Market Conditions in 19711>Question Details

Amy Eyre, Home Buyer in 19711

What Are Realtors Thinking?

Asked by Amy Eyre, 19711 Fri Sep 5, 2008

It seems to be real estate professionals are very much out of touch with the hardships and difficulties the average American Family faces today. With changing credit criteria and increased interest rates in a slow market why do I keep seeing homes lsited for much more than they are truly worth. There seems to be no pattern. I could see a home in any given neighborhood in updated condition listed for anywhere between $15K and $30K less than another similar home in worse condition. I live in an area where homes in similar neighborhoods with similar appeal and location varying vastly in price to one another. Some of the homes, especially those that have been on the market the longest, are listed way above their worth or what their condition calls for. If a home is a fixer up and it's priced above 200K in my area I would say that is outrageously over priced. So, my question is what are realtors AND homeowners thinking? Wouldn't they rather sell their homes than have it sit on the market?

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Answers

18
Amy,

There is a process in place that the vast majority of real estate professionals embrace when it comes to pricing homes that does not include a "wild guess" or "this one looks nice."

The system is essentially the same process an appraiser uses to establish a home's value. This "comparisson method" has its drawbacks but for the sake of establishing a guideline and being fair it does a good job.

Yes, there is a check and balance involved as well. If the public does not agree with the assigned value........they walk away and find one they agree with.

The difficulty here is that the real estate market is going through a serious downward adjustment that is by all standards, difficult to keep up with. This is complicated by owners that are faced with selling their home for less than they paid for it...try walking in their shoes for a while. You'll come to understand this decision hurts.

What are realtors thinking?

The reality is we are thinking about a lot.......seemingly, more then people give us credit for.
3 votes Thank Flag Link Fri Sep 5, 2008
It's a case of denial mixed in with the fact that nobody in those areas is so desperate that they HAVE to lower the price. Also, there may be few or no foreclosures at discounted prices that the sellers in those areas need to compete with. Real estate is a slow moving animal, and it takes years for things to cool off. Be patient!
2 votes Thank Flag Link Fri Sep 5, 2008
I often find myself competing for listings with a homeowner with unrealistic price expectations....looking for an agent to take the listing at that price with a deep discount. It ultimately hurts the seller.

As far as under-pricing a home, this is a technique that I use t generate multiple offers and get the home into contract faster....great for distressed homes. I don't think it's possible to "underprice" a home if it's properly marketed. However underpricing without a solid marketing strategy hurts the seller, the neighborhood, and the industry.
Web Reference: http://www.cindihagley.com
1 vote Thank Flag Link Fri Sep 5, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
MVP'08
Contact
I understand your frustration, but there are a number of factors that have come together to create the market as we see it today. Due to the troubled mortgage industry, many buyers who previously could qualify to purchase a home no longer qualify even with the lowering sale prices. This fact, among others, effects how long a property will sit on the market before it sells.

As for the inflation of home prices as compared to 20 years ago, I think you can look at any product from food prices, to automobiles, to clothing and see the same trend. The purchasing power of a dollar 20 years ago is not the same today.

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference: http://www.YvonneBaker.com
1 vote Thank Flag Link Fri Sep 5, 2008
Hi Amy. . . Realtors are thinking about how best to serve their clients in such a volatile market. The market value of a home is set by "what a willing buyer will pay to a willing seller," no more no less. In some neighborhoods, however, property values are dropping faster than the market has time to adjust. Therefore, if a property is listed at a determined market value, but does not sell and sits for a few months; each month that property does not sell, it is worth less due to market decline.

Some homeowners who bought at the top of the market, who now find they owe more than the property is worth, may find they must sell for whatever reason (often financial hardship).

There was a reversed trend in the 2004-2005 market when values were increasing at a phenomenal rate.

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference: http://www.YvonneBaker.com
1 vote Thank Flag Link Fri Sep 5, 2008
Hire a real estate broker to sell your home and one of the first things he'll likely suggest is hosting an open house, so potential buyers can casually check out your property on a weekend afternoon. While open houses are promoted as a great way of finding a buyer, a National Association of Realtors study found that their success rate is a mere 2%.

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0 votes Thank Flag Link Thu Dec 11, 2014
Hello Amy....welcome to the psychology of real estate. Often a homeowner is ABSOLUTELY CONVINCED that their home is worth more than the market suggests and WILL NOT list it for less. That leaves the Realtor with two choices: walk away, or list it high and hope that the Seller comes to their senses and gradually reduces their price to a point where it sells (or maybe get lucky and find a buyer willing to pay more than market value). A Realtor has to read the customer and decide if s/he will ever face reality (or if the market might come up to meet the currently unrealistic price), because it is not worth my time (months or years??) to sit on a listing that isn't going to sell. SO MUCH of real estate is psychology, I think a major in business and a minor in psych would make the best college education for real estate agents.
0 votes Thank Flag Link Thu Dec 11, 2014
I use my knowledge of local markets to give my clients open and honest recommendations for pricing. Desperation often plays a part in sellers being unwilling or unable to understand market value.

