Moreover, in a downturn market, an over-priced listing ends up costing the homeowner, because while the property sits unsold, its value continues to decline.
a) I refuse overpriced listings, based on the experience that after I have done the prep work and marketed it nicely, I get fired by an impatient and grumpy seller, the listing then goes â€“ heavily discounted â€“ to Dump-It-Fast Realty, and they quickly earn an easy commission.
b) my observation in our market: nearly all overpriced listings with no price reductions expire, get cancelled or withdrawn.
Overpriced listings with reduced prices eventually sell down the road if they get priced according to market, but take time.
If priced well or aggressively right from the start, listings can sell within 30 days or less, even in this pitiful market we have.
Overall, I would say our market is quite similar to what Keith describes.
I truly don't think a buyer who is looking to buy a lot in a certain neighborhood will care if owners are deluded enough to think they could actually sell their lot for 3 times the current market value. I often show overpriced listings and am not afraid to submit a "market price" offer if my client likes the property.
So, if you're trying to get information here to encourage your Seller to come down to earth on their asking price, well you should recommend they pay $300 to a licensed appraiser to get a very crystal clear idea of "current" value.
The remainder sell over the next 30 to 365 days at about 96-97% of asking price.
So what does that tell us?
1. 70-75% of listings are overpriced ( and these are the one's that sell - excludes expired and canceled listings).
2. Only 20-25% are priced correctly.
3. What if all listings were priced correctly? I agree, the law of supply and demand would probably result in overall lower prices.
However, given the significant amount of listings that are overpriced, no fear of that happening.
I'm not so sure that's true; I don't really think that having lots listed at $150,000 damages the saleability of the $50,000 lots. When a supermarket puts a 12-pack of soda on special at a lower price than a 6-pak, people don't throw up their hands and walk out without soda, they buy the 12-pack.
I agree with Alma; having short-sale houses in that subdivision listed at $100,000 would damage the value of the $50,000 lots more than having $150,000 lots listed.
Price is a big part of supply/demand. Using your analogy of retail stores selling products, let's filter that a little more closely for a better comparison to real estate. For this example, let's look at only houses in one subdivision which have 3 beds and two baths, varying between 1600 sqft - 1900 sqft. And, instead of looking at sales of an entire store, lets look at one type of item in that store, like milk.
Brand Jersey Farms milk is priced at $3.59 per gallon and Brand Dairy Farms milk is priced 30% greater ($4.67 per gallon). Theoretically, all else being similar between the brands (eg - not comparing organic to non-organic), more Jersey Farms milk will be sold and not many of the Dairy Farms' milk will be sold, until after the store is sold out of Jersey Farms' milk.
I see similar things happening with real estate. You have lots in a subdivision selling at $50,000. There are several similar lots listed at $55,000, and 15 lots listed at $150,000 which is the price the seller needs in order to break even. Guess how many of the $150,000 lots have sold?
The answer is zero, and they won't likely sell unless they can get in line with prices buyers are willing to pay. Do you think it is confusing for buyers to know what is a reasonable price to pay for a lot in that subdivision if prices are all over the place? Buyers would rather not look the fool, and they are avoiding those lots altogether.
Actually, I think they'd be much lower. I think of a retail store with thousands and thousands of SKUs; fact is, any one shopper is only going to buy a relatively few items at a time, and some items are just never going to sell. But if you cut back the inventory to only the hottest-selling items, then you end up fewer sales and smaller profit.