I specialize on the condo market, and in particular, concentrate on the City of West Hollywood. I've witnessed prices go all the way up to $800 sq ft (and more) only to fall all the way down to around $400 sq ft.
I've been watching a recent listing of a 1580 sq ft condo in a particular condo building. The Unit was originally priced at $1,550,000 and just 23 days later reduced to $1,440,000 as seen in The MLS extract above.
At this "reduced price" of $1,440,000 the unit is priced at $911 sq ft.
The last comparable sale was listed at $757 sq ft and ultimately sold at $636 sq ft (Listed at $1,249,000 and sold for $950,000).
That condo and was in great condition and decorated by a designer - so it's reasonable to say it sold at the upper end of the price spectrum. It just so happens that this condo is now For Sale again at $737 sq ft ($1,099,000).
My question is about the other condo that's now offered at $1,440,000.
How can the Listing Agent and Seller begin to justify an asking price of $1,440,000 ($911 sq ft) when the last comparable sale was $636 sq ft ...and that very same unit is now re-listed for sale at $757 sq ft?
It makes no sense and unless a buyer who is totally out-of-touch offers $911 sq ft, this property won't sell unless it's priced around $1 Million.
It's effectively 30% overpriced right now!
Anyone can do the math.
I have to agree with you when it comes to pricing the property to move. I listed a home two weeks ago 5% below market value-under contract in 5 days closing in 32 days. Bingo
try getting the full story, they may just have it listed to meet deed in lieu requirements.....many persons doing a DIL need to have the home listed for 60 -90 days to be eligble. Many agents or owners will then list the home over market value just for DIL purposes.....
OK....I am BUSTED trying to give the agent the benefit of the doubt.....most likely they are just ignorant, or, particuarly with an upper end home, REALLY hungry for a listing and just told the Seller what they wanted to hear in order to secure the listing.
So, here's a different angle-- maybe the agent is working with "seller pricing" to keep the seller happy. The seller and the agent agree to give it a shot-- it doesn't work out. No hard feelings, and when the market turns around or the seller is more motivated, the seller will be back because the agent was willing to try.
Don't look at me. I don't do it (or haven't had occasion to). But there are those who do in this down market.
Stewart,
Can you spell, Realtor n-o-t d-o-i-n-g h-i-s j-o-b?
This is a popular topic here on AR and a pet peeve of everyone I know in our industry because it is clearly not in the best interest of the client (or reputation of our industry).
Recognizing Realtors by volume alone encourages listing, listing, listing, at any price. There are even brokerages that still offer courses on getting the listing and then working on the price reduction. Whatever happened to fiduciary duty?
If we want to recognize and reward Realtors let's do it primarily by list vs sold ratio. Surely it's time for some accountability.
If it is the same Realtors doing this (buying listings) all the time just to get the listing, boards could target them by monitoring unsold listings.
Stewart,
I have walked away from many a listing when the seller was in denial. Yes they can get someone to list the property at the inflated price but what does that get the seller? Not a sold property. The other pet pieve....listng a house then taking it off the market to reset the days on market. Who are they fooling?
This might be the most common denominator among us. Apparently we cannot do our jobs properly. I think clients influence us when the MLS 'sold' history should be influencing us.
Pricing is the main thing and sellers got to agree with that. Its the market which decides the price !
I just won't take an overpriced listing, my time and money are to precious to waste and so is the clients. If they want to test the market,, I'll skip it.
Stewart - I agree do the math - when will that condo sell 2013 HA!!!! Boy do you have a nice market to work in - gorgeous condos.. must be great!!!
Sign calls perhaps? Here folks will take listings at almost any price just as a means to attract buyers. I won't do it, but boy others sure will!
I recently interviewed a potential seller, Stewart, who thought his home was worth twice what the current market conditions dictated… and gently told him so. He later chose another agent to list his home… at only 50% more than comps suggested. I just checked the status of the home…
Still active… on the market for over 60 days, now… and still listed at 50% above market value.
Thank you posting and sharing your informative article.
I know....I had a great success story with a "lowball" offer last week, but lost one last night. They are priced at $800,000 and the comps are about $725-750,000 at best. We were willing to pay $750,000 and agreed to bring some money in over appraisal, but they said no lower than $760,000. I think they are going to beg for our offer in a month.
Hello Stewart,
Thanks for the post. Have a great day.
Stewart - Isn't this a recurring story of our industry. Many agents 'buy' a listing by taking the listing at too high of an asking price just to get work. They know full well it will not sell for that and must drop the price, but hey they got the listing right?
There may be more aspects to this than either you or I know, but it seems valid that the agent needed to have a frank discussion with the client about market value...
Stewart,
I don't know what agents avoid the tough discussions before listing a property with their clients like, "what you want for property is not what anyone will pay & even if is not what any bank will lend on." Instead, they feel it's better for their business to take a chance & have the client screaming at them in 3 months about why their property hasn't had any showings, let alone offers. If your sellers are unrealistic, it's better to let someone else waste their time, money, & reputation.
I just did the tango with the hybrid list agent/seller (one in the same) who was a little too emotionally involved. While our PPSF is NOT ANYWHERE NEAR THAT.
I just spent DAYS trying to convince him (a standard seller also) that it will not appraise for my FHA buyer when he wants $7 over the highest PPSF sold in the last month. I told him good luck getting an all cash offer or someone willing to pay the appraisal difference in our market that is shifting from no inventory to inventory rising very quickly. There is no more first time buyer tax credit to help make up the difference.
I would have never wasted time showing his home if I would have pulled comps first (we show lots of homes so we typically don't pull comps first.)
Like I said, comparing apples to oranges here with the different markets but the principal is STILL no different.
