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OVER PRICING:....A FORMULA FOR DISASTER IN A FRAGILE MARKET PLACE:

By Paula Hathaway, REALTOR, LBA

Real Estate Agent with Douglas Elliman Real Estate 30HA0800896

February 04, 2010 09:40 PM

OVER PRICING HOMES = HIGH INVENTORY + LESS SALES + DESPERATE SELLERS = CONTINUED HOUSING CRISIS: A FORMULA FOR DISASTER IN A FRAGILE MARKET PLACE!!!

We MUST do in-depth research before we price properties!!! ....and we MUST price properties as if our lives depend on it.(...because they do!) If we don't face over-pricing head on, we will see the inventory levels climb like never before! Not only that, the desperation seen and felt by huge numbers of sellers that we witnessed during the downturn in 2008 will likely re-appear! In many markets there are still great numbers of desperate sellers.

DO THE RESEARCH!

OVER-PRICED HOMES = HIGH INVENTORY + MORE DAYS ON MARKET + LESS SALES + DESPERATE SELLERS = CONTINUED HOUSING CRISIS.

In my last blog post, I mention the above formula to the umpteenth agent who said he would take an over-priced listing but would schedule a reduction in the agreement in 30 days or 60 days. There are still huge numbers of real estate professionals who do not understand the importance of correct pricing---and we direct the whole real estate market; or at least we are supposed to!

In my last blog post "HOW DO YOU HANDLE A SELLER WHO WANTS YOU TO OVER-PRICE THEIR HOME ?..." I was amazed at how many agents feel it is ok to over-price a listing "for a short time like 30 days" ...let me remind you all that the best time to sell a listing is in the first 2-3 weeks on the market! Over-price it and you miss the best selling time!!!

Even a small amount over the correct price of a home will keep it on the market for too long! We can not afford this in this housing climate; people are desperate now (and more will get there)....but there are buyers out there and they are looking for bargains, even here, where the average income usually very high.

As a community of professionals who are looked to, by most homeowners, for our guidance and expertise, we MUST not over price homes. We need to take a stand NOW before we slip again into the abyss.

This may seem evangelistic to a lot of you but it is the basic truth: If we all take one listing with even a small of amount of over-market pricing, look at the impact! Guess who is in charge here?...We are and we MUST do what we can do to bring the housing market back to some normalcy.

PLEASE TRY TO UNDERSTAND THE URGENCY AND IMPORTANCE OF THIS! DO NOT OVERPRICE HOMES IN THIS MARKET OR WE WILL NEVER GET OUT OF THE CRISIS!!!

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Paula Hathaway, REALTOR, LBA

Douglas Elliman Real Estate - Southampton, NY

...A Local Expert in all The Hamptons

Kim: I know; a lot of agents are now doing that--Good luck and thans for commenting.

Daniel: You are so right--we all do want a win/win situation; hopefully the word is out now and pricing is the focus---correct pricing that is! Thanks for commenting

Alison: Good to hear the timing was right for you to read. Thanks for commenting

Feb 06, 2010 07:56 AM

Gary & Claudia Scott

Realty ONE Group - Scottsdale - Scottsdale, AZ

Scottsdale, AZ Real Estate

Emily - I cannot agree with you more!! Thanks for your insight and ability to make the problem clear. I am going to share your 'formula' with future sellers. It is difficult for them not to see their home as more valuable than the others in their neighborhood :-)

Feb 06, 2010 08:15 AM

Paula Hathaway, REALTOR, LBA

Douglas Elliman Real Estate - Southampton, NY

...A Local Expert in all The Hamptons

Jon: Feel free to read all the comments when you have time---I would not want to be responsible for domestic unrest!!! Happy moving!

Francisco: It is our responsibility as a collective brokerage community to make sure that we don't go right back into a market with artifically high prices!! That would be the end of a seemingly healthy market trying to re-establish itself---another reason we need to price houses properly! Thanks for your valuable input.

Mary ANN: Thanks for stopping in and commenting.

