Home Selling

Selling in Greater Seattle's Cooling Market

Most stock brokers offer two kind of stock trades: Market trades and Limit trades. Market trades usually get executed within seconds, while a Limit trade may never get executed. A market trade means that you want to purchase, for example, 100 shares of Amazon at the market price. A Limit trade means that you want to purchase 100 shares of Amazon at a certain price, let’s say $X each. Often, an investor is looking to buy the stock at a slight discount to the current market price in a Limit trade, because otherwise the investor could just purchase it at the market price within seconds. What is the tradeoff? The tradeoff is that the order may never get executed and minutes later the market price of Amazon has increased so much that even a discount to the market price would be more expensive than the purchase price that investor could have gotten earlier in a market trade. If an investor is looking to purchase Amazon stock, the investor is betting that Amazon stock will appreciate. If that is the belief that investor has, optimizing on the purchase price is like optimizing for pennies when the bigger bet is to pocket Amazon stock appreciation. Now here is the rub. A limit trade does not actually give you a price better than market. The limit order at $X gets executed when the market price falls to $X, counter to the thesis the investor had in the first place. In fact, it is extremely unlikely that a falling Amazon stock would fall until $X exactly, then your trade gets executed and then the price start appreciating again. No, usually, if the market price has fallen to $X, it is likely that it might fall a bit more. So if you were to dictate your own price, you are betting against your own thesis.

Now what does it have to do with housing? Housing is the same, but the timing is different: how people react to the stock market in seconds is how people react to the real estate market in a month. In a hot market, we told our buyers that getting a home even at an inflated price is likely to be a better win than losing the home altogether. In a hot market, buyers should try to win the home because they can take advantage of the appreciation. In fact, we told buyers if you had won the home you wanted to buy a year earlier when you started your home search, you would have paid a lower price than what you are paying now, got a better home, enjoyed it a year earlier, gotten a better mortgage rate, and saved on rent too.

Now the table has turned. As per Seattle Times, just in the last few months home prices in Seattle have fallen $27,000, or close to 4%. If you are seller, you may be better off selling at the market price today than selling at a limit price in a few months, or even a year, unless of course you want to keep your home for an extended period of time. If that were the case, you would not have listed the home for sale. As we just said, a real estate month is a stock market second, so if you take the entire second or two - as other home sellers are taking - then you have no advantage over them. Selling is likely going to become much harder. There is significantly more supply in the market now. Our escrow partners inform us that only 70% of greater Seattle homes are selling.

Faira is in a unique position to observe the market, since we do business in urban areas and as well as the countryside, so we can compare. Other major companies, such as Redfin, run its business mostly in urban areas. We see that the pace of home selling has decreased only in urban areas, while homes are selling well in the countryside. It gives a hint that the prices in urban areas overshot and may be correcting a bit before stabilizing. Indeed, when sellers decrease their prices, they have been selling homes by beating other sellers who are late to read the market.

We also get to see what happens to the sellers who cancel their Faira listing contract and go to traditional brokers. These sellers not only have to pay a hefty commission to traditional brokers, but have to drastically cut the price. Given that the market is cooling off, Faira's technology is becoming ever more important to home sales. It prevents a clever buyer from sniping a home with a low ball offer and enables a savvy buyer to save up to 5.5% on the purchase without costing the seller. 

Our recommendation is that if you have no offers on your home then you should decrease the price substantially. Note that on Faira, savvy buyers have a 3% advantage, since they can save on buyer’s agent commission. So if your home is not getting any interest, even from savvy buyers, it means your home is at least 3% or more overpriced in this market. The longer you wait at your Limit price the more you may be losing. On an average in the last few months, as per Seattle Times, sellers have lost 1% monthly. It is not surprising, since in the past sellers were gaining 1% monthly. In fact, recently a seller sold a home at a lower price than the offers he declined a couple of months back when he originally listed. Trying to get that extra dollar beyond what the market wanted to offer cost the seller much more.

When you have chosen Faira to sell, you have several advantages over all other sellers. Not only a 3% discount for unrepresented buyers, but you can even pass on your listing agent savings to buyers to price your home even more competitively and still net the same amount as a seller with a similar home using a 6% agent. Just like in the stock market, optimizing the price is less important than taking the position you desire. So if you list a home, clearly your desired position is to sell, so you must listen to the market and price your home to attract today’s buyers.


Kamal Jain

Written by Kamal Jain

Kamal is the CEO and Co-Founder of A technologist and economist, Kamal specializes in designing business models for the internet, which he did for both Microsoft and eBay. Kamal now wants to align the interests of home buyers and home sellers with Faira.


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