Home Buying in Woodmere>Question Details

Jason Miller, Both Buyer and Seller in Queens, NY

Are homes priced with the expectation that there is a certain amount by which buyers will automatically underbid?

Asked by Jason Miller, Queens, NY Sat Nov 19, 2011

There seem to be a lot of homes in the neighborhood that are priced very high even though the market is soft and similar homes in the area have sold for less. What is expected for a home on the market for a while & priced above recent sales? Are the owners expecting bids of 100k under and priced their homes with that expectation, or does a very high price mean the seller is not really interested in selling? See MLS 2438331, 2425456, 2413980, 2413013 & 2435939

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LOL... this is a great question, as there is so little on the market and people are over pricing the homes so badly thinking they will make out... yet if the bank won't appraise the house for the selling value then you have both waisted time effort and money. I keep running into this snag with my clients, and the sellers are sticking to the prices, even though the home won't appraise... its crazy out there and we are hoping things loosen up and more comes on with better price points.

I always tell my buyers go down 10% of the asking price and if they want to sell they will work with us and if they won't then they don't really want to sell they are tire kicking to see what they can get!
0 votes Thank Flag Link Sun Sep 14, 2014
The market value of a house is based on the recent sales of homes that have the same features, condition and location. The homes are going to be priced by most owners at the current competitive homes available for sale. You need to look at the sales of homes that have recently sold that the banks will use for appraisal purposes. You should work with your buyers agent and let them advise you on the real purchase value and how to negotiate the transaction.
0 votes Thank Flag Link Tue Dec 27, 2011
Jason,

Most Seller sell on emotion..... they know what they paid for their home and know what they have put into it... and always think it is worth more than what the current market trend expects it to sell for...

Most owners expect to get back what they have invested into the property but some updates and ungrades do not a value to the property, I have also seen home owners that have put a lot of work in but have never had their house reassessed due to their Taxes being raised. So even thought they have updated it may or may not add value to the home.

I have had owners tell me they "put in this pink shag carpet 15 years ago for X amount of dollars" and they want that money back when they sell.

And some sellers could go either way with the sell..." If it sells at X price I will sell it".

Buyer also want a great deal on their "New Home".

Jason you also have to remember you might have a similar home on the market that sold for much less but the condition of the home does come in to play here....

Say you as a consumer see to exact houses both for 600,000 one needs a lot of work and one you can move right into with doing no work which would you buy?
So when you ask why have home gone for much lower for others that might be your answer.

if you need assistance please don't hesitate to contact me directly.

Warmest Regards
0 votes Thank Flag Link Sun Nov 20, 2011
Regardless if a home is overpriced or not, the offer should be based on recently sold similar properties in the immediate area; if an owner is serious about selling, any fair offer will open up the negotiating table, and if it doesn't, move on as plenty of other choices to opt from exist...
0 votes Thank Flag Link Sun Nov 20, 2011
Sometimes.

But usually such homes aren't significantly overpriced. Just a bit to provide that wiggle room.

Every situation is different. But the way it often works is this: A listing agent will look at the comps and determine at about what price the home ls likely to sell. Let's say, based on comps, the agent thinks the home will sell for $300,000. The agent presents this information to the seller.

Now the seller has a choice. Does he want a quick sale and price it at $280,000? Does he want or need a bit more money and price it at $299,000? Does he want to build in ample wiggle room (price negotiations, seller subsidy, etc.) and still attempt to maximize his net and price it at $329,000? Or does he get greedy (or look at other houses on the market, not the ones that have sold) and price it at $349,000?

All of those scenarios happen all the time. In all but the last (clearly overpriced), the listing agent probably will be fine with the seller's decision. If it's really overpriced, though, some agents won't take the listing. Others will, but will discuss with the seller the need to reduce the price if there are no offers within, say, 30 days. And there are a few agents out there who will tell the seller that the house is really worth $349,000 . . . often just to get the listing.

Understand, too, that in today's market some people owe so much on their mortgage that they can't afford to ask (and accept) what the property is really worth. Unfortunately, it means they won't get any offers. But in the scenario above, let's say the house is worth $300,000 and the seller owes $310,000. In that case, the seller can't sell for less than about $340,000 without bringing money to closing. So the seller may put the house on the market for $349,000 and then reduce it to $339,000 . . . but then go no lower.

