Gary, Home Seller in Paramus, NJ

Is it more difficult to sell a house that is slightly better/ higher priced than the surrounding houses?

Asked by Gary, Paramus, NJ Fri Jul 31, 2009

The house next door to me has been on the market for quite some time now. The house itself and property look nice and the price seems fair to me, however the house is on the market for about 100k higher than any of the houses around it would sell for. Could the difficulty in selling it be because someone who is willing to pay that much for a house would rather be in a more upscale neighborhood as well? How much of a factor is this? Is what's taking place next door going to have any impact on my ability to sell my house if i choose to do so?

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Gary, the price may seem fair to you, but apparently the buyers are thinking otherwise!

The only test of the market IS the market, and the market is saying this home is overpriced. A home is only worth what a buyer will pay. The market is speaking in regard to this home.

Is the house much larger or better than the surrounding homes?
To answer your question, yes, It is true that most buyers don't want to buy the most expensive house on the street, especially in this economy. Buyers want to see value, and less expensive homes next door don't instill a lot of confidence in a potential buyer.

Sounds like the sellers have overestimated the value of their home.

Thanks for the question......
Debbie Rose
Prudential NJ Properties
2 votes Thank Flag Link Fri Jul 31, 2009
I have such a listing now in the Clinton Hill section. The house is every bit worth it, but the price is at least 20% beyond its most likely sale price.

Part of the pricing of the property is conformity. How well does the property conform to the surrounding inventory. You are right in saying that most who want an upscale home will look in a more upscale community. Conformity is related very closely to situs, i.e., "location, location, location." A 2M contemporary in even a $2M Victorian community will lose market value. However, consider this. While your neighbor may lose some value because of the surrounding stock, the surrounding stock is gaining in value because of your neighbor!

I just looked at the clock and saw the time. You're lucky. I can be really long-winded! I love what I do!
0 votes Thank Flag Link Tue Aug 4, 2009
I have such a listing now in the Clinton Hill section. The house is every bit worth it, but the price is at least 20% beyond its most likely sale price.

Part of the pricing of the property is conformity. How well does the property conform to the surrounding inventory. You are right in saying that most who want an upscale home will look in a more upscale community. Conformity is related very closely to situs, i.e., "location, location, location." A 2M contemporary in even a $2M Victorian community will lose market value. However, consider this. While your neighbor may lose some value because of the surrounding stock, the surrounding stock is gaining in value because of your neighbor!

I just looked at the clock and saw the time. You're lucky. I can be really long-winded! I love what I do!
0 votes Thank Flag Link Tue Aug 4, 2009
Hi Gary, the fact that your neighbor's home has not sold confirms that it is overpriced. If a home is priced properly, it attracts showings and an offer - and this is true even in our sluggish market. Overpricing is a big mistake in a down market - though tempting to "test" it out, it begins a course that is proven to work agains the best interests of the seller time and again.

Consider this:
Fact 1: Homes continue to sell within 1-5% of their asking price - WHEN they hit their strike price, determined not by the seller, but by the market.

Fact 2: The greatest excitement for a home is when it is newly listed.

Fact 3: Homes generally sell witin the first 60 days if priced right, or shortly after the price adjustment that corrects their asking price.

Reflecting on these facts, consider these examples:

Example of Success with Pricing Right:
Martinsville, NJ -
Asking Price: $689,900
Sale Price: $685,000, 99% of asking
Days on Market: 11

Exampes of Peril of Overpricing - and there are so many of these, but I'll just reference a few:
Example 1:
Basking Ridge
40 year old Split, recently renovated
Starting Price: $749,000 - 4 price reductions later bringing home to $659,000
Sale Price: $637,750, 97% of "strike price"
Days on Market: 288

Example 2:
Warren
20 year old Colonial, dated but well-kept
Starting Price: $1,400,000, 3 price reductions brought home to $1,100,000
Sale Price: $999.950, 90% of "strike price"
Days on Market: 276

We have a tool designed to support a price reduction discussion that review examples just like these. Rather than wait, I bring that book with me when I talk with a seller about the wisdom of pricing right. The Martinsville example is a listing of mine - do you think that our pricing discussion was a tough one to digest for the seller? The answer is "yes", but their decision to go with my recommendation proved to be the right one. We sold quickly at 99% of the asking price. The reason is simple: while we were new to the market, our buyer was not. They had been looking for months with their agent. When we hit the market they recognized the home to be a fair value - great home in a great location at a fair price - and jumped on it. Did we give the house away? No way. Would the seller had done better or worse had they gone the tempting route of "testing out" a higher price? Example 2 and hundreds just like it answer that question, "No!" they would have sold for less, there is no question in my mind - or theirs.

