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August 3rd, 2011 1:52 PM by David W. Welch
Five years into the housing downturn and properties are still being overpriced. It is human nature to believe that your home is somehow more valuable than your neighbors. Afterall, the saying goes that your home is your castle. Unfortunately, the truth is that even if your home is truly the nicest in the neighborhood, buyers don't want to pay a whole lot more for it. Recently, Zillow published their finding that nationally, people are overpricing their homes by about 14%. I just read this within the last week, but could not find the article again. Our local paper The Orlando Sentinel, just published similar findings reported by the Orlando Regional Realtor Association. When comparing sales prices with the original list prices of recently sold homes, there was a difference of 13%.
Of course, this brings up another common misconception that leads to overpricing. The buyer can always make a lower offer, so why not start with a higher price? In the Sentinel article it points out that the 13% difference was between the original price and the sales price, but the difference between the final list price and the sales price was only 6%. In other words, the sellers had to reduce their asking price by 7% before they were able to get a contract and still had to agree to 6% less to close the sale. I am not suggesting you price your home using Zillow or any other pricing model, but listen to the advice of a knowledgeable experienced local Realtor.
In fact, it does not hurt to speak to two or three agents, but make sure they are showing you truly comparable sales for your local area. If the properties they are showing you are from another neighborhood two miles away, ask them why they are using those homes for comparison. If you have a two bedroom, one bath bungalow and they are using a four bedroom, three bath home, ask why they are using a home so different. If they are using sales that closed more than 90 days ago, ask why. There may be legitimate reasons for using such different locations, home styles or timing, and the agent should be able to explain those reasons to you. If they cannot satisfactorily explain these variations, they may not know how to properly price your home. Poor advice is another reason for overpriced homes.
Finally, there are agents who will take a listing at any price. There is no better advertising for a real estate agent, than a sign in a yard. The reality is that an overpriced listing does not benefit anyone. The home owner cannot get a sale, the listing agent's reputation is negatively affected by not being able to sell the property. Buyers who call on the sign have their time wasted. Much of the sales and value information is available on the internet these days, so buyers have some idea if your price is in the ball park or not. As an example, I recently saw a listing for $140,000 for a townhome in a neighborhood where the sales are closing in the $60,000 range. If you are serious about selling, price your property appropriately. If you are not serious about selling, don't put your property on the market. It is that simple.
David Welch Real Estate Optimist, Orlando Real Estate, Any Home-Any Phone