Matt: Thanks for your comments Matt; if you have been keeping up with the dialogue on this post and the other post I wrote last week, you would see that the whole point is to awaken the entire country to what I view as pricing houses "just to play the numbers game, put a sign in the yard" and hope for the best---we have all had enough of that; time to do the hard work and make sure that the prices reflect true value that the buyer can SEE and BUY without feeling ripped off in the end. This is also the only way our industry will survive--it takes no genius to over-price a listing and it takes no business acumen to stand by and watch as the over-priced listings sit and become stale in the first 30 days of exposure....at exhorbitant prices!

Feb 06, 2010 09:00 AM

Anonymous

Joe Woutersz

I have been watching our inventory growing and growing over the last couple of years and thinking exactly the same thing. At one time I felt it was fine to take the overpriced listing , but I have been walking away from listings for the last few months. Not only will the overpriced listing sit there forever, if you are fortunate enough to put a contract together, there's an excellent chance the appraiser will kill it. I agree comploetely that it is the Realtor's job to bring reality back to the market.

Feb 06, 2010 10:01 AM

#112

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

I agree with you and do not like to take them over priced. However, I have seen two homes sell recently that I made listing presentations on. They listed with another agent higher than I suggested and sold much later lower than I suggested. The seller may have got what they deserved, but the other agent got the commission and I got nothing! I always give people and honest opinion of the home value.

Feb 06, 2010 12:40 PM

Doug Patterson

Park Place Real Estate, Broker-In-Charge - Winston-Salem, NC

CRS, ABR, Broker-In-Charge

I agree 110%. I'm offering to have a NC Licensed Appraiser do an appraisal on a home that the seller feels is right, but I know is overpriced. For $350, it convinces and I'm off the hook. Anything that works...

Feb 06, 2010 05:01 PM

Paula Hathaway, REALTOR, LBA

Douglas Elliman Real Estate - Southampton, NY

...A Local Expert in all The Hamptons

Joe: The appraiser is very valuable right now; in fact the appraiser may hold the key to what is happening in the housing market at the moment---always has been a value to us but not as he/she is today! Thanks for your comment.

Gene: Unfortunately, this has always been the case---you pitch and do a great job--and the other guy gets the listing!!! The BIG difference right now is that if the other guy gets it at a higher price--I wish him a lot of luck getting past the appraiser at closing if he sells it at the high; and I wish him even more luck with the costs of holding onto the listing until he gets the "low-ball" offer that will surely come, eventually, maybe....Do you see where this is going? It is a dead end street in terms of running a business---the good old days in real estate are long gone! Gone with the idea that prices always go up! We are in a holding pattern in case you haven't noticed.....best to be the loser in this one because the "Bigger Loser" is the hot shot agent who has loaded himself up with over-priced inventory that doesn't move very fast, if at all! That will keep him busy with inventory that clutters up his days and keeps him off track while you are out there pursuing the REAL listings that move! Thnks for contributing

Feb 06, 2010 07:52 PM

Donnie Worley

A Team Real Estate Professionals - Johnson City, TN

I like Joe Jackson's (response #86) sarcastic take! At least if you referred the listing to one of the "agents specializing in over-priced listings" you could get a referral commission!

The root of the "illness" is greed! These agents are greedy for a few more dollars, the sellers are greedy for a few thousand dollars and the market suffers even longer. We are in real estate to earn a living but the transactions are not about money they are about education and counsel. With the proper education and counsel the commissions will come on their own.

Feb 06, 2010 10:25 PM

Ty Lacroix

Envelope Real Estate Brokerage Inc - London, ON

Paula, unfortunately overpriced sellers will find starving sales people to list their home

Feb 07, 2010 12:35 AM

Stephanie McCarty

McCarty Homes - Canton, GA

REALTOR

The "good ole days" in real estate is gone - buyers have all the info they need to determine whether or not a property is overpriced and unlike days gone by, it does an agent no good to list overpriced homes. I feel like the percentage of listing appointments where I get the listing is pretty low at only 50% but I genuinely believe it is in large part because so many agents in our market are willing to indulge the delusional seller in hopes of getting a price reduction. I just listed one and told the seller that if he had hired me in the first place he would have been out of this house two years ago. He listed with another agent about $50K higher than I was recommending.

Now, there is no telling how long it will take to sell this really gorgeous home because the only thing selling in volume right now is under $150K.