Well said. We are here in Manhattan New York condominium market, price per square foot is also important for the buyers and sellers. Many times it is hard for sellers to comprehend that buyers are very savvy now days with all the internet website with all the closed and sold comparables in the building and neighborhood.
Renee in #18 above raises an excellent point - At the inflated List Price the property wouldn't appraise, so would a buyer be prepared to pay in the difference?
This kind of thing is a dilemma in all specialty areas, it seems.
Stewart:
This happen in the Oceanside, Ca, a local agent priced a three condo community 1.5 million each over market, these brand new condo's that were build in late 2008, languish on the market for over 320 days the price came down to $1.125,000 million - still no takers. So, the builder finally put all three up for auction and the first one just closed for $648,328.
Price is king.
Yeah, like the average agent is listening. Not.
Fact is, the market (and all those buyers) will "correct" the price eventually...but, in the meantime, we have to just deal with the fact that many sellers are hoping for a magic buyer who doesn't mind overpaying. In their dreams.
Real Estate 101: Price it right.
Thanks for the reminder, Stewart!
If the seller really wants to sell, the agent is doing them a disservice but hey, it makes the correctly priced listings look better (& makes the seller/agent look ridiculous when it's that far out of line).
Stewart,
Well said. It makes no cents (or sense any way you look at it.) Besides the tangible issues, there are some huge intangibles as you do damage to your reputation. There are a number of agents I seriously wonder about whenever I see their signs as they have been so off base on other homes.
Then, there's potential clients, why would anyone want a reputation for pricing high and not selling. I've turned down a large number of listings where we were way off on price and to this day I have better respect, as I am known in my community at making things happen.
All the best, Michelle
Unfortunatley there are agents who will quote high prices just to get a listing - or who will take a listing at any price just to get their sign up. I prefer to be honest with the seller up front - it saves me effort and money (in marketing) and saves them frustration!
The example you've posted is just another of an agent who "buys" a listing by telling the seller they'll put it on at whatever price they want. The listing agent then drills the seller to reduce the price while pointing out that the property isn't getting any showings. At least the price is dropping quickly.
Great post. Pricing a listing correctly the 1st time will yield the best result for the seller everytime.
Hi Stewart, Both seller and agent are hoping to find someone with more cash than common sense ! Any buyer needing financing will eventually get a beat down from the appraisor.
Stewart, AMEN to that brother!!!
Stewart
The price can't be justified - it's mystifying to me why an agent would choose to look foolish. Hoping for that needle in a haystack perhaps?
When the seller says "I need" this $ much from my home sale, so I can do" this...." ....we thank them kindly and say - we'd love to be your 2nd REALTORS...call us when your home listing expires.
I love it when I show a seller what they will net with the recommended MARKET price and they ask in return..."What will we net at ____________ (their higher price). I always say - NOTHING, because it won't sell!
Stewart,
These listings are the greatest way to get future business. In my work, I often meet with potential clients. I happen to also be a Certified General Appraiser as well as a broker. I provide them with an appraisal, comparable listings and closed sales. I then tell them my opinion of value. IF for example, a property is worth $500,000, I tell them. Then I suggest we list the property for $519 to $539,000. If the homowner is persistent, I'll maybe allow them to list at $549,000. (10% above what I perceive to be the future sales price.)
I also tell owners every time I meet them that there are other agents out there who will tell them there property is worth more. I tell them to never be afraid to get a second opinion, but if the opinion is much different, make sure the other agent has a basis in fact for their opinion, i.e. closed sales, not just listing of other properties that have one thing in common, they haven't sold!
Generally, people want to believe me, but will still choose someone with a higher value estimate. They think to themselves, "Why not go with the person who will at least try to get me the highest price?" In that case, I always tell the person (when they have the courtesy to call and tell me they are using someone else) that I wish them the best of luck and that I would certainly hope they would keep me and my appraisal in mind in 3, 6, 9 or 12 months, or whenever their listing expired.
The best part about this is that a) you don't have to service an overpriced listings and b) by the time it is withdrawn for not selling, the homeonwer is generally eager to call me and apologize and say they wish they hadn't been greedy. We call is 'sloppy seconds' in our office. Howevever, the homeowner has a lot more trust in us when they know we didn't compromise our ethics in the first place to get the listing.
Stewart, Normally I would agree. However, My partner turned down a condo listing for $1,900,000 because it showed a comp of around $1,200,000. This lady had done some very off the wall decorating but was done expensively. Within 30 days the agent that took the listing sold it. You just never know what will appeal to people.
This reminds me of a story in which I had a person ask me to appraise their house for sale. I told them $975K was the value, but to get a second opinion. He did, and the second opinion was, "Let's list it at $1,325,000" The owner, remembering my advice, asked the other broker (the #1 broker in the town) if he had any basis in fact for this opinion, such as a sale that had closed nearby for anywhere near this price. The other broker's response was, "I just don't want to see your house undersold, and I think you should trust me because I've been doing this for 40 years."
In this rare instance, the homeowner chose me to list and sell the property. Humorously enough, the first group throught the property was from that same broker's office. The agent, in a voice made loud enough for her customers to hear said to me, "Do you know how overpriced this house is?" (Meanwhile it was listed below $1m). I said, "No, but do you want to know what your boss told the homeowner to list it for - $350,000 more!!! Can you believe it, your boss thinks the house is worth more than $1.3m and you think I overpriced it - weird. It almost makes me think that you guys are just a) out to get a listing at any cost and b) trying to make anyone who gets a listing other than you look bad.
The agent turned ashen in color. Her customers quickly exited. I doubt they were her customers much longer.
PS - The house sold for $950 in a few weeks after dozens of shows in a market where the average DOM was over 300 days.