S. Walt Simpson
KW
0 votes Thank Flag Link Wed Dec 10, 2014
I agree with everyone here. I cannot force a seller to list their home at the price I deem fit; however, it is my responsibility to put my expertise on the line and tell them what I think it is worth. When I overprice a listing, I tell them what is a realistic price and ask them if they are willing to decrease the price at 30 or 60 days. If the answer is no, sometimes I choose not to take the listing.

I wish that buyers that feel like you do, would offer what they truly feel a home is worth. That would sure help us relay to our sellers that the market feels the same way. I am good with negotiations and I think a lot of buyers would be surprised what they can get a home for, if they just offered a realistic price and played ball with the seller.
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0 votes Thank Flag Link Mon Jun 13, 2011
IIIIII UPDATE June 1, 2011

This question is quite old, but still relevant.

We're in a price driven market now. Pricing is critical. My counsel is to price realistically for this market. That means comparison to other properties. The Denver area market, like other western states, has been hit by plenty of foreclosures and this has influenced prices. Still, there are many parts of the metro area - especially the city of Boulder - that have resisted national trends.

Buyers should concern themselves first with obtaining financing and then shopping for homes in their budget. If you're looking to get into a home you can easily afford and you don't mind if there are some things that need to be fixed, then a lender-owned home may be right for you. Remember though, a foreclosed home typically has not been maintained for a while. Foreclosed homes are auctioned "as is."

We're empowered to do the best we can for every client. We can give counsel on prices, but it is the seller who has the last word. If the price can't meet their needs, the property does sit. Some sellers become discouraged and pull their homes off the market. The job as a seller representative is to make sure a home doesn't remain on the market for long.

Everyone has this in common: Buyer and seller alike want a stable market. Real estate professionals want to see the market recover, too.

I have worked in real estate in good markets and not-so-good markets. This is a tough, tough market for sellers. There currently are two factors that can favor the seller's outlook. There have been job gains while mortgage rates have come back down. In some areas, buyers have to compete for homes. That may be a function of reduced inventory. So, homes that remain on the market for a little longer might benefit from more bids.

Three years removed from 2008, the market generally has been soft. Nationwide, values have returned to levels not seen since 2000. It's as if this past decade didn't happen. If only that were true ... no 9/11, not real estate bubble, no wars.

SuZ,
PML of Longmont, CO
720 810 0683
0 votes Thank Flag Link Wed Jun 1, 2011
Hi Amy,

I love your questions here as I see this happen from time to time in my area as well. I don't think you can group all of us "real estate professionals" in one bucket as there is a very small percentage of agents who are in this business 100% and working full time to sustain our career and community out reach.

In my experience working with sellers, I always warn them of the negative outcome of pricing a home too high however I always get those sellers that want to do it anyways. This is situation where an agent can take the listing as an overpriced listing and do the three P's of real estate - - put a sign in the yard, put it in MLS and PRAY!!

A good agent will counsel their sellers on the experience of having an overpriced listing and hopefully will get the seller to come to a point of compromise on price or will not take the listing due to ethical reasons of not being able to truly serve the client in selling their home at a price that is above market value.

I hope this helps as far as the mindset of a good agent!!! Sadly, it seems that those folks that are trying to sell at a price that is $15-30k above the market may actually turn to a distressed property.

Our nations homeowners are definitely facing some tough times right now and it is more important than ever before (and ALWAYS has been important to me) to counsel them on their very best option for their home and execute this plan in full. Whether it means selling the home and sitting tight for a couple more years while we await recover - we will get it done.

Thanks,
Brooke Hengst
REALTOR
Your Castle Real Estate
(720) 988 5952
bhengst1@gmail.com
Web Reference: http://www.brookehengst.com
0 votes Thank Flag Link Thu May 12, 2011
The issue of overpricing the listing price does not correlate to the selling price. I just read a marketing report that states non-distressed housing listings sell for 91% of their asking price. So that means even low end houses sell for at least $10, 000 less than asking price. If a buyer likes the home they can offer what ever they can afford on the house. Sellers are aware that the listing price will not be (in most cases) the selling price, so why not list for 10% higher? Of course if a seller needs to sell the property due to financial needs asap then the 'bank value' is probably the better bet for a fast sell.
0 votes Thank Flag Link Thu May 12, 2011
It's not about giving credit where credit is due. I see houses sit on the market and it frustrates me that the local realtors...and sellers...seem to be blind to it.
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LOL Realtors aren't blind to it. Unfortunately you have some Realtors who will take an overpriced listing and as you say, it sits and sits. After it expires, some sellers get real and price it right, some find another realtor who will take the overpriced listing, and some will go FSBO. Realtors need to WALK AWAY from overpriced homes, but some don't--they think they will be able to get a price reduction in the future, or they think they will sell other homes off the calls they get. Unfortunately for them, buyers aren't stupid and can spot an overpriced listing when they see it and they don't call. I have stopped even showing overpriced listings, because I've found that even with supporting comps, sellers will not negotiate. They're waiting for the price "to come back up" to where it never was to begin with.
0 votes Thank Flag Link Sat Sep 6, 2008
Amy, I understand your frustrations. Keep your eye on the prize though...in a couple more years this will all bottom out and things will be much more 'normal'. You will have hopefully fixed your credit within that time, and prices will be less.

