This is a buyer’s market, but that doesn’t mean sellers are always going to cooperate. More often than not in this market sellers are not wanting to cooperate. It may be a buyer’s market, but some sellers are fighting that reality and behaving as though it is a seller’s market. You would think all sellers would realize what a buyer’s market means, but I can tell you that some sellers are behaving as though buyers are a dime a dozen and that they can demand a higher than FMV price or any terms they want, even if it is unreasonable in this real estate market. This article is the fourth in a series entitled Buyer Tips in a Buyer’s Market.
Buyer’s Market Reality
Buyer’s Market Not Seller’s Market
I sat with clients today talking about the value of their home and what they might be able to net if they sold it. We looked at comparables that have sold, and we looked at active listings that are comparable. We discussed how many days these homes have been on the market (DOM), first for the ones that have sold and then for the active listings still on the market. For the homes that sold I brought out the data sheets showing what the original listing prices were and what the final selling prices were. All of this information is invaluable in understanding this buyer’s market, and it is important in determining a reasonable listing price in the very beginning.
Buyer’s Market – Pricing
We discussed a home just coming on the market that is comparable and the listing price. It is listed at what I believe is several hundred thousand above fair market value (FMV). This is a disastrous seller mistake, and it is a disastrous listing agent’s mistake. Here’s why.
A home that is grossly overpriced when it first comes on the market will lose some buyers right in the beginning for all the months it is overpriced. Those buyers search the MLS online based on their maximum price. A home that is priced substantially over FMV will never capture the eyes of qualified buyers who would look at it if it were priced at or closer to FMV. Since buyers are few and far between, loosing a single buyer could mean not selling the house for a year or longer in the higher price ranges. Those buyers will buy other homes, so they are lost to an overpriced seller forever.
There’s another disastrous result in a buyer’s market for a home that is substantially overpriced. It disappears from the radar for other real estate agents. Agents who walk through a home that is clearly overpriced will mentally remove that home from their radar entirely. They know their buyers will not pay that ridiculous price, and so they won’t waste their client’s time or their time. If agents show an overpriced home, it is to persuade their buyer to buy the other home they are about to view with a substantially lower price. The longer a home is on the market at a grossly overpriced home in this buyer’s market, the more stale it will be. Like stale bread, no one wants it anymore, and no one even wants to look at it.
Here are two bits of trivia for you. Many sellers who are getting advice from agents who overprice their listings do not understand any of these issues and have no idea that their home will suffer these disastrous consequences and grow stale on the market. This comes from 37 years in the business and talking to hundreds of sellers over the years. The other fascinating aspect of an overpriced listing is that the listing agent never gets paid. Isn’t that interesting! He or she wastes time (maybe several years) and money listing and advertising a property without ever selling it and earning a commission. That’s just plain crazy.
My buyer tip in this buyer’s market is don’t waste your time looking at homes that are way over priced. The sellers are not in touch with reality, and they rarely are willing to negotiate reasonably with a buyer who is in touch with reality. This is a buyer’s market–not a seller’s market.
Last Updated on September 4, 2011 by Chuck Marunde