Saturday morning my phone rang, “Hey Dar, did you ever stage Joe Johnson’s house?” It’s one of my clients. He’s an investment broker. After much initial deliberation and skepticism, he asked us to stage his house and it sold in one day for over asking. Now he advises numerous coworkers and clients to stage. “No,” I respond to him, “He brought us in for a consult but decided to just go on the market as is.” He sighed, “Well it’s been months and he’s still sitting. That’s too bad. Hey, can you come pick colors for my new house.”
Many of our clients are in finance. It’s no coincidence. They have witnessed first-hand the value of staging. They understand that the amount a seller chooses to invest in the sale of their home can reap a steep return on investment. A good stager is similar to a good investment broker and can advise clients of smart, cost-effective options when selling a home. For most people their home is their largest investment; walking away from the closing table with as much profit in hand is critical.
The average investment for staging an occupied home is $2500-$3000, depending on the square footage and number of targeted rooms. The average staging price for a vacant home is 1-1.5% of list price. Investing 1-1.5% in the sale may seem steep for some sellers, but it is significantly less than the average price reduction in Fairfield County, CT.
Within 76 days or fewer on the market, 42% of homes in Fairfield County will take a 5-8% price reduction, according to the Trulia Price Reduction Map. Homes remaining on the market past the first price reduction have a 42% probability of a second reduction. Homes spend an average of 146 days on the market. The average days on the market for a staged home is 45 days or less. Staging helps to avoid the 5%-16% reduction that many homes will see as they sit on the market.
Still, many buyers perceive staging as an expense rather than an investment. In an attempt to illustrate this concept, let me throw out a notoriously dreaded high school word problem: If a seller of a $1,000,000 home was asked to sign one of two checks to jumpstart the sale of their home: one for a $50,000 price reduction, or the other for $10,000 of home staging, and both yielded the result of a sale, which action would have produced the best profit? There’s no fancy Algebra needed here, however, it is all too often that the seller takes the $50,000 loss because it is intangible, but the $10,000 staging investment involved “spending” tangible dollars. They also fail to realize that that $10,000 improves the perceived value of the entire $1,000,000 worth of home. For every dollar spent on staging, they would’ve influenced $100 worth of value in the home. 100:1 is a nice value-impact ratio.
I asked another former client to run statistics for me. He’s a portfolio manager and partner in an investment firm. He’s been in the investment advisory business for over 20 years. After we painted and staged his home, an appraiser came through and told him the value of his home was $50,000 higher than expected. His evaluation: “Let’s imagine a seller has their house on the market for $1,000,000 in CT. The current real state market in Fairfield County has houses selling at approximately 5% below asking price but factoring in numerous price reductions, sellers can expect a range of 10-15% less than the ‘original’ asking price. The average time a house is on the market before a sale is 4.7 months in CT currently. So that seller would be looking at selling their house for $100,000 - $150,000 less than they think it is worth. Now that may or may not be a good investment decision based on their original investment in the house, but for the moment, that is besides the point. Now your data shows the average cost of staging is around $10,000 and the average time a house sells after a stage is 45 days or less. The average sale is around 5% less than asking. For a $1,000,000 house the difference is $50,000 - $150,000 that would have been left on the table without the stage. Let's just take the average of $100,000 on a $10,000 investment. THAT IS 900% RETURN ON INVESTMENT IN 45 DAYS!!! EVEN IF IT TOOK 90 DAYS TO SELL, AVOIDING THE SECOND PRICE REDUCTION…THERE IS NOT AN INVESTMENT ON WALL STREET THAT HAS THAT KIND OF ROI.”
This is not to say that some homes don’t warrant a price reduction. There is a very simple formula to a successful sale. Price, location, market, and condition must all be perfectly aligned to stand out among the competition. Staging only address the visual condition of a home and sometimes helps buyers overlook other objections. Still, there are sometimes underlying objections that even staging cannot overcome, like structural issues, railroad tracks running through the yard, or overpricing. A home that is overpriced won’t sell, even with the best staging. I commonly hear clients say “I need to get ________ dollars for my home because I have to pay for my kids college” or some other personal reason. These clients often have the most difficult sale as they don’t understand personal value versus market value. Market value is based upon actual, factual supported statistics of sold homes. It’s qualitative. Imagine someone trying to sell you a used car for $5000 more than it’s market value simply because the seller feels it has more value than it’s appraisal and he needs to put $5000 down on their new BMW. Buyers are savvy shoppers, particularly with information so readily available today on the internet. They do their homework and they simply won’t pay any more than what they feel a house is worth. Staging can help increase the “perceived” value of a home and reduce the days on the market but it is only one part of the equation. In my experience, homes that are staged well AND priced to market value, have the most success and see the greatest return on investment.
When I stopped at my client’s house to pick colors, I asked what he felt his return on invest was for staging. He said, “Let me put it this way. I listed my house in the fall market for $750,000. I barely had any showings. At that point I had dropped the price to $735,000 with still no interest, so we pulled it off the market in December and you came in to paint and stage. We re-listed at $729,000. In one day I had multiple offers and settled at my original list price of $750,000. I was prepared to accept about $720,000 for the house. I invested less than $10,000. Based on what I expected it to sell for, in one day I would say my overall return was over $20,000, let alone the relief of carrying multiple mortgages at the time!”
This of course is a best case scenario. Like any investment, there are never guarantees, but statistically staging provides better odds for a positive ROI while multiple price reductions from sitting on the market will only ever be a loss. Sellers don’t “need” to stage a home. It’s a risk management option. If you had $500,000 in cash and assets to invest, would you say you can invest it better than a good financial advisor? Smart financial folks aim toward stock “performance”. Combining a good Realtor with a good professional stager and your own open mindedness will yield the best “performance” of your home in today’s savvy marketplace.