The reason that home prices have gotten so high is due to two things. The tech bubble bursting, and 9-11. These two things had very negative effects on consumer confidence and spending, and the government therefore lowered interest rates to very low levels to jump start things again. The rest is history, which I'm sure you've been following for the past few years since late 2001.

The reason that the dollar is devalued is not from artificial inflation of prices. The dollar is devalued because the government has been printing more money. The reason they are doing this is because they need more money to fund the Iraqi War, provide bailouts and loans for troubled banks, try and help out Freddie and Fannie, give everyone a stimulus check, bailout people facing foreclosure...the list goes on and on. They don't just have cold hard cash sitting around in a vault, but they do have access to printing presses to MAKE cash. The more of an item in a marketplace, the less rare it is, and thus it's value goes down. That is why prices on consumer goods have gone up (actually the haven't gone up, it's just that it takes more devalued dollars to buy the same tube of toothpaste now).

It's finally time for the government to stop stepping in and trying to stop the fallout from the mess it has made. We'll see how things pan out in the next couple of years.
0 votes Thank Flag Link Sat Sep 6, 2008
Good Morning Amy... I think the "monster" is about to devour the city. I just finished writing a blog on the status of the market in light of the eminent take-over of Fannie Mae and Freddie Mack by the government. The market is still in a down-turn and this is not a good sign for either the buyer or the seller. If relocation to a more steady market is not an option, you and your husband will have to exercise extreme patience; look at foreclosures; look at short sales; and don't lose sight of your goal. There are still some markets wherein $150,000 will buy you very nice home. Texas is one of those.

Good luck...

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference: http://www.YvonneBaker.com
0 votes Thank Flag Link Sat Sep 6, 2008
It isn't fair, by the way, what has happened to new home buyers. I am in that position. My husband and I have worked hard and been very diligent about building our credit. We've been working on it for over four years (he has been building for four and I have been for over 2). We did EVERYTHING we were told we should do to be in a good buying position. We almost bought two homes before the criteria changed and now we are stuck and in a home that was supposed to be a short term two year limit rental...and we are now in our fourth year in extension. Due to a series of bad luck those two houses did not work out. We could get a loan at a very high interest rate now so if the market prices were lower we could afford a home now...as it stands we have just been told we need to work another 6 months on our credit...and that's assuming the criteria doesn't change again and that the market does not go up in the meantime. That may get us into a home just before our lease runs out...if we find a decent home with cooperative sellers. I know it's all business to the real estate industry...what else is new. Yes, the same can be said for everything from toothpaste to clothes and that the dollar isn't as strong as it used to be...but the sad truth is it is the artificial inflating of prices that has weakened the dollar and got us in this mess to begin with. It's about time the industry starts taking responsibility for the monster it has created and stop pointing the finger at those it has taken advantage of.
0 votes Thank Flag Link Sat Sep 6, 2008
Hello Amy,
sometimes the price of a home is what the home owner insist on listing it. As a real estate professional, we're supposed to advice you what the market deems your property is worth, however, despite that, some owners put a sentimental value to the home and feel that although the market is down state wide, they still feel that there home is still well above the norm. This results in a house sitting on the market for a long time, getting stale. We offer the advice as we are supposed to buy if the home seller has a different opinion of the house value we have 2 options, list it for what they want it listed for and let reality hit them, and their pockets in the long run, turn down the listing and move on. A lot of Realtors won't do the second option so they end up with a house sitting, and sitting, and sitting. Hope this answers your question somewhat.
0 votes Thank Flag Link Fri Sep 5, 2008
It's not about giving credit where credit is due. I see houses sit on the market and it frustrates me that the local realtors...and sellers...seem to be blind to it. This didn't happen over night. I've seen some homes sit on the market for 6,9 even 12 months...and often the list price remains the same well passed the first 3-6 months and then lower very little. I agree that it is difficult for sellers who paid too much for their homes to begin with but that should have never happened to begin with. If you look at how much people paid for their homes 30 years ago the market increases were exponentially greater in the past 10 years than previous decades. 20 years ago a home costing $150K was the home of someone wealthy. Now a home costing the same amount is typically in a poor neighborhood.
Also, may I point out, there are plenty of homes in foreclosure in the area. Getting a listing for those homes is not so easy to get.
0 votes Thank Flag Link Fri Sep 5, 2008
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