What Is Stale Real Estate and Why Is It Problematic?

The real estate market typically moves fast.

When it doesn't, it raises some eyebrows.

Stale real estate, or houses that don't sell quickly enough to meet expectations, can be problematic for both buyers and sellers.

But why is this the case and what can be done about it?

The Basics of Stale Real Estate

The general definition of steel real estate is consistent, but you might find different specific parameters among different real estate investors. Broadly speaking, stale real estate is any property listing that has been on the market for “too long.”

What exactly is too long? That's difficult to say – and real estate experts diverge on this topic. We'll explore this question in more detail in the next section.

For now, understand that stale real estate is typically not a good thing for buyers or sellers.

How Long Is Too Long?

So at what point does a real estate listing go from being reasonable to being stale?

The average home stays on the market for about 58 days, but this number is a bit misleading. Because this figure is an average, it takes into account exceptionally high outliers, which might push this numerical value higher than it should be to meet reasonable expectations. It also doesn't take into account seasonal differences, regional differences, or other subtleties that can play a role in determining whether or not a property listing is stale.

Generally, if a property sells in three weeks or less, it's considered perfectly reasonable. If a property has been on the market for less than a month, it's almost certainly not stale – although there may be some exceptions for particularly fast-moving markets.

On the other end of the spectrum, no real estate expert would disagree that a house that's been on the market for three months is stale. Even in relatively slow markets, a seller should be able to find a buyer in less than 90 days.

The gray area is in the middle. Some real estate investors start becoming suspicious of a property if it's been on the market for more than a month. Others might wait for that average 58-day (or two-month) mark before they label a property as stale.

Ultimately, this determination depends on too many factors for it to be universally and objectively defined. Instead, we can point to general indicators and state that a stale property listing is any listing that's been up for too long.

The Problems for Sellers

So why exactly is stale real estate problematic?

We'll start by looking at the problems associated with sellers of stale properties.

·         Buyer suspicion. First, when properties don't move quickly, there's probably a reason for it. It could be that the property is priced too high, or that there's something deeply wrong with it. In any case, buyers tend to be more suspicious and wary of properties that have been on the market for too long. If the house looks fine in photos but the listing has been up for several months, most buyers will second guess their first impressions and look for a newer property.

·         Timing issues. Many sellers have a diverse mix of motivations to sell their property quickly. They may be eager to move to a new area, they may need the money, or they may just want to be done with the ordeal as quickly as possible. In any case, if a listing becomes stale, it can interfere with your ideal timing.

·         Uncertainty. The longer a property remains on the market, the more uncertainties sellers have to deal with. Is this house ever going to sell? Is it going to require a massive price drop? Our buyers going to start low balling with their offers? Selling a house is stressful, and these questions in the midst of an ambiguous situation can make it even more stressful.

·         Downward pricing pressure. Stale real estate listings produce downward pricing pressure. If there's one variable that matters more than any other in the real estate game, it’s price. If your property is cheap enough, it's going to sell instantly. If your property is too expensive, it's never going to sell. Obviously, sellers are motivated to sell their properties for as much as is reasonable, but as the listing becomes stale, high prices become less and less plausible.

·         Loss of negotiating power. Similarly, sellers with stale real estate listings lose negotiating power. There are fewer buyers making offers, the buyers who are making offers are typically incredulous, and the offers themselves are usually for below listing price. You're still free to reject these offers or make counter offers, but with a property that's been on the market for this long, you simply don't have the standing to make demands.

·         Overall market dynamics. Overall, the U.S. housing market is in a good place. But there are some areas that function slower than others. If your listing is one of several stale listings in the area, it could be a sign that the entire market is grinding to a halt. If that's the case, you may encounter even more trouble trying to sell your property.

The Problems for Buyers

As we've already established, stale real estate listings are also problematic for buyers.