Excellent point, but unfortunately, you're probably preaching to the choir. Deed-in-lieu or a location that offers excellent views for a "for sale" sign are the only possibilities that make any sense.
Piggy-backing on #5, I'm sure most MLS' will get to a point soon where expired/cancelled data by individual agents or offices could be crunched. However, consumers would have to know how to ask for that report card from individual agents -- it's unethical for us to bad-mouth our competitors.
I agree that listing too high is a waste of everyone's time. I work in a market close to, but not in, a hot urban market. As a result, much of the local media coverage about real estate is focussed on how quickly prices are rising in the city - which often has little or nothing to do with what's happening locally. Nevertheless, homeowners constantly upgrade their own home in the their own mind based on what they see happening in a hot urban market though they live in a cool rural market. And because so many are listing too high, they compare their beliefs against homes that are currently listed and think they are justified in their delusion... even though the homes they're comparing end up selling after one of more price reductions and after negotiation on a final price somewhere south of there again.
What it all means is I spend my time as a buyer's rep going through houses that don't meet the buyer's expectations, and then when we do find a house that is suitable, the negotiations are that much more difficult because the seller has been led to believe their property is lined with gold or some such thing. The nature of being a professional is that you tell people the truth about their homes - even if that means you don't get the work because they end up listing with someone else for more. But if everyone sticks to their professional obligations and evaluates homes according to standards and best practices, then losing to the overpriced Realtors should happen little and they will begin to stand out as the Realtors who don't actually sell any of their listings.
And negotiations go more smoothly, turn around times are shorter, showings are more productive, and all in all the job becomes much more straight forward than having to show 25 houses, only five of which were priced properly!
pricing properly is the name of the game, if you intend to make any money......and your overpriced home is a weight on everyone's back....
I find it funny that every agent will say Price It Right, but then there are tons of overpriced listings. I don't get it. Actually, I don't find it funny. I thinkit's a disservice to everyone, except that one person from out of town who's looking for this exact home and is willing to pay cash for it.
Stewart - The agent wanted the listing, price didn't matter.
Stewart,
Will read more than the first 7 or 8 replies later.... hve an appointment. But.......
Are prices in your community increasing? How many months of inventory are there in this area & price range?
Whatever the real answer, it sure appears to do a disservice to the profession and the client.... Saw the D.I.L. answer..... I don't know. Think he was right. May need more information.
Hi Stewart -- I couldn't agree more with you. That old saying: measure twice...cut once -- applies to pricing. One should always be grounded in sold comparables, current trends, what is selling, why things sell, why it doesn't, and have a very good pulse on the market. Throw all that together, and it creates a whole lot of certaintly and a 5%+/- margin is acceptable, imho.
The appraisal is a reality check, if and when, an overpriced listing receives an offer. 30% over comparable sales is setting the seller up for disappointment.
WOW Stewart great post and let's keep your post alive at one of my favorite groups ...
LATE NIGHT - EARLY MORNING AT ACTIVERAIN
Vegas Bob
Stewart, is can be a waste of time but like Ted said, sometimes properties that appear overpriced sell. Ben might be on to something about the DIL. If for some reason they sell at that price, they might be solvent. Check it out.
We struggle with this every day. We do a fabulous job with perfect price analysis (pat self on back) and then wonder what to do when the client wants to "start" at a higher price. I know every argument for not doing this, but in the past year I've gotten a little tired of being the purist who educates the client, doesn't win the listing, but then sees it drop to our recommended price in a few months. Thanks for being a voice of reason, good to hear that other people are working through this as well.
Stewart....I believe it's important to try to get our Sellers as much as we can in this marketplace. However, enough is enough.
Great Post! Thank You.
I definitelly agree 100%. If a agent does their preliminary work they do not have to be a rocket scientist to get it right. Sometimes sellers like to list it a little over value just to make sure that they get every penny they can but a little over is just that a few thousand dollars total not several hundred per sq. ft.. Thank you for a great post!
We all deal with those agents who buy listings every day. I bet you can name a few off the top of your heads who are you local "pros" at buying listings. They're often in it for sign and advertising calls, and sometimes to stroke their own egos by having a larger portfolio of listings. I always wonder if these people think about how they look to other agents, buyers, or anyone who pays a little attention to RESULTS.
Years ago, when I was new to the business, I was guilty of doing this on occassion... but it gets old quickly and, for me anyhow, made me feel like an order-taker vs doing my job in a consulatitive manner. Not to mention the time wasting aspect, which I suppose didn't as much matter when I was new and had time on my hands. About a year into it, I made the mantra "No overpriced listings!" an integral part of my M.O. Have I missed a couple of odd-ball sales that did happen at what on paper were "overpriced" amounts? Sure, there have been a few, but way more the exception than the rule.
Well said. The math is dumb-founding. Have you tried to question the other listing agent? I can understand a rookie having some seller pressure, but this seems extreme.
Some agents are nothing more than a pencil pusher for the seller. What the seller wants, the seller gets! You are right, in that this is a waste of time for everybody. It makes it especially difficult for the 2nd listing agent, sometimes, to convince the sellers that the first Realtor had their head in a cloud!
I know the feeling. I've seen my own home intrinsic value go from 1,7M to under 1m in the last 2 years according to Zellow. But upon a little research of my own soon found that I had a very large custom home with a panoramic ocean view on a flat hilltop. This made it unique to the neighborhood so folks don't mind paying a premium for a premium piece of property. I don't know your market but perhaps there is a premium to behold with the 1.4m vs the other one. Just a thought.
I learned the hard way years ago that taking on an overpriced listing is the best way to work hard, make no money (lose money in fact), and leave a trail of disappointment. I have no problem passing on unsellable properties anymore.
This is great, and there are those who want to blame the mortgage industry for all of it. Go figure...