Take a look at the link below for a link that discusses the Martinsville sale - it was truly a combination of proper pricing and online marketing that carried the day.
http://www.realtor.org/rmosales_and_marketing/howisoldit/col…


Chasing a falling market is a dangerous course - don't worry about your neighbor's folly in pricing too high. Rather learn from their mistake. When you are ready to sell/buy, please consider reaching out to me. You'll find great local market stats and commentary on my website http://www.feenick.com Just click on LOCAL MARKET COMMENTARY when you get there - it is updated regularly so please visit often.

Best,
Jeannie Feenick
TruliaPro, Weichert Executive Club ~ Top 5% nationwide
"Unwavering Commitment to Service"
Search the MLS at http://www.feenick.com
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Sat Aug 1, 2009
The house next door should not have a negative impact on you unless you make the same mistake and overprice the house. I f you price the house correctly it could have a positive impact instead.

Good Luck,

Don McBride
0 votes Thank Flag Link Sat Aug 1, 2009
As the other answers note, if it isn't selling, it's overpriced. The price may seem fair to you, but it doesn't seem "fair" to potential buyers.

And your observation is probably correct that someone willing to pay the higher price wants a more upscale neighborhood. That can be a big factor.

What's going on next door shouldn't have any impact on your ability to sell your house, so long as you price your home properly. In fact, if anything, it could make your home more attractive. Many smart agents would show both. They'd show the more expensive home first (knowing it was overpriced for the neighborhood), then show yours pointing out, "And here's the house right next door for $100,000 less."

Hope that helps.
0 votes Thank Flag Link Sat Aug 1, 2009
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
There are 2 reasons for why a property doesn't sell: 1) ugly property, or 2) ughly price/erms. You already mentioned the house looks nice, so it's obviously the price.
0 votes Thank Flag Link Sat Aug 1, 2009
Gary:

Here’s an easy way to look at it. Only a buyer determines the value of a house. If no buyer steps forth, no deal. It’s as simple as that, in the final analysis.

Now, in regard to your neighbor’s house. A long stay on the market, especially in this market, means that the price is not attracting any of the few buyers who are looking and qualified to buy. Are any other houses “Down Neck” selling? At what prices? A Realtor can give you the whole picture on this question.

Let’s put it this way. You go into “Tents are us.” You have a limited budget for a camping vacation. Would you buy the super deluxe model and live on beans or the “regular” good shelter and buy steaks for the grill?

Expensive things are for those with money to burn. They may not feel that the Iron Bound is the place to burn an extra $100K, even if they have it to burn. So, the house, having $100K of improvements and amenities will suffer against it’s adequate but plainer competition. If ten houses are for sale and only two buyers are able to buy them, only the two best deals will sell. (Not always the nicest house or the lowest priced but the best value for money ones and the ones that have that extra “something” that the buyer really appreciates. Since we rarely know what that “something” is, lower price is the best way to compete.)

The other eight, five of them in good shape, two dogs and one $100K over the neighborhood will have to wait until a spate of new buyers come into play and, when they do, hope that a new spate of homes doesn’t leave the eight back at the bottom of the barrel.

In my tent analogy, a rainproof shelter with mosquito netting in olive drab may sell before the one that adds decorator colors and fringe and extra space for the electric beer cooler, unless the price differential is insignificant and the color appealing.

Does that help your thinking?

Bill Holt
0 votes Thank Flag Link Sat Aug 1, 2009
What's happening next door shouldn't impact your property, assuming you don't make the same mistake of over-pricing it when you decide to market it. Just because your neighbor's house looks nice to you doesn't mean that your local market is willing to pay for the cosmetics that appeal to you. Comparable properties within the neighborhood do affect home values directly as buyers typically aren't willing to pay substantially for upgrades they may not want or can reproduce themselves by choosing a property for $100K less.
0 votes Thank Flag Link Fri Jul 31, 2009
"Been on the market for quite some time now".

That is [most likely] because the Price is Unrealistic.

Over-Priced houses will not get any traffic; Real Estate Agents will be hesitant to show them.

They will not appear in the Search Results when Buyers are on the Internet, and if they do, the Buyer will usually hit the Back Button.

There is a principle in Real Estate Appraisal known as "Conformity". A house will not be worth more than other comparable houses in the same area; it will "conform" to the prices of the comps. If an Offer comes in at the over-price, the house [will probably not] appraise.


When you put your house on the market Gary, set a Realistic Price based on Comparable Sales. If you do not have very recent comps, talk with a Real Estate Appraiser about what the house should be priced at.

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Best wishes to you,
Fred
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0 votes Thank Flag Link Fri Jul 31, 2009
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