Why would a house "priced below market value" not sell?

Asked by Jim Walker, Carmichael, CA Thu Aug 2, 2007

I'm starting a new thread here; I have read sellers post that their homes were below market price and still not receiving offers. Some were annoyed at the suggestion they go still lower when they are already lower than every comparable house for sale.
Here are some reasons: 1) Buyers perceive REO's to be better deals. Period. If you are competing with Repo's, you have to undercut them. Even though your house is cleaner, better, even cheaper. Perception counts more. 2) Due to the overwhelming amount of inventory, buyers may not see all the houses that meet their criteria, thus miss out on the best deal. 3) When inventory is so high that only 1 in twenty listings sell each month, you have to be in the bottom quintile to have a 1 in 4 chance. 4) If you don't want to risk not selling you have to be the lowest; not just low. I am in Sacramento California, one of nations worst markets today, so this advice only applies to an unequivocal "buyer's market"

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15
Paul Slaybau…, Agent, Scottsdale, AZ
Thu Aug 2, 2007
BEST ANSWER
Great post, Jim. Most sellers just flat-out do not have a grasp on what market value actually is. In a slow market, you can't pull out comps that are 6 months old as evidence of current market value. Sellers also look at the houses around them currently for sale and think, "By golly, I am priced under all of the competition, so I must be below market value." Wrong! Until those properties sell, they do not constitute market value. Especially in an area with declining values, there is a high probability that most everything is overpriced. If the only homes selling are the cheapies, that is market value. People have a hard time accepting the fact that they can't go back to the high water mark from a year or two ago, circle it, and cite it as proof that their current list price is well below that "market value."
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6 votes
Ellen Chung, , San Mateo, CA
Thu Aug 2, 2007
Great post Jim, I agree with most of your points. However, there are other reasons behind why properties don't sell--one of the many reasons is that we can't overlook the fact that homes just have to be aesthetically appealing to buyers. If they have the decision between a home that will need to be repaired, cleaned, and polished for $600,000 or a home that is ready to move-in with clean, aesthetically appealing interior and landscaped gardens for $630,000, I think that most people would go with the latter.

For sellers, yes it is frustrating to continuously lower your price in order to appeal to the potential buyer, but the concept behind lowering your price is to gain a larger audience. The more people that come to view your home, the more likely it is you will get offers. The more offers you receive, the higher the chance you will get the price you are looking to sell for. Just because you're lowering the price doesn't mean that you won't get the price you want. Lower your price and if the offers are too low for you, then you always reserve the right to turn them down or to present counter offers. So keep your chin up! Sure lowering the price of your home to below market values may depress you, but it can lead to many more opportunities and possibly lead to the offer you're looking for.
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4 votes
Pricetellsall, , CA/NY
Thu Apr 3, 2008
A house could never be priced below market because it would sell at some price. Maybe a seller thinks it is below market but it isn't. Adjusted properly for condition, location, asthetics, etc.. it could never be below market - it would clear at the market at the right price.
2 votes
Bruce Lynn, Agent, Coppell, TX
Thu Aug 2, 2007
Location Location Location......otherwise style of house, condition, smell, availability to show, responsiveness of agent to answer questions, condition of homes around it, history of the house (haunted, deaths, crime), color, does it back up to Wal-Mart, lots of factors can be in play other than price.
Web Reference:  http://www.teamlynn.com
2 votes
Carrie Crowe…, Agent, Southaven, MS
Thu Aug 2, 2007
I agree Paul and Ellen. If you were above the market and keep lowering a little, you are just chasing the market because it will also be lowering a little. It is like a domino effect. If you lower, make it good! Don't be afraid to push the envelope and get the big jump on the others in your area first. It is never easy to lower, but it you do it right, you won't have to keep doing it!
Web Reference:  http://carriecrowell.com
2 votes
The Hagley G…, Agent, Pleasanton, CA
Thu Aug 2, 2007
It's either Price, Product (the home) or Pitch (the marketing.)
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1 vote
Deborah Wade, Home Buyer, New York, NY
Fri Jul 8, 2016
Why does Trulia list a house 115 Teak act Pine knoll Shores NC on the cannel has3 baths not 2 Assessment Market Value for2015 was4 8$431,647 your listed price $,380147. Difference is $51,500 less. This property is on a deep water Canal
0 votes
Rochlin, Home Buyer, Camp Hill, PA
Wed Jan 9, 2013
I am a seller and my home is in a fantastic location, with a larger yard than anyone else in the area. It is sound, only needs minor stuff like paint, has all oak hardwood floors in every room, its at teh end of a cul du sac only 2 blocks from two schools and has a 2 car 600sq' garage in the back that is a real building with a roof like a home-- it coudl be converted into an apartment in fact. We are unfortunately at the top of the market in value and we started out at what the appraised value was 2 years ago, we have dropped the price 3 times and now its below market value. Its a beautiful home with a lot of room in a great location and no one wants it because it is not completely remodeled. It just need paint -- throw rugs on a hardwood floor is beautiful. Ok so right now we are going to lose money if we sell it at the curent below market price-- it is only 20k higher than what we bought it for 10 years. We only get low ball insulting offers while smaller homes 20 years older than ours on tiny lots [less than 1/4 acre] in less desirable locations, off busy high volume traffic streets are selling above our asking price-- 5 years ago those same homes were woth 40% less than our home was. I don't understand how buyers can be fooled into thinking new paint/carpets = better house. to me it is like that roast at the grocery store covered in spices and in the reduced meat section-- we all know that meat is waaay old and the spices are covering up the green color-- to me thats what these houses are and these buyers are falling for it! We are going nuts with our house sitting for 5 months on the market and only 2 low ball offers..... When we bought it there were people bidding against us and it sold the day of the listing!!
0 votes
Pricetellsall, , CA/NY
Fri Apr 4, 2008
Houses are hardly like used textbooks. I've yet to see a dogeared text book restored to better than new condition, or a textbook with outdated information "renovated". Nor have I seen a textbook "expanded" and enlarged or otherwise improved, after it's been printed.
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Everything has a price that will clear the market. Renovated or not any house will clear at some level. Maybe it will clear for only land value or .10cts to the dollar but it has a price. This is economics 101 - pretty simple stuff. At some point someone will take it off your hands. That's what makes a market. There is always a buyer. Show me a house and I'll find you a buyer - you may not like the price but I can find someone who will pay for it.
0 votes
J R, , New York, NY
Fri Apr 4, 2008
I'm sorry Elvis, I was responding to Pricetellsall's comment to your post. He said:

"What you have describe is the housing market in a nutshell. Everyone has a house and nobody "wants" one now. Prices need to be lower to a point where speculators or long term investors/homeowners are willing to buy and hold it until it goes back up again - next semester in your book example."

I'm disagreeing with him.
0 votes
J R, , New York, NY
Fri Apr 4, 2008
In your example the books are worth less than $65 after everyone has one. What you have describe is a typical market cycle. The bookstore can sell the books but it is no longer worth $100 or $65 but something lower that would lure someone who is willing to buy it now and sell it next year when people need it.

What you have describe is the housing market in a nutshell. Everyone has a house and nobody "wants" one now. Prices need to be lower to a point where speculators or long term investors/homeowners are willing to buy and hold it until it goes back up again - next semester in your book example.
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Houses are hardly like used textbooks. I've yet to see a dogeared text book restored to better than new condition, or a textbook with outdated information "renovated". Nor have I seen a textbook "expanded" and enlarged or otherwise improved, after it's been printed.
0 votes
Linda, , Berwyn, PA
Fri Apr 4, 2008
Buyers do not choose a house simply based on price. The majority of buyers want a house that is updated, move in ready and in a desirable location. Condition of a house is an important component of the buying equation. The house still has to appeal to them--even at a bargain price. With so much inventory to choose from, a buyer will choose the house that is priced right and looks the best.
0 votes
Pricetellsall, , CA/NY
Thu Apr 3, 2008
If a text book is normally sold @ $100.00, and in the classroom that requires that textbook, each and every student buys one... and now the school bookstore lowers the price for $65.00... they will undoubtedly have difficulty selling them, even though they are now priced below market value.
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In your example the books are worth less than $65 after everyone has one. What you have describe is a typical market cycle. The bookstore can sell the books but it is no longer worth $100 or $65 but something lower that would lure someone who is willing to buy it now and sell it next year when people need it.

What you have describe is the housing market in a nutshell. Everyone has a house and nobody "wants" one now. Prices need to be lower to a point where speculators or long term investors/homeowners are willing to buy and hold it until it goes back up again - next semester in your book example.
0 votes
Mike Kelly A…, Agent, Santa Rosa, CA
Thu Apr 3, 2008
Jim, I don't know how many "unequivocal" Buyers market we have. In our area of Sonoma County, short-sales are one area where you could be priced WAY BELOW market value but due to the very nature of the type of listing and the uncertaintly of getting paid Realtor/Licensees that are smart IGNORE THEM!! Last month we closed 3.4% of all short sales now on the market. We only sold 200 homes from a stock of 2550 so not even 10%! The pendings are the ones to look after and they ain't doing much. But the REO's--it's a SELLER's Market! For all the reasons you state--you get paid, great pricing, some even look good! Then throw in the absolute NEW REO market which is the New Home field and you've got an inordinate supply competition out there that really NEED to sell. Sure they all NEED a lot more money but the market, as we all know--doesn't give a rat's tush what are Seller's need! (oooops! Hope that passes the moderation police!?). I like reasonable facsimile portrait above versus your "reality TV look!".
0 votes
J R, , New York, NY
Thu Apr 3, 2008
I wouldn't lower my price either. I need to make some money.
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There ya have it, in a nutshell. What a seller "needs" is irrelevant to the buyers. Just like what a buyer "wants" to pay is irrelevant to the seller! You, dear homeowner, "need" to stay put, because you aren't going to sell.

Maybe that's what I should tell potential homeowners when they question my 6% fee! I "need" to make money! Maybe I should raise my fee because right now I "need" to buy a new car! :)
0 votes
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