On the other side of the "real world".... Sellers always think there properties are more valuable than they are. Our jobs are bring them into the "Current Real Estate" reality. On the other hand, in today's reality there are many sellers that, without bringing 10, 20 30 percent to the closing table, or doing a short-sale, are desperate and want us to try. By doing "Real Estate 101", "putting our clients best interest first", we do what they ask as long as it is legal and ethical while giving them our expert advice.
Sometimes all you can do is all you can do.
Who cares about asking price? Write the offer up anyway. If it is a reasonable offer based on facts with accompanying documentation it will likely be considered. Why wait until it is priced low and there is competition.
Asking price is often meaningless in this market.
Yours is a great example of overpricing - for whatever reason.
However, proper pricing in some markets is a moving target. I listed a home on the low end of the active comps and only about 5% above the sold comps in the immediate area. The next day someone listed a comparable home right across the street for $55 less! It was a short sale but nevertheless, that was a blow to "market value" since even the short sales in the area were only about $20K to $30K less.
Your example is a blatant pricing foul though.
I think you need to know the whole story before deciding that the agent is an idiot and does not know how to do his/her job. You don't have enough facts to make a judgement about the listing price just by looking at the MLS sheet. I think we should give agents the benefit of the doubt until we know otherwise.
Good post and so relevant. It happens here and there and we all scratch our heads. Clearly it's over-priced. Of course there could be other reasons, maybe a court ordered sale and someone else doesn't cooperate. We could all speculate, but the bottom line is it won't sell at that price and the public isn't of the mind set to just "make an offer."
Maybe the listing agent didn't have any high end listings and was trying to drum up some buyer business. I believe we should be doing ourself, our seller and our industry a favor by doing our homework and educating the seller about market value, appraisals etc. but you never know the story behind the listing.
I know that when ever I can get a property priced slightly below market value, it's pretty much a slam dunk and I will spend the majority of my time and efforts on that listing. Listings like this also bring customers to my door who end up buying something else, so I am always seeking seller's who really do want to sell and listen to me when I tell them what to price it at to make it sell. Unfortunately, some sellers will listen to the advice of a relative in Calif who has no idea what our market is here, rather than the advice of a 26 year local Real Estate Broker. Over priced listings lose the attention and dedication of the listing agent when they realize it will probably never sell at that price, and if the seller is stuck on his price, just cut it lose. My time and advertising dollar can be put to much better use working on listings that are truly priced to sell. Good Post!
There's certain high end areas of Paradise Valley, Phoenix, Scottsdale where dominant agents "buy listings" - only to grind the seller to eventually drop the price into the "zone." One dominant agent's average sale in 2009 was over 20% BELOW original list price. And other agents in the area have to match the dominant agent's unrealistic prices to secure listings...many listings lose over $100K by the time it hits the "zone."
This tactic hurts everyone - sellers, buyers, and agents.
Stewart - Delusional pricing is why I am concentrating my efforts on being a buyer's agent right now. Sellers just do not seem to get it.....or not enough of them, anyway. I am not going to take a listing if it has no chance of selling. That's plain silly.
Unfortunatly, what I am finding right now is the owners are thinking that the buyers are going to knock 20-25% off their price anyway so they (the owners) want to put that in the asking price! My advice to them: If you want to sell in a reasonable length of time, price it as close to the comparables as possible and you are more apt to get your price. If you don't care when you sell--I am not interested in handling the property; it is not in anyone's best interest to over price a property!!!
Stewart,
Overpricing never makes sense, especially when spread is as high as what you have stated in your condo market.
Wish our properties here were going for $600+/sq ft! WOW!!
I just blogged about this last week. Price is the most important thing. The second is home staging which is what I do! Great post!
Vivian
I definitely believe in pricing a property to move but in today's industry there are many reason's to factor in. I often price short sales high for a few week's to show the bank I tried to get a higher price. I also once took a listing because the list price was court ordered. I new it was $100K over but I also new it had to be sold so who cares if it started there. I do believe that most over-priced listings are desperate agents trying to get their sign up.
I agree that we don't know enough facts to pass judgement on the agent. Perhaps the agent only agreed to take the listing if the seller agreed to do price adjustments in x amount of days if it didn't sell which would account for the quick price reduction. It could also be a family member or referral they feel obligated to work with. Too many possibilities for us to judge without knowing.
With that said, there are unfortunately agents that "buy" the listings. I just had that happen to me. I know because the sellers told me they were listing with the other agent mainly because of price. They are $50K over where it should be priced and the other agent has convinced them they are priced right. No idea how the agent came up with the comps on this one. These are the agents that are not looking out for their clients best interests and make me ill. This makes our industry in general look bad and is how we have so many upset owners with expired listings.
I see your plight and deal with the fustrations everey day... but the best thing I have ever done was the following. I lay out my listing plan to the client that is firm on the price that they think the market is at. The I will agree to market at that price with the following conditions... that I will be alowed to reduce the price to where I feel the market is. It's very impotant to get this in writing... then over the next 6 months I move the price down to my numbers.
What heppans to me, is that by the time I get close to my numbers, buyers show up and take the property. but instead of having the deal done 4 months ago I waited 6 to 8 months.
Next time you are in the building, preview the condo and wait to see if the listing agent calls you for feedback. Then you can ask them directly what they are thinking.
That should be blog worthy!
Excellent pricing analysis using actual sold prices - the way it should be done.
Stewart, you seem acutely aware of your market. Kudos! I am of the firm belief that the market most often finds equilibrium. Under priced homes usually get multiple offers that drive the price back up the market value and sometimes beyond. Over priced homes get few if any offers.
Someone is in denial...either the listing agent or the seller. Unfortunately, the seller will will ultimately pay the price.
