Home Selling in 92078>Question Details

Jim Brownrid…, Other/Just Looking in 92078

Why are so many empty homes listed with seamingly artificially inflated pricing when they don't sell?

Asked by Jim Brownridge, 92078 Sat Sep 10, 2011

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Sometimes the brokers the banks hire are not really familiarized with the neighborhood and do not price them accordingly. The asset manager will call for price reductions though if a property is not selling.
0 votes Thank Flag Link Mon Sep 26, 2011
No big mystery: Empty homes, typically REO, are listed at high prices to prop up prices of other homes in the area owned by the same bank, trustee, or whoever owns the empty home. While listing prices cannot be used as "comparable properties" for appraisal purposes, their values can be used as references for negotiating. Unless, of course, one of the parties in the negotiations has the brains to say... "Are you freaking kidding me? You're using THAT listing to support your rediculous asking price? How about we start again using information from THIS QUADRANT OF THE GALAXY. Thank you." Or something like that...
0 votes Thank Flag Link Sun Sep 11, 2011
without some specific addresses we'll have to opine that the seller is delusional. many cannot accept that the home they are selling is not that much nicer than a comp down the street.

there are some agents that will take a listing that's overpriced and hope to wrestle price reductions from the sellers...some of those sellers won't accept the reality that they have an overpriced dog and the agent is stuck with the thing until it expires
0 votes Thank Flag Link Sat Sep 10, 2011
Simple. They're not selling because their prices are too high. Or the flip side: Their prices are too high, so they're not selling.

Either way you look at it, the problem is the price. So why are the prices on some of those properties so high? Could be lots of reasons:

**The seller has a large mortgage and feels he/she has to price the house that high in order to sell conventionally. Example: The house is worth $250,000. The seller owes $245,000. After you factor in real estate commissions, negotiating the price with the buyers, negotiating the price again after the home inspection, the seller calculates that he has to sell the house for $265,000. Unfortunately, he's overpriced the house and so won't get any offers on it.

**The seller remembers what his neighbor got when he sold the identical model 2, 3, or 4 years ago. The neighbor sold for $300,000. The seller thinks he's being flexible by only listing it for $265,000.

**The seller has sunk a lot of additional money into the house--much of which won't yield any return when he sells. Or it's a low payback. Let's say he's put $15,000 into new appliances, new bathrooms, new carpeting, etc. His agent tells him that other houses in the neighborhood sold for $250,000. But the seller figures that since he's spent $15,000 on improvements, that his house is worth $15,000 more. (It isn't.)

**The seller figures that with the right marketing, someone will be willing to pay $265,000 for his house. Maybe open houses every weekend. Maybe constant ads on Craigslist. He knows that $265,000 is on the high side, but figures that there isn't one precise "right" price. C'mon, it's a range. So sooner or later, he figures, someone will come along, fall in love with the house, and pay a bit more than the market says it's worth.

**The seller figures anyone making an offer is going to offer less. So, rather than pricing at or close to $250,000, he'll just price it higher and then negotiate with someone who makes an offer.

There are other reasons, too, but those are some of the main ones.

Tip: You've listed yourself as a "Home Buyer." I'm guessing you'd consider making some offers if the prices weren't "artifically inflated." So: Make offers. Consult with your Realtor. Get CMAs on properties you're interested in. Then resolve to pay no more than the CMA. Probably offer less. Using the example above, you'd probably offer somewhere between $235,000 and $250,000. ($235,000 so that if the seller was willing to "split the difference," you'd come out somewhere close to $250,000. Offer $250,000 as a "take it or leave it price.) Again, your Realtor can suggest the right strategy.

But what do you have to lose? If you don't make an offer, you know you won't get the house. If you make the offer and it's rejected, you're no worse off than you are now. If you make the offer and it's countered, you may be able to get the house at a reasonable price. And if you make the offer and it's accepted, you've bought the house at a fair price.

Hope that helps.
0 votes Thank Flag Link Sat Sep 10, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
While I can't speak to what you consider "artificially inflated" I can share with you my experiences with short sales and foreclosures. If a seller gets pre-approval for a HAFA short sale the lender is bound by a formula to arrive at a list price which is typically way over market (thank your current administration for that). This can also initially happen on a foreclosure when the bank is told by the investor at what price they want the property listed. To compound this problem there are times the Broker Price Opinion or BPO (kind of like an appraisal that the bank will use to arrive at list price) is done by an individual who is from out of the area and does a poor job at coming up with a fair market value(I have seen them off by as much as $100,000). i have also run into some companies who are in the business of buying foreclosures in bulk, remodeling them and then asking above current market value only to drop there prices to finally sell. I can also say that certain areas of San Marcos and certain price points have done well even in this market and have shown some appreciation recently, while other areas are still trying to find a bottom.
If you would like to discuss your specific situation, please don't hesitate to call.

Best Regards,

Gil Soto
Realty Executives
760-672-9407
0 votes Thank Flag Link Sat Sep 10, 2011
Understand that the LISTING PRICE has one primary objective, to attract attention: It is not intended to be set in stone, and in many cases it is not even a good guideline toward the SELLING PRICE.

Some Sellers believe that by setting the LISTING PRICE high, they can always come down, and people will make an offer anyway: WRONG! Buyers will just bypass the property and look at houses that are within their price range. And six months from now, the Seller will slowly start lowering the PRICE, (this is called “chasing the curve”) and Buyers will be asking the question; “What’s wrong with that house?” and “Why has it been on the Market so long?”

Other Sellers set the LISTING PRICE low, to attract multiple offers. (The correct strategy.) We are asked; “Aren’t you obligated to sell at this price if someone offers it?” The answer is probably not; for that to happen, you would first have to have only one offer, and secondly, the offer would have be exactly the same, down to the smallest detail, (please discuss this with your Realtor).
Another thought; Buyer will search for potential properties by groups; for example, $400,000 to $450,000, and $250,000 to $300,000. If your house is priced at $460,000 or $310,000, the Buyers will never see it. (something else to discuss with your Agent.)

Different Banks have different philosophies about pricing their properties: You cannot draw any conclusions without a good analysis.

Have your Realtor do a CMA, (Comparative Market Analysis) to help you determine your Offering Price. It is the surest way to determine the Market Value of the property.
0 votes Thank Flag Link Sat Sep 10, 2011
Hi, Good 'in general' question but why are you so frustrated? Ru looking in your price range? Lots of inventory available to move into asap or to lease out or fix/flip here and now in different areas but the price ranges make a huge difference and in some price ranges here, homes are stabilizing. Condition is a huge factor. Some are for sale priced low to be bid up or some offers may have cash low balls or multiple offers and going through the marketing process. Others are priced too high and just sitting vacant. Some actually have offers on them and are awaiting short sale approval which takes longer then a traditional or equity sale. Some may be going through a longer REO process. Email me with details and I can assist your from research to Close of Escrow. Maureen 760 622 6855 or at maureen@bellrealtygroup.com
Web Reference: http://www.coastal.biz
0 votes Thank Flag Link Sat Sep 10, 2011
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