The Local News Says The Average Price of Homes in San Jose Is $615,000
I received a call from a client who asked me "Are you following the news? Do you know the average price of a home in San Jose is $615,000.00?"
He went on to say that he only wants $ [price intentionally omitted] which is less than $615,000.00.
I take a deep breath, sit down, say a silent prayer, and begin to explain the law of "averages."
"Average" is determined by adding a group of numbers (in this case it is the price of sold homes in the City of San Jose during a specific time period) and then divide that number by the number of homes sold.
Applying a city-wide average sales price to a hyper-local real estate market will only result in false and misleading information.
This person wants to list his San Jose home for sale for more than it is worth. This statement "more than it is worth" is well supported by the fact that there is no market data to support the price he wants. I've explained numerous times the risks and consequences of listing a home too high.
I also explained that the MLS data provides historical data. If he lists again and does not sell again, people will begin to think something is wrong with the property! When that happens, value is decreased. There is plenty of MLS data to support that statement as well.
I further explained that it is best to let the buyers drive the price up. Buyers always determine the value of homes. I told him that I would rather walk away from the listing than to agree to do something that I know will not serve him.
Of course I can take an over-priced listing. It's just does not fit my business model, therefore it is not something I do. This decision ties to seller motivation. The fact is, absent true seller motivation, I will invest countless hours of time and money preparing and marketing the home for sale. If the seller does not get an offer that meets their inflated perception of value, the listing is canceled and a lot of people wasted time on viewing the property, reviewing disclosures, writing offers, and waiting patiently for the seller to respond. That serves no one - not even the seller.
As a real estate professional, I do not need to test the San Jose real estate market to know and understand home values. I know the market. I monitor the market closely. I track statistics monthly and follow the trends. What the news reports about "average" is just that. I don't need the news to know the average or median home prices. I can extract that data from the MLS. When averages are applied, the average is for the specific homes sold in a specific neighborhood, not the entire City.
I explained that the "average" home is a 3 bedroom, 2 bathroom home, with 1,500 square feet; and his home is less than 900 square feet and only has one bathroom. I further explained that we need to look at each home individually and factor unique characteristics of each home.
I prepared a Comparative Market Analysis for my client which suggests a list price $26,000 less than what the client wants for the home. The list price I suggested is at the high end of what I feel a buyer may be willing to pay. I explained I cannot guarantee the home will sell for my suggested list price; I do feel there is a strong probability that it will; and I will do everything to get him the highest and best price possible.
Be careful what you hear on the news about real estate. Most of it does not apply to a hyper-local real estate market in San Jose, or likely anywhere else for that matter.
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