I've not taken a fair number of listings in my career and saw them sell at my price a few months later. The sellers have told me they listed with the higher price because the agent "believed in their home" whatever that means. A few times sellers have listed with me after their trial run expired, but that's rare. Still, I don't need the work overpriced listings bring. Plenty of real work to do.
Sure, we can take a listing slightly overpriced with the clear understanding (in writing) that we will revisit and adjust the price, but it sure makes sense to price it right the first time!
I read through everyone's comments to see if anyone else was puzzled, but couldn't find this point:
Basing a price on one recent sale (or "the last" which might not be too recent?) is not really a decent base for comps.
Everything you say and everyone says above is true, but it could be based on a faulty assumption, that the previous sale represented an arms length transaction, with a seller able to go the mile. The seller could have been so "highly motivated" that they did not hold out for a fair market price. I'm NOT saying this is so, just that it's possible? Comps need to be showing a pattern so that you can eliminate any sales that were unusual in some way.
In a marekt of reduced sales volume we are finding ourselves in a postition right now of trying to comp multi millioon dollar homes when there are less than 10 recent sales in the price range IN THE WHOLE SEATTLE AREA last year. How can one do that? Do we take 2-year-old sales and adjust for the reported average decline since they sold? They are predicting up to a 44% rise in prices here over the next 4 years, do we take any of that into account?
Same thing in the southwestern Ohio are too Stewart. Some Realtors take a listing no matter what. Not only does it waste Seller and Realtors time (and money) it is bad PR. Walk away from unreasonable Sellers. Another less principled Realtor will take it and everyone will eventually get the point.
Same thing in the southwestern Ohio are too Stewart. Some Realtors take a listing no matter what. Not only does it waste Seller and Realtors time (and money) it is bad PR. Walk away from unreasonable Sellers. Another less principled Realtor will take it and everyone will eventually get the point.
We see this all the time in our market. Many agents simply have no concept of correct pricing. And, then there are those who are so desperate to have a listing (any listing) that they just walk in and ask the seller what they want. Listings like this do no one any good. Seller gets mad at their agent and then that reflects on the rest of us. Improper pricing leads to LONG sale lead times or ultimately to NO sale.
Hmmm...I remember, years ago, reading about agents who took over priced listings in order to make their correctly priced listings look like a bargain to buyers. In other words, with no intention of even trying to sell the over priced home - just to use it as a comparison to show first.
You have to have SOME reason for doing it - because otherwise it's just a waste of time to even do the paperwork.
Perhaps listing properties is just a hobby for him!
When I was a new agent, I would take a listing even though the seller's idea of pricing was unreasonable. Hoping that the showing feedback would convince them they were overpriced wheareas I could not convince them. (Again, I was new) I ended up wasting a lot of time and money and then the seller would move on to another agent who would get the price lowered.
I am no longer "new", so if a seller is unreasonable, I don't take the listing. I move on to the next seller who is reasonable. Maybe the overpriced seller will learn and I'll get a chance to be the second or third agent who will get the price right.
I don't think there is any challenge to this; if you aren't the third head on the pillow, you don't really know why the listing is at that price; there may be more of a strategy or plan that you don't know about.
It's like when a neighbor says to me "he really thinks he's going to get THAT for this house?" and I have to answer "yes, and don't you hope he does, it makes your values go up doesn't it?"
We have had overpriced a home at one time or another and it should not be a reflection on the individual agent/broker - it's completely up to me whether I take a listing, and if I want to risk the long term exposure of 'not being sold' then so be it.
It's the same assumption I made not too long ago when I complained that a broker had only provided outside photos of the house; thought it was 'incompetent'...turns out it was the seller's instructions.
My buyers usually make the determinatinon of what is overpriced anyway; one time I listed what I thought was a dirty, messy, badly staged house for too much...and guess what - it sold in 2 weeks to a buyer who said they had found their dream house. It turned out they weren't looking for a nice housekeeper, they were looking for that house in that location at any cost. All of the feedback had been very derogatory to me about how I needed to 'get that house staged...' I guess that buyer could have cared less.
Also, had a young 'hitter' from our company call me one day asking 'where do you think you got the comps for this property'? on a new listing I had taken for a very small house on a very large and amazing lot...I am not going to say what I said, but I did have to suffer the string of comments that he poured on me while grandstanding in front of his 'buyer'. 3 days later we had a full price offer from another broker whose buyer totally appreciate the lot and wanted the house.
I don't know, but I just don't think it matters to me if something is overpriced, my buyer just won't ask to see it - or if they do, they won't buy it. Simple.
Mike Schneider, ABR, CDPE, SFR
Re/Max Superior Properties
Chicago Region
Excellant point, Stewart.
My way of thinking....there are two objectives to reach at the first interview with "seller"...
While they're interviewing me....Im also interviewing them...the two things im looking for are:
1.) Sellers Motivation?
2) How educated is "seller" regarding local, current market trends.?
I believe thise two issues are most important before going any further...
Best wishes and success to all......
Mike
I'm seeing this a lot in my area, but mostly with standard sales. When I go to look up the tax info on them, you can see a lot of them are pricing to cover their loans not necessarily to price for the market. I think it's sellers hoping they can sell without going short. Most seem to end in either a short or an expired listing...
Just logged back in after quite a while. So, Activerain is charging now for public blogs. Time to get back to basics as I thought. This place damn sure isn't THAT good. I'm outta here.