·         Pricing signals. All other factors being equal, a buyer might notice that a real estate listing is stale and conclude that the price must be too high. Even if the price is reasonable for a property like this in an area like this, the delayed sale could be an indication that something is wrong with the property or that the seller has somehow overpriced it anyway. Some buyers will immediately stop considering such a property, and others will use it as an excuse to put in a very low offer. Neither situation benefits the seller, and the buyer still takes on additional risks.

·         Seller signals. If buyers aren't concerned about the price, they might be concerned about what a stale listing could say about the seller. Assuming the market is operating under normal conditions, it's likely that the seller has received at least some offers in the first couple of months. If a seller is sitting on a relatively stale listing, it could be because they aren't reasonably considering reasonable offers, because they're negotiating too aggressively, or because they aren't opened offers below market price. Seeing this and not wanting to waste their time, some buyers are dissuaded from acting.

·         Market signals. In some cases, stale listings are indicative of broader market performance. If there are many stale property listings, it could be a sign that the market is slowing and that buyers have more negotiating power. This gives buyers much more flexibility and more options to consider, dissuading them from pursuing properties unless they're particularly compelling. And of course, if there is only one stale property listing in a market flush with opportunities, most buyers will simply turn their attention to newer listings.

How Sellers Can Mitigate Stale Real Estate Issues

What can sellers do to mitigate stale real estate issues?

·         Know your goals. Before anything else, take a moment to formalize your goals. Are you trying to sell your property as quickly as possible to avoid any potential stale real estate issues, or are you willing to take your time in pursuit of the highest possible sale price? Are you willing to make concessions in pursuit of these goals, and if so, to what extent are you willing to make those concessions? As a buyer, what compromises are you willing to make and what types of real estate are you going to proactively avoid?

·         Proactively strategize. Even in a buyer’s market, it’s possible to sell in a way that benefits you. However, you need to proactively strategize. What are you going to do if you aren't able to sell your property after a month of it being on the market? Are you willing to drop the price or change something about the property? Consider working with a real estate agent or another real estate investing professional to put together a more objective plan.

·         Be prepared to drop the price. One of the easiest solutions to the stale real estate listing problem from a seller’s perspective is to drop the price. If the price is low enough, you’ll have no trouble attracting buyers. The question is, how low are you willing to go? You’ll need to thoroughly consider the variables in play to maximize your asking price while simultaneously getting your property to move.

·         Carefully consider the bids you get. The longer your property stays on the market, the more seriously you should consider the bids you get. That doesn’t mean you have to accept those offers, but you should at least review them carefully and use them as indications of market preferences. If you’re consistently getting bids $40,000 under your asking price, it could mean you’ve overpriced the property. If you’re consistently getting offers contingent upon a list of specific repairs, consider making those repairs.

·         Collect feedback. If and when a buyer passes on your property after viewing it, ask them for feedback if they’re willing to give it. They might be willing to make suggestions about how you can improve the property listing, or at least give you peace of mind that the listing is sound. Together with other pieces of evidence, you should be able to reach a firmer understanding of how your property listing is functioning – and how you might be able to close a deal.

·         Make fixes and changes. As a seller with a stale real estate listing, there are probably meaningful improvements you can make to both the property and the listing itself. If there are significant structural or aesthetic issues with the property, consider spending the money to correct them. If you haven’t used tactics like staging or professional photography, now might be the time to integrate them. You can also adjust your listing to highlight different aspects or selling points of your property – or include more photos.

·         Delist and relist. Finally, as a measure of last resort, you can delist your property and relist it again later. If you do this, consider leaving the property off the market for long enough that people forget about it. Simply delisting and relisting the same day to refresh the “days on the market” counter won’t be sufficient to persuade buyers to move.

Stale real estate is difficult to wrestle with, both as a buyer and as a seller. But fortunately, there are many ways to prevent stale real estate listings and mitigate the risks associated with them.

Working closely with real estate agents is one of the best ways to navigate this difficult area of real estate investing strategy.

If you’re ready to get started with a free discovery call, contact us today!

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