But to answer your question about whether there's an expectation that buyers will automatically offer less than the listing price--often, yes. Buyers also understand that lots of sellers will ask for closing costs. So it's not unusual for sellers to ask for 5%-7% or so more than they expect to end up with. That's not always strategically the best move, but it does happen.

However, a buyer really should pretty much ignore the listing price. A buyer should determine what the house really, truly is worth. Then pay no more than that. Perhaps offer less. A Realtor can help with that strategy.

Hope that helps.
0 votes Thank Flag Link Sun Nov 20, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Jason,
If you want your home to sell you must price it for the current market. Buyers may look at some of the homes that are overpriced, but they will only buy a homes that offer the most value for the money. If you want to sell in this market, you must stand out and the best way to do that is offer an exceptional value. If you do that you may have multiple buyers compete with each other to buy your home.

As for buying, look at homes that are priced for the current maket (not overpriced) and have motivated sellers. Minimize you contingiincies and offer cash if possible.

All the best,
Gary Geer

http://www.GaryGeer.com
0 votes Thank Flag Link Sun Nov 20, 2011
Good morning Jason,

The methods used to determine asking price on any given property are so wildly varied as to defy clear definition. Especially as emotion plays such a large part in the ultimate decision.

In this market, in my opinion, the Buyer should set their own price.

A Buyer who worries while shopping about asking price and list price is missing the bigger picture of how to negotiate the purchase of a home.

1. Create your wish list for the home you want.
2. Identify the neighborhood(s) you like.
3. Get out there and shop, shop, shop (that means: do NOT sit at home looking at internet listings; all you’re seeing are ADVERTISEMENTS, not homes).
4. Being out there you gather personal data to compare/contrast against your wish list.
5. Being out there you develop your own personal “gut-feeling” of market price.
6. Make offers. That’s how you, the Buyer, determine the market price. (btw: I gave the SAME advice during the boom).

If a Seller is truly interested in selling, you and the Seller will work out your differences on price (in other words: your opening bid is almost NEVER your maximum price, nor is it the Seller’s bottom price) and find that equilibrium wherein both parties are happy and there occurs a “meeting of the minds.”

If a Seller is unrealistic, you will walk away from the house because no amount of patient negotiating is going to convince that Seller of the “true” market price.

Trevor Curran
NMLS #40140
0 votes Thank Flag Link Sun Nov 20, 2011
Don't understand why the balance of my answer did not appear. Some of the Reasons why a home is overpriced.
* Seller is stuck in the "housing bubble" period of the mid 2000's and can't accept that the market has changed.
* Seller bought at the height of the market and is trying to recoup as much as he can.
* Listing agent took an over-priced listing with the hope that the seller will realize where today's pricing is and adjust accordingly (prior to the listing expiring).
* The house is updated vs. the competition.

Find a good buyer's agent who will pull comps and guide you with your offer. If a seller does not accept a realistic offer, move on.
Good luck,
Nina Harris
Coach Realtors
0 votes Thank Flag Link Sun Nov 20, 2011
Hi Jason,
There could be a multitude of reasons why these homes are priced over the competition.
* The seller is stuck in the
0 votes Thank Flag Link Sun Nov 20, 2011
Everthing in life is negotiable.

When purchasing, decide what the value of the home is to you and bid based on that price. If the seller is not willing to come to a reasonable amount, move on.
0 votes Thank Flag Link Sun Nov 20, 2011
Jason - some sellers have it in their mind exactly like you said. They know what the market price is for their home, but they automatically assume that people will bid low, and then they can meet in the middle.

The best way to determine what to pay for a home is to have your buyers agent do a comparative market analysis to determine the market price for the home based on recently SOLD properties. Make sure to take into account any seller concessions for the deals, if those are included in your local MLS system.

Submit your offer along with a copy of the market analysis to show why you are bidding that. Keep in mind, you are showing them that you know what the home is worth, so don't underbid the market price unless it is in poor condition.

Best of luck with this!
0 votes Thank Flag Link Sat Nov 19, 2011
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