoods close to Portland’s City Center. However, this data is also interesting when properties taking up to 150 days to sell are included in the sample.
The above chart suggests that sales price could trend downward when the market time for a particular property in the sample extends beyond 30 days. However, it is important
to recognize that this is a small sample and the data could be skewed by properties with less attractive floor plans or other less desirable features (like busy roads), which typically result in longer sales times and lower sales. More research is necessary.
Wouldn’t it be nice to have access to Fannie Mae’s CU
data for this type of research?
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
On a side note, I was asked back on Portland’s Real Estate Today show on April 10th. Here is the recording for those of you who missed it. Listen while you
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