Most of the responses below were solid info, but the one lacking piece of data, or I should pieces of data is- Recently settled comparables. In some sub-markets there are more than a handful of comps. But in other micro and sub-markets, there is simply not enough or even none. The meaning of comparable is; being Similar .
Now I understand that one persons perception of similar varies to the next. But, this is where CMA's/BPO's and Evaluations lose credibility. Using just 2 or 3 comparable properties is not enough, ideally you want to have at least 5 or 6. But that is just not possible in most markets. So analysis becomes even a tougher job.
If the subject in question is 3 br, 1.5 bath then the comps need to be just that. At most you could utilize a 3 br 2 ba, but not a 2.5 bath. CMA's/BPO's typically do not allow for adjustments for the crucial differences of each house. Subsequently, a typical 4 br colonial shopper is not going to consider a 3 br ranch or split. Yes, there are those who will, but the majority will not. Using comps Similar to the subject is a key factor in determining value. Also keep in mind that Market value is determined by the seller, the buyer and market forces.
I do absolutely agree that most active homes in my area are overpriced, from a small amount to a large amount. The most common reason I have found is that typically, the owners paid too much during the bubble and/or owe more than what reasonable market value is. Whether that was done through re-financing or taking equity lines. Not too many owners that are selling are free and clear or have low mortgages.
The fact is that these sellers are unrealistic in their expectations and do not understand the
We are currently in a Value Pricing Model economy, despite what some people will keep saying.
Beyond intrinsic values, the contributory values of years gone by are not valid selling points right now.
Buyers want Value, period. Again, while there is a large portion of intrinsic value in homes, the perceived value is often miles apart from buyer and seller. Sellers tend to attach too much emotion to their asset.
Understandably, a home is more than just an asset, but economically, a home is AN asset. Traded on the markets like stocks, bonds and commodities. Something a lot of sellers aren't aware of.
The overall Somerset market has declined 12% in the past 6 months.
In the Basking Ridge market (all homes- condo/sf detached/etc) has declined 18.7% in the last 6 months.
The median settled price has gone from $590k to $480k.
Now, you can certainly macro analyze several micro/sub-markets. You could breakout just sf detached, just condo's, etc. You can show a rise in certain sub-markets. Just as you can show a decline or rise in almost any sub-division in town. The analysis could even breakout the values on a bedroom count level, etc. But if we are talking about a township wide macro analysis, then values are Declining. That is a fact.
Sellers need to be educated by their agents. Instead of being placated to and agreeing that yes, your house really is worth $. In some cases, it may be worth the amount a seller thinks, bit it is rare. Subsequently, most agents are guilty of recommending an overpriced listing.
The clear undeniable evidence of this is in the Days on Market. Now, the published DOM on the MLS's is mostly false. Agents and brokers do not like to tell or publish this fact. The MLS data suggests that houses have been selling in 60 to 90 days, when in fact it more like 90 to 180 and beyond. Also, the LP to Sp Ratio is also false. Most agents will tell you that homes have been selling for 95% to 97% of their asking price!
Well, no not really Dorothy.
The problem lies in the system itself. When a listing is withdrawn or expires, the DOM gets reset. When a listing has a price reduction, the original price does not factor in the LP/SP Ratio. Often times the true DOM is one third to a half more than what gets published, as well as the LP/SP %. Which is typically 80% t0 85% of the ORIGINAL asking price. What this data backs up, is the initial overpricing issue.
So, it comes down to knowledge and understanding- from buyers, sellers and agents. I have always said that Real Estate is not really a Sales profession as much as it is a financial/economic profession. Knowing just more than the basic supply/demand concept of economics 101 is required today. Buyers are much more savy and are armed with much more information, thanks in part to technology.
While there are still some justified high prices in certain micro markets, most sellers need to realign expectations and remove the emotional equation out of their thinking. Just because your home is in a certain zip code, doesn't mean it is worth a half, three quarters or a million dollars. Thorough Research and Analyses are an agents best bet.