Stewart:
Anything over priced causes a delay in selling. With respects to a house, the delay is longer and oftentimes bespeak of the inexperience of the listing agent. Some agents would prefer to profile a collection of overpriced properties, rather than giving an honest and relevant Comparative Market Analysis. And it is also unfair to the seller who has hopes of sale. Everyone in the long run suffers to some degree, however needless this overpricing be. Thanks for Posting
Stephen
Stephen
Some of the most experienced agents are having trouble pricing in today's market. They do all the right things and price homes in a way that has 'always' been successful, but ultimately because of the volatile market it just isn't working the way it should. WE can pull comps and present/suggest the recommended list price and then it's off in a very short time. Out here, it's a beauty contest or a price war and that just seems to be the way it goes. Very frustrating to say the least.
This seems to be an extreme case where there is ample evidence that the property is badly overpriced. It is easy to be critical of the agent. We all know there are agents out there who are crooks. These are agents who put up as many signs as possible and hope they make money through the workings of random chance. These people offend me as much as they offend you.
However, I think we need to remember our estimates of value are nothing more than that—they are estimates. It is not our job to be the "value police."
If every agent always computed a flawless, well-informed estimate of value, and every seller listed at the exact price recommended by the agent, does that mean every listing would sell? Of course not! There are only so many buyers out there who have the means and the motivation to purchase homes in any given month. On the whole they are going to bid on the homes that offer the best value for the dollar. There will always be homes that do not sell!
It seems to me the American way of selling homes actually requires that some people price too high. If every seller priced his home "just exactly right" I believe the result would be lower prices for everyone. Look up Price Elasticity Of Demand on Wikipedia. They say, "the demand for a good is said to be inelastic when changes in price have a relatively small effect on the quantity of the good demanded."
Often the successful seller is the one who lowers his price just the right amount at just the right time. That doesn't mean he was a fool when he originally listed his house at a higher price, and it doesn't mean his agent was dishonest when he took the listing.
Ken Lampton, CRS, CDPE
RE/MAX About Dallas
One big reason many fsbos don't sell is because they overprice. Basically, most sellers are greedy and/or unrealistic. Of course that doen't excuse Realtors from doing their jobs of educating their sellers.
Stewart, I'm really enjoying reading all of the responses to this post. I've always felt that agents do a disservice to their sellers when this happens but some of your responses gave me more insights. Thanks now I will view SOME of the local agents and their listings different. However for the agents that just take the overpriced and inflated valued listing just to get their name on the sign...that's not right IMO.
True it is overpriced. It may be that there is a seller who is unrealistic and the LA took it with an understanding that if there are no bites on it in 30 days they will reduce it. The proof is in the pudding however. The only property selling nowadays is the property that is priced right.
Stewart,
When I see properties such as the one you described in your post -- I call the listing agent and ask the listing agent to provide me with his or her CMA. Guess what? I usually never receive the requested document and the agent goes silent.
Unfortunately, we see this way too often - and we all know those agents who take listings at inflated prices and then beat up their sellers for price reductions. Interesting comment above regarding "deed in lieu" listing just to satisfy lender requirements - always learn something new here - thanks!
If the seller is unrealistic about the market is it not the listing agent duty to inform the seller is market in the area?
It's obvious that agents who list over priced properties and relinquish their profession to the seller is merely a PINO. What all of them fail to recognize is that their credibility is being tarnished beyond repair.
When anything of value is reduced, it has no value to sustain, so buyers will continue to offer less and less. Buyers have choices, especially in today's market where inventory is tremendously high.
Not much to add except that our team always suggests a realistic price for a listing. We also tell prospective clients that we know that our competition will often suggest a higher price just to get the business. That leads to an interesting discussion about the ability of a seller to obtain a higher price because they "want" or "need" to in spite of the market's lower valuation of the property.
Brings to mind realtor stopping to talk to me two years ago while I was working in the yard. He was hoping we might be interested in selling (after it took us a year to find it and close - not likely). But after discussing with my wife, we decided if we had any other such inquiries, we would be happy to list it for what we owed (@$200,000), plus about $400,000- which wouldn't be taxable income. Anybody crazy enough to want to list that way would really be out on a limb.
A lot of critical comments here, criticisms and name calling, too.
I submit there is no tarnishment of reputation here. And I think it is mean to ask the listing broker for a CMA. Please work on your own deals. This is not your deal. MOVE ON>
You dont know what is going on.
Perhaps they are painting a picture for the bank, showing they marketed it at higher levels...possibly what is owed and they are bringing it down to where a buyer will appear.
Or perhaps the listing agent has no control over the seller (surprise), and the price will come down as the reality of the situation starts to work on the seller.
Regardless, the agent is working for the seller...not YOU.
Many thanks to everyone who has commented and participated in this discussion.
Randal (#102 above) - Realtors co-operate with each other on deals and we show each others properties. Accordingly, we are all entitled to comment on active listings and discuss pricing.
It's not a matter of this "not being your deal .... and perhaps they're painting a picture for the bank".
What you're suggesting is that the agent work with the seller on a completely unrealistic price to influence a bank - is that fair and reasonable of any professional Realtor? I don't think so!
Nothing beats a well priced home. It is just a waste of everyone's time and not to mention your reputation, because on many occasion it's always the realtor's fault. It's just easy to blame us for not selling the homes fast enough than letting their pairs the truth.
The Seller is living under a rock and totally out of touch with reality. I agree with John.. the seller probably "needs" to make x amount of dollars. Maybe it would be the time to walk away.
I wonder if the seller were buying a car and the blue book value was x but the owner needs to sell it for xy because he had bills to pay off. Would the seller buy it for xy?? Probably not.
In our market we say it's 80% price and 20% marketing. That's why foreclosed homes get sold faster irrespective of it's condition.
Nima Buva
Looks like you got some attention here with your post Stewart. Here in AZ we have to be very careful to price to market or be prepared to have the work of having a listing and the seller breathing down our necks to get the sale. Like Renee said the appraisal will kill the deal even if a crazy buyer comes along and falls in love with the dwelling......
