Zack, Other/Just Looking in Westchester County, NY

Odd, possibly unethical description?

Asked by Zack, Westchester County, NY Sun Feb 10, 2008

So looking at 20 Milestone Rd in Rye Brook, NY, the remarks from the mls listing and on all non-Houlihan Lawrence sites reads like this: "Dramatic Price Reduction! Priced Below Market Value! Incredible Buy! Will Not Last! ..." My only question is with the "Priced Below Market Value!" comment. If the house hasn't sold, then it is obvious the market has priced this house below its current asking price. Unless this enters contract within days of the reduction, this statement is completely inaccurate, but my question is, is it ethical? The statement of below market value tells a buyer that if he were to buy this today and sell it immediately at market value, he could make a profit since its below market value. Obviously that is highly unlikely, and I know the buyers should know better, but it feels wrong to me to see a comment like this. Also, this community's prices are nuts. The houses are large but every one looks exactly the same outside. Little boxes on the hillside ...

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I completely understand what you are saying but want to defend the statement. The reason, in addition to what JR said with "sold comps", is that homes are not LIQUID assets. Also, if they had priced it between the original asking price and the now "below" market value price, it might have sold. However, you can't make a second first impression. So if the home didn't sell at the original price, it probably won't sell "at market value" because people fear that if other people didn't want it, they don't want it either. Listings become stale and the fear of loss disappears after the first couple days on the market.

So, give the house a chance and see if you think it is really priced below market value. If it's not, tell the agent what you think. If it is and you like it, buy it and enjoy the value. Just remember, you can't turn around and sell it the next day for a profit because the buyers look at the history and homes are not liquid assets.

Sincerely,
Ruth
1 vote Thank Flag Link Sun Feb 10, 2008
Ruthless, Other/Just Looking in 60558
MVP'08
I see this type of remarks all the time. It's referred to as "puffing". I'm not a big fan of these type of remarks and I don't think they draw buyers. If it's a good house, and priced competitively with other homes in the area it will sell on it's own merits. As far as "Priced Below Market Value", this could be a price the owners have on a fairly recent appraisal. Can you promote it based on this if the list price is below appraised value? Yes. Does it mean it's really below market value? No. HERE'S FOOD FOR THOUGHT! A good real estate agent will price a home they are putting on the market according to the current competition. Buyers do NOT look at homes that have sold. Buyers only look at other homes that are in competition. In reality, you could have a dozen homes that sold in a neighborhood for $800,000 and currently have a dozen priced at $700,000. If you price your house according to the solds you will wallow away in your frustration.
Don
Web Reference: http://www.nyhomeseller.com
2 votes Thank Flag Link Fri Feb 15, 2008
2) Realtors evaluating their houses. In some cases, realtors are being forced to list at these prices because this is what a seller wants.
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No one is forced to take a listing. Realtors should NEVER take an overpriced listing. One of the problems in this market is overpriced inventory that is not going to sell. It is a waste of everyone's time: the buyer, the seller and costs the realtor money. I would guess at least half the houses I see listed aren't really for sale, and I am basing this on how many offers I submit that either are taken off the market or not countered. Realtors are not qualifying sellers.
1 vote Thank Flag Link Tue Apr 22, 2008
While this will likely be an unpopular response, the truth in a market that is seeing downward adjustments is that the only way to establish "below market value" would be to assume that no other homes are going to sell for an amount "below" the asking price. So, in my opinion yes, it's misleading. Establishing "market value" is a big challenge right now- to suggest that something is below a changing figure is inappropriate. Opinion only.
Web Reference: http://optionsrealty.com
1 vote Thank Flag Link Thu Feb 14, 2008
Interesting timing of this article which I think is relevant:

http://online.wsj.com/article/SB120260793426556765.html?mod=…
1 vote Thank Flag Link Mon Feb 11, 2008
You are over analyzing things. Most listings and the verbage in the write-ups are reviewed by the owner. If anyone has an objection they should. If they are OK with it, that's want counts. How do you know it's NOT below market value? Gail is right. If you are serious about buying a house, hire a Realtor and stop spending your time looking to see who may be writing what you think is unethical. The perfect home for you may be out there and someone else is putting an offer in while you are on the computer!
Get out and look! (and I don't mean open houses) Get an agent who knows the market you want to live in and put your trust in that agent.
1 vote Thank Flag Link Sun Feb 10, 2008
You cannot assume that it is inaccurate just because it has not sold below market value. There are literrally 100's of 1000's of homes for sale as short sales and they too are sitting. Does that make it inaccurate information?

Do you have a Realtor representing you? If not, get one. Ask that Realtor to do the comparative sales for you in the area in the last 3 or 4 months and then you will know for sure.

There is an Article in our Code of Ethics that states we must be truthful in our advertising. I would not accuse anyone, however, until I researched and found accurate proof.
Web Reference: http://GailGladstone.com
1 vote Thank Flag Link Sun Feb 10, 2008
Unfortunately, puffery is not illegal or unethical. While it may be technically true, that if it hasn't sold yet, it's not really below "market value"... but there are several lines of logic, as Ruthless outlines, that allow for it to have the ring of truth.

Ticky Tacky little boxes on the hillside deserve to be loved by someone too. :-)
1 vote Thank Flag Link Sun Feb 10, 2008
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
Value is what someoen is willing to pay for it. i think instead of filling th limited space available for comments with puffed out verbage, use it to describe the features that make the house stand out. Good point Zack
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Wed Oct 22, 2008
Hi Zack,

You are right, it is not below market value if it does not sell quickly. The "Priced below market value" would be an opinion call or what is called puffery in sales. Since it is an opinion, it really isn't unethical, could be wrong, :) but not unethical.

If I can help, let me know.

All the best!

Kevin O'Shea
Homes of Westchester
0 votes Thank Flag Link Wed Oct 22, 2008
Actually, its not really possible to claim a market price for a house, when it sells, that's the market price. If ever there was a community where you could nearly find the market price, this one is it as the house are all extremely similar. That said, when this post was initially posted, the house's Listing Price was $999,000, and had the comments in the original post. Now its asking $949,000 so apparently they were wrong. So while this thread convinced me its not really unethical, I'm completely convinced that claims like this are completely without merit.

Zack
0 votes Thank Flag Link Tue Apr 22, 2008
Good point,

I think there are two compounding reasons here

1) The sellers are being unrealistic. They still want their buying price + some profit (or at least break even). This is a reasonable expectation but unrealistic. If I look at the Owings mills market in maryland, houses built in 1999 are being listed for 320k when I can get a new Ryan home SFH for 370k (you bet I can get them to shave off a LOT ). With so many foreclosures hitting that area, I m not sure what comps are these people looking at.

2) Realtors evaluating their houses. In some cases, realtors are being forced to list at these prices because this is what a seller wants. However, their estimate for house is not too far below. Say its about 95% of the list price which is still way too high in my opinion. However, realtors price the house according to current market conditions and current value for the house. The buyer looks at the overall trend and probably the price one year from now. This is leading to a disconnect between the what the buyer thinks is the real price and the actual market value that might be.

In the current market, if a house remains unsold it is not a negative against the house or the price. Its just that there are not enough buyers out there. The price originally listed for the house might be the market price for that house when it was listed. A reduction might adjust the price according to recent fall in prices or price it below the rate of fall. So if the fall was 2% they might decrease the price by 3%.

In such cases, it is completely ethical to say "below market price". No house comes with a tagged MSRP. So in order to prove its unethical you need to prove what its worth should be.
0 votes Thank Flag Link Tue Apr 22, 2008
Thanks to the people who answered with a reasonable explantion and in a civil manner. To answer a few questions that appeared in the answers, yes, we're working with a realtor, and we did not have her run comps for this place or any of the 3 in this community we looked at. We're not interested in the community although this house was the nicest of the 4 we saw.

