Teresa Boardman over at the St. Paul Real Estate Blog recently posted a very direct article about homes that "eat" Realtors. The concept sounds funny, yet the reality behind it is anything but. The fact is, some homes sit on the market for years without being able to sell and the home ends up going through several different listing agents, each failing to get the home sold.
Here's how it happens:
Step 1: A seller lists their property in Southern Maryland with a Realtor. Realtor does a Comparative Market Analysis (CMA), and determines the home is worth $250,000, and the seller decides to list the home for $275,000.
Step 2: House fails to sell. Meanwhile, the home down the street sells for $250,000. After 6 months, the seller decides the agent hasn't done their job and fires them.
Step 3: Seller hires a new agent, and lists the house for $250,000. The current CMA shows the home is now only worth $225,000. Once again the home is overpriced because the market value is declining. The house sits on the market for another 6 months without a single offer.
Step 4: The agent can't sell the overpriced house, so the seller fires them, and hires someone else. The home has been on the market for a year now, with 3 different agents. This time, the seller lists the home at $225,000. Again, the market has declined and the home is only worth $200,000.
Step 5: I think you get the idea here....
The problem is not with a bad agent who listed the house, nor is it because the market is bad. The problem is a bad seller. Had the home been listed for $250,000 from the start, it would have sold. Every month the property sits on the market is another month that the home is losing value, and as time goes by less and less people even bother to view the property.
The other thing to bear in mind is appraisers look at the same comparable sales that we as Realtors look at. If the market analysis can't support a listing price of $275,000, odds are good that the appraiser won't be able to support the price either.
As a Realtor, my solution is simple. If the seller is determined to list the home for a price that I feel is unrealistic, I don't have to take the listing. It doesn't make sense for agents to take 'dead on arrival' listings like that because we don't get paid for our services on homes that don't sell. For a seller, if you think your Realtor's analysis of your home is inaccurate, it might be a good idea to have a formal appraisal done on the property. It's extremely rare for someone to be able to sell a home for more than the appraised value because lenders will not write a loan for more than a home is worth.
There are lots of appraisal companies in Southern Maryland, and the cost is generally a couple hundred dollars. It's a small price to pay in order to be able to sell your home for $250,000 now rather than waiting months or years to find out the home has lost $100,000 in value. At the end of the day it just doesn't make sense for sellers or agents to list properties for more than they are actually worth. I understand wanting to make sure you do get as much as possible for your home, but listening to the expert opinion of your Realtor can make the difference between a sale and a foreclosure.