We can’t help but notice that the home values are rising. We read the papers, see the news on T.V. and hear the radio announcers as we drive to work…all taking about the changes in the local market!
So, when a real estate agent shares the great news to a seller about their home values, I see more often than not…the seller demanding still another (higher) dollar amount considerably higher than what the agent and the comparable sales justified. Many agents express the same frustration time and time again, stating “It was the seller’s price!” as if to avoid embarrassment.
In some rare cases, ‘over-pricing’ a home can be explained because of simply no justifiable comparable sales, although many times, this ‘Fantasy Land; pricing, stalls sales, confuses buyers and in the end…can cost you (the seller) time and money.
It is more interesting how some sellers will base their prices on other similar active listings (properties that have not even sold yet) where as the true value is only from recent sales if they are comparable in size, condition and location.
The ‘Fantasy Land’ seller influences other sellers and it becomes contagious in the marketplace. On the slim chance that a buyer chooses to perform on an overpriced listing, (and financing is needed to complete the sale…) the appraiser is usually the one to blame when value is not found. Appraisers must justify several similar comparable sales in their report and without justification of value, the appraiser must share the facts. Local agents are seeing a high number of properties coming ‘back on the market’, and this is the most common reason.
The ‘Fantasy Land’ seller is the seller who dreams of big numbers. Possibly has a high mortgage or possibly plans on moving up to a larger home and simply needs more money. I guess we can’t blame them from trying, as everyone wants more these days. The fact is, that if every seller had this notion, soon the tables would shift and buyers would be able to sway the market and offer ‘below asking prices’ on properties…commonly known as a ‘buyers market. With a shortage of listings and more buyers than sellers, this creates a ‘sellers market’.
The key to effective pricing Scott Cary says, “..is to first study comparable sales, second, evaluate the inventory levels with area sales records. Finally, come up with the highest and best price the home will bring once the home is exposed effectively on the open market in a reasonable period of time.”
The reality is that a home is only worth what a buyer is willing to pay and a seller is willing to accept. If we can’t agree on the ‘fair’ purchase price…the property sits on the market and possibly never sells. This strategy often making other properties appear to be a better bargain, as today’s home shoppers are driven to a good or fair value.
It’s important for the seller to review the data the real estate agent provides in the market evaluation in order to make sense of the current market conditions.
Some sellers may choose to even pay an appraiser for a complete evaluation, although it’s important to understand that the appraised value is also subjective and generally not transferable to the future buyer’s lender. The lesson here is to price your property correctly in the beginning. In most cases the first offer is usually the best offer!
Did your agent BUY your listing?
It’s shameful to think that this happens, although in this changing real estate market…it happens more often than you may think. It’s probably more evident in the ‘low inventory’ markets, where we see more and more examples of overpriced properties on the market.
In the Greater Central Valley, in Northern California, Scott Cary shared an example of one particular property owner who chose one agent over another because of the 20% increase in a suggested list price. We all know the outcome of this story…The property did not sell and they seller lost out on other opportunities!
The huge disadvantage to a seller when they fall in love with the ‘Fantasy Land’ number…is they lose time & money! – When the agent misrepresents property values it hurts more than just the seller! Obviously, both the seller and the agent are to blame, where the sellers “Fantasy Land’ dream of more money never became reality…the agents desperate call for acceptance in getting a new listing falls short in the end and they only managed to put up a sign with no results.
The reality is this type of agent hopes that the seller will either become more motivated…over time, (possibly believing the previous agents lower number as time goes on…) at which time the agent will push for a drastic price reduction, or the seller will wait – hoping for the right ‘Fantasy Land’ buyer…a real miracle to say the least.
In the end, the seller soon realizes this was the wrong approach…the listing expires only after the agent spent for to much time and money trying to promote an over-priced listing-just to get no results.
No surprise to the other agents in the marketplace though, as most agents wait and watch as the second agent comes along and meets a more educated seller (this time) who now re-listed the home with an agent and priced it right!
So the obvious advice from a real estate blogger who has seen most everything in the crazy, unpredictable real estate market…do you homework and study the comparable sales in your area so you can avoid the frustrations of being an over-priced listing.