Last weekend we participated in the Park City Bike Swap, sponsored by Young Riders. My son and daughter had outgrown their 20 inch bikes long ago. I decided that they could “trade up” by selling their old bikes in the swap and buying new ones.
What does this have to do with real estate? Stay with me. A couple of days before the swap we took the twenty inch bikes to Jan’s to complete the paperwork. We paid over $250 for each bike when they were new. The Jan’s person suggested we price these bikes at $200 each. We took his advice since we have never sold used bikes before.
The swap was jammed Saturday morning. Within a few minutes each of my kids found a bike they wanted to buy. These larger bikes were priced at $200/each. Immediately I began to wonder if we priced the twenty inch bikes too high. I decided that I wanted to sell those small bikes. I did not want two old bikes and two new bikes in my garage.
The next morning, I checked the swap to see if our bikes had sold. They had great exposure, as there were hundreds of people at the swap on Saturday. But, those people chose other bikes, not ours. I cut the price on our bikes to $100/bike. Three hours later, the swap was over. There were several bikes that had not sold. Ours were gone. Someone had purchased them after we dropped the price.
I thought about all the similarities between the bike swap and my real estate business. Here are some lessons:
1. If you decide you are a seller, you need to price your property to sell.
2. All the exposure in the world is not going to encourage someone to over pay, especially when there are choices.
3. Buyers search for the best value for their budget. We found the best bikes available for $200. We passed on bikes priced at $200 that were lower quality or in poor condition compared to the bikes that we purchased. Two houses may be priced the same, but the nicer of the two will sell first.
4. We know we over priced the bikes we wanted to sell because no one bought them. We did not place blame on Jan’s or Young Riders. The market told us the bikes were overpriced. Because we wanted to sell the bikes and the swap was open for only 3 more hours, we slashed the price.
5. If we had priced the bikes right to begin with, we may have been able to sell them for $150 each. We had to slash the price because we missed our best selling opportunity. This is like the owner who slashes the price of their resort property after ski season ends.
6. If you are trading up you will probably be more in tune with the market by being a buyer and a seller at the same time.