Different day, same old "trick" used by some to do whatever the seller wants to hear to get it listed. I think when you stick with the real value - even when the seller doesn't want to hear it - word gets around that you know what you are talking about.
#34 "I love it when I show a seller what they will net with the recommended MARKET price and they ask in return..."What will we net at ____________ (their higher price). I always say - NOTHING, because it won't sell!"
EXACTLY, you hit is right on the head!
And when it sits on the market fo months, doesn't sell, and now needs to be priced lower they still wonder why.
Lots of good posts. Pricing matters and there are lots of scenarios that influence it as we see here. My experience has been more with sellers wanting to list too high and not completely understanding sold comps vs. active listing prices.
I, too, am seeing the "pricing strategy" for the banks to see on short sales and DIL's.
Long thread, I think you hit a nerve, overpriced listings in this market do not work. Some people list them at what they paid at the peak, agents should spend 4 minutes and give them a CMA report instead.
I always price in the middle..If seller wants an unrealistic price, better to walk away if they don't want to listen to your advise. You will have an unhappy client, and any offers that come in will just upset them. It is hard to walk away, but price right and you will sell....we all know that.
Love this one Stewart. Not only are they wasting all the other Realtors time. It will not appraise, so the offer will fall apart wasting the buyer's time and money. Altimetry wasting the sellers time to.
Stewart - So glad you posted this...... the comments have been all over the board and brain food. Sellers many times feel that they are in the drivers seat and they probably are except they should be made aware that we do this for a living. While we cannot read minds we can read the market. It is our responsibility to guide them through the process and pricing too high in any market, especially this one, with an over abundance of inventory will not get their property sold. So I must ask. "Do you really want to sell this property or are you just speculating"?
Don't you hate it when you take an over priced listing, market it for 6 months, seller gets mad at YOU because their over priced listing is not selling, they re-list with another company, drop the price and it sells ....
Stewart: It doesn't make sense does it, yet peop;e over price daily and switch careeers yearly.
Ty
Stewart:
I couldn't agree more. There are a couple situations where some sellers who "Don't have to sell" want to test the waters. I hate that too but I do agree.
Lisa aka @allstarmom3
It is so tough to walk away from a seller that wants to list well above market value but the alternative is the frustration of doing open houses and receiving no offers. I am actually dealing with a client that is convinced his home is worth 10% more that market value. We told him we would take the listing on the condition that we have an automatic price reduction every 2 weeks until the property sells. He's stewing on it as we speak! Thanks for the post
What's new about overpriced homes for sale.
Do you remember the saying: "Their house grows with them?" Or "Their house grows as they grow?"
Maybe that is a Midwest thing I don't know.
Well I fully agree with you that a well price home sells faster.
BUT!
in this kind of a market with all those foreclosures and short sales can you please tell me how you can price a home to sell? Think about this for a moment............
Allow me to give one scenario here in Kansas City, MO:
A newer half Duplex subdivision of total 80 units built in 2006. average brand new sales price in 2006 was 140,000 to 160,000 each all units are almost the same very small Sq Ft differences.
Last 180 days this subdivision has the following activity:
Active on the market now 5 units average listing price $126,000
Sold last 180 days 4 units average sales price $119,000
Market rejection "Expired" 20 units at price average of $135,000
The last days offers we are getting are about are mostly from investor for about $70K to max $80K for each unit. Unfortunately the short sale banks are not approving the sale. And no other showing in the horizon.
So my question back to you is how in the beautiful real estate haven can we price homes right?
have a nice weekend you all.
Keep smiling.
Two things sell the property.
•· The seller's motivation
•· The price.
Obviously that seller is not motivated.
The condo to which I'm referring in this post was last sold in July 2007 for $1,222,000.
That's about the time the market reached its peak!
If we reduce that price by 20-25% to account for the decrease in market values, the current value is between $950,000 and $1 million.
Public records indicate the outstanding loan is a $970,000 ARM.
The Listing Agents (there are two of them on the MLS Listing) have indicated monthly homeowner dues of $0.
I went to a Broker Open Hose couple of months ago. The community was build on a busy street and zero privacy. The Luxury town homes were starting from $880K. I drive by almost every day. No one still buys there and the prices went way down to $440K.
This is what happens when high prices don't meet the reality!
Hmm. Well, perhaps there is a reason they are listing but with the intent not to sell. If, as you say, there are errors in the listing that would lend themselves to appear to diminsh the value, plus everything else that is going on, then I think this might be the case.
I don't see that they are wasting 'your' time, and the only waste of time for you was writing a pointless blog.
Jordy (#123 above) - If there's no point to this blog, why did well over one hundred ActiveRain members choose to participate in this blog?
I see you're new to ActiveRain, so before you make inane comments, perhaps you should take a closer look as to what this forum is all about!
The irony of your comment is what YOU state in your ActiveRain Profile:
"Pricing property correctly is one of the most important aspects of selling. With a certificate in Real Property Assessment, and continued studies in Real Property Appraisal, I can get this right. A home will sell quicker, and for a better price, if it is priced correctly right from the beginning".
I say this all of the time to both buyers and sellers, the data doesn't lie. To put it another way, I'd like to be able to pay $2 a gallon for gas but that ain't going to happen, is it?
If a seller who I do not know asks me to list a home for more than market value I generally will not do it. but sometimes good clients or friends do it, in the hopes of getting a miracle offer. For these people I try even though I know that I will most likely never get the price reduction needed to sell.
Stewart---I disagree with Jordy too. I do not have time to run comps on every home I show prior to showing it. So if my client falls in love with it and I run comps before we make our offer only to find out the seller is being unrealistic, the seller and their agent have absolutely wasted my time. Great post Stewart and congratulations on being featured!
