For buyers interested in a clearly overpriced home, they need to rely on their agent to properly ascertain a true market value range. The agent should also know if a deal at market value is possible - it may not be. If the home is destined for the foreclosure pool, most times it's better left alone as despite all of the short sale "experts", few actually get done and fewer still at a price that justifies the garbage you put up with. Find a home you like, establish market value by careful and comprehensive research, make a bid and stick to the data.
Buyers need to be all business - all numbers. Emotion plays a role, but a secondary one for if you screw up the buy side in this economy - which isn't getting better anytime soon - you may end up circling the drain when you become a seller.
Sounds harsh and to a large extent it is - but my clients tend to appreciate the lack of nonsense and reliance on the data - since that's all that really matters.
62% of all listings never sell.
88% of all listings are overpriced.
So what's the big deal about this one overpriced house in March 2011?
What does significant mean?
Where do you find value in this particular house?
What is the seller missing that you so seem to readily get?
What does it matter if this house never sells and what if you never even attempt to buy it?
What if the seller lays crestfallen and weeping at their doorstep right now, wallowing in their own ignorance, swooning in their broken dream-state...just waiting for your one offer...their redemption...their saving grace???
That's how I "advice" my clients, then I say "make an offer - quit your analysis paralysis."
Negotiations start with the buyer's offer.
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1. Overpriced homes stand out like a sore thumb when you are viewing the market. There's little reason to view them. (Most people see overpriced homes when they search unassisted by an agent)
2. Overpriced homes are typically sellers who don't have to sell and want to try the market. Our last buyer that ran into this scenario made an offer that brought the seller to a situation of aggression - he took it personally. Of course, explaining that he was living in past and need to come "back to the future" might not have been the best tactic (we're kidding!).
3. There's just too much inventory on the market to worry about homes that are even slightly overpriced let alone one that is grossly overpriced.
If it is significantly better, I take the buyers to see at what price point similar houses have been selling, because they are going to be the true comparables for this house, not the "junk" that my buyers have dismissed within their affordability range. It is from there that I help them determine market value.
Now, if they want to "try anyway," at least they will be better educated as to the market in this new price range.
Hope this helps,
I will echo Mathews point about submitting CMA data or other market analysis with the offer. When my clients like any home well enough to make an offer, my goal after determining the real value, is to forward the listing agent such compelling and irrefutable data to support our offer that the listing agent often is left with little recourse but to actully sell our offer to their seller. That is particularly easy when the agent knows they took the listing at too steep a price.
In this market, as Hank mentioned price has to be realistic with recent market sold comps and even then, your home better stand out from the crowd. There are simply too many options to pay more than a home is worth - and even if you are willing to overpay, the home still has to appraise.
In closing, I would like to ask - how did you determine that the property in question "is significantly overpriced"?
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The fact of the matter is that there will always be sellers who will insist on pricing against all logic. Its easy enough to show sold comps, explain the reality of the appraisal process and try to get sellers to understand the reality of the market.
However some sellers will insist that their house is worth more, that if they wait long enough there will be a cash buyer who is willing to pay a ridiculous price, that the listing agent isn't marketing enough and the most often heard line these days: we're not going to GIVE our house away!
Experience can be a tough teacher and unfortunately for sellers, times are especially tough. The market is brutal, has utterly no concern for sellers needs or wants and it will force overpriced sellers to reconsider selling or to lower the price.
I am getting the impression that you have a particular house in mind. If that is the case, patience is the key because as I said, the seller will ultimately learn from reality of the market what they didn't learn from the agent.
If you can provide me with more info on the house, I could help you out better. I need to know the comps, how much the seller owes, etc...