My thought on the question is that you can't establish market value for a home. Use all the comparables you want for a best guess, but its just a guess. The companies who bought/packaged and sold mortgage based securities also priced them based on formulas that were built from past prices and risk, in the simplest terms, using comparables. Although, I guess the lesson remains the same, caveat emptor.

Anyway, thanks again. To those who chose not to, it seems like its poor business in a time when the internet is intruding into your margins to make a bad impression of your profession on a public forum.

Zack
0 votes Thank Flag Link Mon Feb 11, 2008
Assessed values are established for taxing purposes, and not necessarily reflective of market values.

There is a good possiblility that the sellers perceive that they are offering the property for sale at a price far below what they consider to be the fair market price. Indeed, ultimately, the market will set the price for this property.

In pricing a property, I might have provided a different price opinoin on a specific property 3 months agao as compared to today. The market is not stagnant.

Properties, even at market value, or slightly below market value, do not necessarily sell if inventory provides more choices than buyers. Some properties will remian, and if the price trend is downward........eventually that price of the unsold home needs to be adjusted. What was correctly "market value" is no longer correct.
0 votes Thank Flag Link Mon Feb 11, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
MVP'08
Contact
I will offer an unlikely explanation, possible, just not probable.

If the listing agent really believes that the value is higher than the list price., she or he may be thinking that this wording may set up an auction type of bidding for the property. If it is considerably under market value, then it is possible that the new price might encourage multiple offers (auction situation ) which can then drive the contract price back up close to market value.

If it is not priced 5 -10 % below the competition and truly under the market value, then the gambit is ridiculous, makes the listing agent look foolish, and by association, all the websites running the idx feeds with the "below market value" wording look foolish too.

I don't see how it is unethical : 1. If it is NOT really below the comps then the agent might just be bad at math, or unimaginative at marketing.

2. If a buyer were to buy it today and immediately resell it, he could make a profit. No, market value implies a reasonable marketing time from listing to sale, anywhere from days to weeks, there would acquisition, holding, and selling costs. I.E. he buys it for $5,000 "below market" can quickly sell it.
Pays $5,000 in closing costs at the purchase. Has $5,000 in carrying costs during the second escrow, then has $30,000 in closing costs at the close of the second escrow (Since he had to hire Realtors and pay commissions in order to sell for "top dollar" ) {Also Ruth's point about buyers, agents and appraisers looking at the immediate past sales history of a house. ) .

3. If it is below the comps, even a little bit then it could be truthful (as in the "auction" set up I speculated on )

4.(Same as #1) I just didn't want you to think I am defending this phrase. I myself would not use it to market a property unless it was at least 5% below any possible competition.AND my seller insisted upon it.
0 votes Thank Flag Link Sun Feb 10, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
And I hate "Mrs Clean lives here." :)
Seriously I just saw that one. I can't believe people really use that.
0 votes Thank Flag Link Sun Feb 10, 2008
Ruth's point is a good one although I guess I consider it a grey area. I know when someone says meticulously cared, or pristine, that's an opinion and probably fluffed up. But when claming a house is priced below market value, its just not possible for that statement to be accurate. I see the assessment is higher than the house for purposes of taxes, but that's true for a solid number of houses on the market in this area now. One of the things that we've found difficult is that houses tend to be very different, so comparing them is rarely apples to apples which makes even comps a matter of opinion, and with the ups and downs in the past few years, their accuracy is much more questionable.

Anyway, I see Ruth's point but still really dislike the wording of this description. Thanks everyone for the feedback.
0 votes Thank Flag Link Sun Feb 10, 2008
Well, if they did comps and priced it well below what others sold for, I would say that it was priced below market value.
0 votes Thank Flag Link Sun Feb 10, 2008
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