I read, in-full, the first dozen or so comments, and skimmed the next dozen or so, but haven't read them all. Forgive me if I'm reiterating a point already made:
In California, can people secure a loan for a home valued over appraisal? It's not uncommon here in TX to see a deal fall through because a house with an offer does not appraise for the offer price. All it takes is a foreclosure here or there nearby.
Right on! I released a well-priced property to MLS on Monday and within 24 hours had 2 offers and a 3rd before the week was out. That's in contrast to a listings I had for over a year that chased the market down and never sold.
Many good points here. I am a newer agent in the Luxury Market here in Newport Beach, CA and albeit #123 doesn't think this is worthy of discussion (well, actually he must b/c he took the time to post) I do.
I have one thing that stands out in my mind over and over since the leap into my new lifelong career...when I listed my homes on the East Coast and I wanted a ridiculous price my REALTORⓇ said to me, "you know Michael, there's no such thing as an expired listing when your house is priced right." At the time it took me a minute to get it but the message was LOUD and clear...I was being unreasonable on my price. My home would have sat there and the listing expired with frustration on why it didn't sell (probably blaming my agent)...we priced them right and got multiple offers (on 1) and closed both! (NYC and DC if you're wondering what market I had homes)...obviously it's not your job to educate that agent so, watch the property expire and then go after the listing educating your new clients on reality. Good luck Stewart!
It is always difficult for me to walk away from a listing. Pre-qualifing before the listing appointment helps. Why are they selling? Where are they moving to? How much do they owe on the property? What do they think its worth? I still go on the appointment. At least I know what the options will be and what challenges we will face in marketing the home. If taking an over priced listing, get a longer contract and get pre-signed price adjustments with dates and amount. Always tell them the truth. It's professional. They may not hire me, but they will be back.
Stewart, this is such a hot topic, one I fear we are all to familiar with. You have pointed out the amount owed is still under what fair market value is, if I read this correctly, which means they are not in a short sale position. So, you have a few choices as to why this happens.
I showed 6 properties yesterday from 800,000 to 1,000,000 plus. There were 4 homes priced very close, all in the same town. After we finished viewing it was apparent that my buyer understood overpriced, unrealistic listing prices. And it was very clear that the sellers didn't want to sell, or are in total denial of the fact they are really in a short sale position.
Who really knows what is in their minds, all I know is that things like this affect my ability to get my buyers to make offers!
This is AMERICA..dude.
Sellers can do any damn thing and ask any rediculous price they can get their stupid listing agent to agree to!
If real estate were "rational" then our current Government would have fixed it by now.
Only the irrational don't understand that ONE should pay whatever the seller wants.
You know...I'm going to go get some Advil...I've got a headache.
Some sellers can't see reason and some agents are too focused on having all the lisitngs to say no. I figred out a while ago to Just Say No! This place will sit on the market taking up space and the price will end up on a steady decline "following" the market and not selling till it is dirt cheap...
The Realtors are going to get the blame for the place not selling. The seller rarely sees their culpability before it is too late for a decent sale price. And haven't we all seen this far too many times!
Stewart
Overpricing is always the sign of an inexperienced agent. It is a rookie's way of getting listings and pumping up the Seller. This usually doesn't last very long, and it is a "lose-lose" situation. I wish they could see all the damage they are doing....I usually keep my eyes on the overpriced listing and call the Seller when it expires.
My kind of agent!
I've been wrestling with the same issue recently with two agents that just don't "get it". It's one thing if a seller insists on pricing over the market, but when an agent makes an attempt to justify the price or worse, suggested the price, they are doing a major disservice to their clients.
I see this all the time, and it's a shame that the market is flooded with just such listings in denial. It makes it even more difficult for the ones that are priced right to sell!
If we only could get the Sellers to read these post. I would rather have a few listings I can sell the tons that set thee.
Pat Ogle, Associate Broker, CRS, REALTOR
Champion Realty, Inc
http://www.AnnapolisHomes4You.com
PatOgle@AnnapolisHomes4You.com
443-569-2736
PS If you have anyone moving to Annapolis let me know.
Lot of people on this site get agitated over this topic. There are various possible reasons for 'overpriced listing' as has been mentioned by several above. The 'deed in lieu' reason being one of the esoteric reasons. I bet it is most often it is the seller who insists on an inflated price versus the comparables. So there is the dilemma for the agent. Should you take the listing and try to work the price down to the point it sells or walk away and let another agent take it and complain that that agent is incompetent - until of course the agent works the price down and it sells and then you can cry that you lost the listing in the first place.
A conundrum. Gordeon knot. Rubics Cube.
When I walk away from an unrealistic seller I just move on to the next opportunity. I take listings and get them sold.
They can't justifiy it. The agent wanted a listing, the seller wants a million dollars (literally!)
Just goes to show that no matter the price range pricing it right makes all the difference in the world. Incidentally, in my neck of the woods the reaction would be "who the heck is paying a million dollars for a condo!?!" but then again our average sales price in this county is about $185,000
Stewart.. This is why Realtors have a bad rep. It is due to these *professionals* no doing their job. They are *buying* the listing to make the necessary quota for the company they work for in order to keep their job.
I won't take a listing if I have to over price it. It is a disservice to everyone.
Stewart.. This is why Realtors have a bad rep. It is due to these *professionals* no doing their job. They are *buying* the listing to make the necessary quota for the company they work for in order to keep their job.
I won't take a listing if I have to over price it. It is a disservice to everyone.
Stewart, just checking in to see if this condo ever sold... and at what price. Curious agents want to know.
UPDATE: 10/25/2010
Don - Thanks for checking in and following up.
The condo referred to in this post was listed at $1,550,000 on 7/26/2010.
It is still on the market, but has been reduced to $1,100,000.
At this price, it still won't sell!