Emotional Sellers May Unknowlingly Contribute to A Loss in House Values
August 23rd, 2008 Categories: Real Estate News
Today, many sellers are unknowingly contributing to the overall losses in home values. This happens when sellers hold on to an “emotional” asking price - which is often is unrealistically high. Current market buyers have done their homework and know when to take action on a property that is priced right.
When sellers are unsuccessful in getting their house sold because of price, they are contributing to the continuation of a downward price spiral.
Here’s why: Real estate is a commodity in the marketplace. When there is an oversupply of inventory, prices go down. When sellers price their house over what knowledgeable buyers know is the reasonable current market price, the property stays on the market, continuing the oversupply.
In today’s market, sellers who understand that real estate is a commodity have priced correctly and are seeing the result as closed sales in days/weeks while those priced above the market, linger for months and some for years.
If more sellers recognized the economic basics of supply vs. demand and positioned their properties at prices to motivate the pool of buyers to action, the supply of houses on the market would decrease more rapidly - creating a lower supply of inventory that will eventually result in price increases.
Smart buyers are looking for properties positioned correctly and are taking action. Smart sellers will enlist the services of an agent who understands how the market is working today. This helps the seller to know when to accept a reasonable offer even it is not what they hoped for originally, e.g., the “emotional price”.
To see what is happening in a wide range of Virginia and Maryland counties, check out the current activity graphs included below:
If you are a potential seller, buyer or just curious, call me at 703.927.4554 and let’s talk about what’s working in the market in your area.
Michael
Great post Michael,
I was just discussing that phenomenon today with a Buyer. We made what we considered an appropriate offer on a home yesterday. It was the lowest price in the neighborhood. Only one home has sold this year in this popular S/D because ALL of the current active, and recent expired or withdrawn listings are still considerably overpriced.
The Seller was insulted by our offer and refused to even counter. I asked the agent to show me comps she used to set her price in case we missed something and all she could reply with was there are minimal comps for 2008 and that 2007 comps were better. 2007 comps have NOTHING to do with our current market value except to maybe set a CEILING for a current asking price. Her next illogical statement was that since she originally listed at $300,000 and now reduced to $260,000 that we should know this is a great deal and buy it. The only problem with that is that $300,000 was NEVER a realistic price for a slab home the size of this one in the neighborhood even in a better market. That is why there are no recent sales in the neighborhood.
On the flip side, a closely related neighborhood has had very good activity over the summer season. Why? Because those Sellers saw that they were overpriced and started adjusting to current market value. Suddenly they started selling. Some even got multiple offers because all the Buyers are sitting around just waiting for someone to price a house right and then everyone sees it is clearly price for the market and they all jump on it at once.
Sellers have got to understand that correct pricing, even if lower than their expectations, will sell a home that is in proper condition for that price. Everything else will continue to bloat our market with unsellable homes. Keep spreading the word!!
Deryk
Deryk,
Thanks for offering a great example of “emotional pricing”. To not even consider a counter offer is sheer arrogance - what ever happened to the concept of driving a hard bargin?
I think one of THE most important services a real estate agent can offer their clients today is an informed assessment of what the market IS - not what the buyer wants it to be.
Stop by again - I like the way you think!
Michael
Hey Michael, Great Post! It is so true that if you take out the emotion and price your home to sell, you will not only get the sale faster, but you will save money in the long run. Everyday that you are in a home costs you money. Those first few weeks are key to getting the right buyer into that home. If they see it is “overpriced” they will just move on.
The New York Time said it again today - it’s a buyers market. It’s curious, everyone understood the rules when it was seller’s market - how hard is it to understand that the rules have changed? You are absolutely right about those first few weeks - they are crucial and set the tone for everything that follows.
Michael
Michael,
I had a post about these listings a while back - I didn’t call them emotional sellers, rather “I’ll sell if…” http://ctrealestateunleashed.com/2008/03/25/ill-sell-if-listings-are-clogging-up-the-real-estate-market/
I’ll sell if…the price is X or higher, I close 6 months from now, the buyer puts down 20%, etc. Often these conditions are based on some misperception (I blame family members and neighbors). Why not hire one of them to sell your home???
Jessica,
Isn’t it fun when everyone wants to get in on the act? Sellers need to take the market seriously and they need to take buyers seriously. “If” does not sell a house - but good value and a good price does.
Thanks for stopping by and sharing your version of what we are all struggling with.
Michael
[…] your tuning in to see the rest of this story, as it unfolds over time. We liked the comments on Michael Bergin’s Post better than we liked the post itself. My favorite line in the final comment (as of today) is […]