The most critical aspect of selling a luxury home in a market like Aspen’s is listing the property at the correct market price.
Listing a property too high can result in a greater loss of value than listing it too low. Properties that are perceived as overpriced may not get shown to potential buyers because brokers with valuable clients may not want to waste time and effort.
Studies have shown that 60 percent of potential buyers will look at properties that are perceived to be priced at market, while only 10 percent of potential buyers will look at properties perceived as overpriced by as little as 15 percent. Many sellers often think they will always have the opportunity to accept a lower offer, but chances are offers won’t be made if buyers think the property is unrealistically priced.
Properties that are overpriced and sit on the market for extended periods may become known as “problem properties” and be more difficult to sell.
Studies from the National Association of Realtors show that when selling luxury homes, the first 30 days are critical. Homes in the highest price bracket spend a median 134 days on the market. Homes that take longer than 180 days to sell spend an average of 774 days on the market and obtain about 77 percent of original asking price, while homes that were sold in less than 180 days sold on average in 80 days and at 93 percent of initial asking price.
There may be many reasons why a property doesn’t sell, but the most common is that a home is overpriced.
Currently in Aspen, there are 288 residential properties listed for sale. Of this number, 118 are priced at values exceeding $2,000 per square foot, yet over the past three years (2016, 2017 and 2018), only 27 residential properties have sold on average each year at prices exceeding $2,000 per square foot.
Although the price per square foot ranges are lower in Snowmass, the story is very similar. The number of properties listed for sale in the upper Snowmass price range of $1,000 or more per square foot far exceeds the number of sales that have taken place in this price category over the past three years by over seven to one.
Of the 118 properties currently on the Aspen market priced in excess of $2,000 per square foot, 32 of them are priced at over $3,000 per square foot. At this time, only 11 of those 118 properties are currently under contract, all of which are priced under $3,000 per square foot. So what does this mean? The market seems to be saying that buyers exist for properties priced under $2,000 per square foot, but when properties are priced over $2,000 per square, the market thins quickly.
For properties priced over $3,000 per square foot, the market is virtually non-existent. Historically it seems that except for an occasional fluke sale, the market has never really existed in Aspen for properties priced over $3,000 per square foot. Sellers trying to sell Aspen homes in the current market need to be aware that few if any buyers exist at price points over $3,000 per square foot, and only a handful exists at prices over $2,000 per square foot.
When you really want to sell a home in Aspen, it’s best to price the property at the market price with modest adjustments for whether market values are trending up or down. Not doing so can lead to a number of risks. If the property stays on the market for over six months, it’s generally because the price is too high. In this case, sellers run several risks, including greater competition from newer, more desirable homes, a potential recession, where the opportunity is lost to sell at the top of the market, additional expenses of maintaining and carrying the property and the lost opportunity to reinvest in proceeds from a sale into other investments.
Lori Small is a luxury real estate broker associate with Coldwell Banker Mason Morse; and William Small, CCIM is the Founder and CEO of Zenith Realty Advisors, LLC, a commercial-investment real estate advisory and investment firm. Lori can be reached at Lori@LoriSmall.com and William can be reached at William.Small@ZenithInvestment.com