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When is the Right Time to List?

There isn’t a right or wrong answer in determining when to start actively market a property that is either a major remodel or new construction. There are pros and cons and deciding which is the best course (or lesser of all evils) will depend on the individual situation. The assumption here is that you are not marketing yourself as a custom home builder (but you do, of course, have the permits, licenses and insurance for what you are undertaking). You’ve got a plan and a budget worked out. Some possible scenarios (there’s no way to predict the actual outcome and it is entirely possible that a buyer won’t appear so the subject becomes moot):

At first glance it seems logical to want a committed buyer on day 1. The buyer has a pretty good idea of what you’re doing by looking at the City approved permits. You’ve got a committed buyer and all is great. Finish the project, close on this one and move on. But your brand new and committed buyer wants you to move this wall a few inches this way, put an extra fixture here and paint the house in Easter egg pastel colors. If you agree to it, you’re back to the City to modify the permits; more time and money invested and you haven’t even started the project. They’re on the jobsite about once a week against your protests, slowing work down and costing time, but you don’t want to lose the buyer because the market is tough. Or maybe you get lucky and the buyer can see your wisdom and lets you do your thing until the day they get keys. If there’s no buyer, the Days on Market are racking up (but do you care?).

The walls are all in place and you’ve passed your rough-in inspections. Changing anything is going to be costly so the odds are the buyer isn’t going to make any substantial changes. The risk is that there is no finish work and since you are small operation it is hard to point the buyer to an example of your finish work- maybe you have a portfolio from a previous project. If you don’t have a way of articulating your vision you are going to have a hard time getting money up front for it. Nonetheless, you’ve got your budget and vision but the buyer wants to pick colors and surfaces. Do you give them an allowance? Do you have veto power? Nonrefundable option money? Their pink nursery is great for them but the next family’s teenage son doesn’t see the humor. In a perfect world both you and the buyer are thrilled because you were able to do some things that really made them feel like it was their home, not something that was done without any of their input. The best part is you hand the keys over to the buyer as the last subs walk out the door and you have no holding costs.

The house is done. Move-in, showcase ready. Staging it or not is an entirely different question. Sign goes in the yard as the last sub walks out the door. You don’t have to articulate what you’re doing because it is right there for the buyer to see. It sells itself (or doesn’t). The clock’s ticking. Your holding costs are at a maximum; everyone’s been paid off as their work is completed. The first buyer walks in and really likes it but decides that they’ve always dreamed of designing their own kitchen (where were these people two paragraphs ago?). A realistic closing date is 30 days after you accept and offer and market time takes three months. Four months of holding costs takes a chunk out of your profit. What if it takes longer? How many months were in the original budget? How long can you hold on until it becomes a desperate situation?

We’ve had our NW Hoyt project in RMLS since October 6th. While we haven’t had an offer, we’ve had some good showings. We’ll reach showroom condition later this week. I don’t think the fact that we have been listed for 60 days will or has hurt anything. It has been challenging taking pictures since each trade does their thing and the next moves in; rooms really are not finished for photos until the last trade is out. We waited until the exterior was finished. When we did our NE 13th project, we had an accepted offer before all the sheetrock was hung.

One Comment on “When is the Right Time to List?

  1. I have always shown and listed my properties when they were 90% complete. At least I would like to think they were 90% complete. They all sold, fortunately, within a day or two of listing and always at full price or better. I always tell my agent we need to price to move in 1 week. Of course, I have listed a few points below competition and have my agent give presentation a week before listing to about a dozen offices. I also, have my agent call every person she knows and describe the property. I make sure the property has a good floor plan and flow. The properties are styles that are in demand. I tend to buy properties at the edge or just inside desirable neighborhoods. The initial cost is less, and once they are remodeled they attract competitive prices.

    When I worked for a commercial real estate investor in Chicago, the senior partner always touted, it’s not what you pay, but it’s what you sell it for and how fast. The opportunity cost is the most expensive cost. Sometimes it is profitable to take a loss and move on to a winner. His thing was speed.

    Good luck with your project.

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