Virtual Staging vs. Physical Staging: A Designer's Cost-Per-Sale Breakdown

One of the hot topics in real estate right now is home staging. Should a seller invest in virtual home staging or go with a physical home stager? On the surface it seems that virtual home staging is less expensive than hiring a home stager. However, there is no substitute for seeing it in person. While virtual home staging is useful for empty homes, beautifully decorated homes can use virtual home staging to justify a higher asking price.

The wrong number for the industry is cost per listing. The cost per closed sale is an entirely different figure.

Why Cost Per Listing Misleads You

The cost to virtually stage a room is approximately $75 to $200 per room depending on inventory and delivery time. Physical home staging for a moderate size home would cost anywhere from $1,500 to $5,000 for the first month and then $500 to $1,500 per month for subsequent months until a sale is achieved. However, by the time you spend all that money on home staging and have the home listed in the MLS, virtual home staging would have been a better investment.

However, that comparison leaves out one very important factor, time on market.

Some actual numbers. A house was physically staged, and in 18 days sold for asking price. Virtually staged in an identical home in the same neighborhood in the same time frame sold in 34 days. Some might say this is a $200 difference. Not when you figure in the carrying costs of holding a house for 16 days (including an additional monthly mortgage payment) plus the potential price drop had it sat on the market longer. In this case physical staging paid for itself three times over. And there was still all that money saved in not having to move all those items around.

Many people don't know that the National Association of Realtors tracks the amount of time homes average before they are sold. What's even more interesting is that homes that have been staged have averaged to be on the market for less time than those that haven't been staged or those that were virtually staged. These numbers speak for themselves!

When Virtual Staging Actually Wins the Math

Most would agree that Virtual Staging is NOT a less expensive alternative to traditional staging. In fact, for the right property type and in the correct market, it is the higher-return investment. So, the big question becomes: What type of listing is the right fit for Virtual Staging?

Vacant investor properties and flips. Physical staging of a home listed as "sellers ready" can be very misleading when most buyers of investment and flip properties are going to tear it down anyway in their minds before they even make an offer on the existing structure. Virtual staging a vacant home in a few neutral photos can give buyers a sense of the home's actual size and potential without deceiving the seller into paying a "sellers ready" premium into the listing price. The per sale cost of virtual staging is very low in these types of listings.

Home buyers searching outside of the local area. As home buyers become more tech savvy, many are using the internet to search for their next home, even conducting the entire search remotely and visiting the homes they like first. The fact is, more home buyers than ever are making their list of potential homes online, and a home presented to online home buyers in a high quality manner is more likely to make the list than a competitor's vacant home. Whether it is a single virtual tour or a full online listing presentation with virtually staged views of a home, high quality virtual home staging options are worth exploring.

Short-timeline listings: This is where physical staging can fall short because it includes sourcing, scheduling and installation of furniture and/or interior design elements and therefore ALWAYS requires some lead time. However, in today's fast-paced market, listings need to go live in days. Virtual staging can help meet these high-demand deadlines without the high cost of a service that cannot deliver a staging installation on a 48-hour basis.

When Physical Staging Earns Its Cost Back

However, it is also important to know in what scenarios Physical Staging might be the best route in terms of cost per sale over Virtually Staging a space.

Luxury and high-end properties. As a luxury home sells for a higher price point, the importance of physical home staging increases. Luxury home buyers experience the home prior to walking through the doors. An empty or sparse interior of a $2.8 million home shown virtually in listing photos can be a harsh reality to an empty space that reduces a seller's negotiating position. When working with high-end buyers, they make an emotional decision and then rationalize the decision after the fact. A beautifully staged home evokes emotions and an empty space doesn't.

Unusual or difficult floor plans. Homes with unusual features such as unusual floor plans, very low ceilings, difficult traffic flow or lack of natural light require the presence of furniture in a home in order to understand how the home would actually function. A virtually staged home can be completely filled up on the computer but buyers will wonder if a home actually feels functional when they are inside looking at the space.

In-Person Showing Volume: High in-person showing volume areas where home buyers may view 8-10 homes in one day. In these markets, a physically staged home makes sense, and companies like Earnest Homes approach this by helping sellers weigh the true cost of staging against holding time before committing to a method. It gives other sellers the feeling that someone has put in some work and consideration into getting their home ready to sell. Even though online listings show virtually staged homes, there is a perceived value to having a home ready for in-person viewings. Sellers can expect a premium sale price as a result.

The Hybrid Model Designers Are Using Now

Most skilled users don't default to one method over the other, instead they become sufficiently skilled at using both to mix and match them in various ways.

A typical hybrid framework works like this:

·        Use Virtual Staging for listing photography, exterior and landscape views and listing description.

·        Focus design elements on key interior spaces such as the Living Room, Primary Bedroom and Kitchen, which are relatively straightforward to stage virtually.

·        Virtually furnish the property to show potential layouts and designs before buyers visit in person, including options with different furniture arrangements and colour palettes.

How to Present This to Clients

When working with sellers on staging their home, the first question is often to reveal their full repair budget and ask for an opinion on how to spend it. The answer is always: let's start there, but don't think about it as "what do you want to spend?" but more "what does the house need to sell at the right number?" and then "what is the least expensive way to get there?"

Approaching the client consultation with a CPS (Cost Per Sale) approach vs. a list of CPL (Cost Per List) prices is an exciting and profitable way to present your services to potential clients. Clients realize that their physical home staging fee covers their cost to list the home an additional month or two on the market, resulting in a higher sale price. They are amazed that virtual home staging is no longer the less expensive option and are pleased to see the profile of the prospective buyer.

A thorough client consultation should include:

·        Comparable sales in the subject market to help evaluate the asking price of the listing.

·        An assessment of whether the buyer is likely to be a local buyer or buyer looking to relocate into the area.

·        An assessment of the in-person complexity of the single family home design, some layouts look great online but can have awkward features in person, which a seller would do well to be aware of.

·        Recommendations based on potential outcomes, not based on personal preference.

The presentation quality of a home, how the home looks and feels to potential buyers, how it has been prepared for showings, and how it compares to similar homes is the number one factor which affects the decision-making time of buyers, and ultimately the number of offers received per showing, according to research from Harvard's Joint Center for Housing Studies. The presentation of a home, or home staging, can be an effective investment for a home seller, whether that seller chooses to hire a professional home stager or tackle the project themselves.

The Honest Bottom Line

The approach to staging is determined by the online real estate experience buyers have, their timeframe to purchase, and whether they are an investor or end user. Virtual staging is effective for buyers who start and end their search online. Physical staging is effective for buyers where the emotional physical experience of a staged space impacts their offer price. Whether a buyer is looking to move into a property or use it as an investment, they have certain expectations of how a home will look and feel once they walk through the doors.

The better method is usually the one that closes the fastest at the highest sale price for the specific property and buyer. Work backwards to find the cost of the deal.