‘Let’s test the market!’ (a bad idea)
April 24, 2009
When the average seller sits down to interview real estate agents, it’s easy to get caught up in the excitement over the price. More money means more opportunities for the homeowner. Maybe it means the seller can afford to buy a more expensive home, help pay for a child’s education, or take a vacation. Unfortunately, sellers often choose the listing agent who suggests the highest list price, which is the worst mistake a seller can make. The truth is, it doesn’t really matter how much money you think your home is worth. Nor does it matter what your agent thinks, or ten other agents just like her. The person whose opinion matters is the buyer who makes an offer. Pricing homes involves comparing similar properties, making adjustments for the differences among them, tracking market movements and taking stock of present inventory, all in an attempt to come up with a range of value, or an educated opinion. This method is the same way an appraiser evaluates a home. And now two appraisals are ever exactly the same; however, they are generally close to each other. In other words, there is no hard and fast price tag to slap on your home. It’s only an educated guess and the market will dictate the price. Homes sell at a price a buyer is willing to pay and a seller is willing to accept. If a home is priced too low, or below the competition, the seller should receive multiple offers to drive up the price to market value. So there is little danger in pricing a home too low. The danger lies in pricing it too high and selecting your agent solely on opinion of value.
One seller of a home in Florida never even interviewed her real estate agents. She plucked the first one off the Internet because, “He looked like such a nice guy.” He lived in another city and priced her home at $1.3 million. After 90 days, the listing expired. The next agent, also from another town, listed the home at $1.1 million. Months passed. Eventually the price dropped to just under $900,000. By the time the last agent was hired to list this home, the seller had grown weary and exhausted. It was now 12 months later. Together, the seller and her agent priced the home at $695,000. It immediately sold for cash. The sad part is the comparable sales in the neighborhood justified a price of $835,000, but the home had been on the market for too long at the wrong price, and now the market had softened.
The question is, how much money have the expired listings cost the sellers? The financial loss often exceeds the extra mortgage payments paid, and goes beyond the uncompensated hassle factor of trying to keep a home spotless during showings. It affects the amount that a buyer ultimately chooses to pay because it’s not a fresh listing anymore. It’s now stale, dated, a market-worn home that was overpriced for too long. Further, it affects future sales in the neighborhood and serves to drive down market values even further because of slow absorption. Banks don’t like areas where there are lots of old listings – it indicates declining values.
Beware the temptation to overprice your listing. If it’s been on the market for more than 30 days, it’s time to reevaluate and determine a price that will sell… or withdraw from the market. Everybody will be better off in the end.
“Welcome Home” is compiled using various industry sources by TheTeam@Elich.com. Butch Elich has been helping people with their real estate needs in Summit County for over 20 years. His team includes Associate Broker, Paula Parker, a Summit resident for 23 years. Find them on the web at http://www.elich.com, or at RE/MAX Properties of the Summit, 305 Main St., Frisco.