Feb 07, 2010 03:43 AM

Martin E. Kalisker, Esq.

Natick, MA

Real Estate Law From A Practical Perspective

You can lead a horse to water, but you can't make him drink. Same with thick headed realtors who are blindsighted by the thought of a commission rather than what is best for the seller client. There are many ways to get a seller to "see the light" and still get the listing. You just have to work a bit harder up front. And if you find that the seller is stuck on a higher price, it's your reputation on the line, don't sell your sole to the devil. No commission is worth your reputation.

Feb 08, 2010 02:39 AM

Paula Hathaway, REALTOR, LBA

Douglas Elliman Real Estate - Southampton, NY

...A Local Expert in all The Hamptons

Thanks to all of you for your valuable contributions--this has been a very interesting blog post and I can see it is still tweeking the interest of alot of you---thanks to those of you who re-bloged this material as well and don't forget to check out the first post on the same subject matter: HOW ARE YOU HANDLING SELLERS WHO WANT YOU TO OVER-PRICE THEIR HOME???

Feb 08, 2010 06:33 AM

Wayne B. Pruner

Oregon First - Tigard, OR

Tigard Oregon Homes for Sale, Realtor, GRI

Good post Paula. You are thinking macro economics and most agents can't get past micro economics.

Feb 08, 2010 02:56 PM

Anonymous

Beth Smith

In counseling sellers today, we need to remember that the inventory in competing with foreclosures head on in every single price point and in most markets. To overprice a property is expensive and ludicrous. And what commission? If the property does not sell, 0% of nothing is 0! We wish every property would sell upwards of $1,000,000 as our commission is a percentage of what we get for the seller. But the sad reality is that 0% of nothing is still 0. And , guess who gets to spend their money marketing the overpriced property?? Why not suggest a price and if the seller does not agree, have him write a check for your marketing proposal. If he is so sure that you can get the inflated price, then he should have no problem bearing the expense. The crime is to take the listing and then because it is overpriced, slam it into the already overburdened MLS and do nothing and spend nothing. Even that takes time. Your time. Isn't that all we really have?/ Good grief.

Feb 09, 2010 06:30 AM

#122

Connie Hall

All Brokers Real Estate - Portland, OR

We had an agent in our office that was going on a listing appointment and when he got back I asked how it went, he said "Great, I didn't take the listing" That confused me until he explained they wanted about $30,000 more than it was worth and he wasn't willing to list a property because it was over priced.

He said he would wait until it expired.

Feb 10, 2010 12:55 PM

Beverly of Bev & Bob Meaux

Keller Williams Suburban Realty - West Orange, NJ

Where Buying & Selling Works

YOU ARE RIGHT. PERIOD.

I've been saying this. I keep saying if every other agent (see i'm not being greedy and saying every agent) go to their overpriced listings and demand a new price that's correct or withdraw the listing the market will be on much more stable grounds.

We study the market and explain why we price a home where we do. If we are too far from the seller, we don't take it anymore.

PERIOD>

Feb 12, 2010 12:30 PM

Matt Robinson

Professional Investors Guild - Pensacola, FL

www.professionalinvestorsguild.com

I agree that it's important not to overprice, it's also a very fine line to walk as well. It's not our job to JUST sell the house. It's also not a race to see how fast we can get our commission in our pocket. We are trying to get our sellers as much money as possible in the current marketplace. Any idiot can just get a seller to price it under value and get it to sell. We need to price it right AND market it effectively. An extremely aggressive marketing plan creates a lot of exposure for clients, which can in turn reap them more for the home. If our only consideration is list price, we may not be doing our job.

Feb 13, 2010 07:19 AM

Kathie Burby

Coldwell Banker Mother Lode Real Estate - Sonora, CA

REALTOR, SFR, Tuolumne County Real Estate Guide

Paula - I've been on this soapbox for the last year in our market. We still have several agents who will take a listing at any price. This is such a disservice to the sellers. I believe the sellers turn to us for our knowledge and expertise. It is our duty to explain how the market works and recommend the best possible selling price they can expect in the current market. I also know agents who will take the listing with an agreement to reduce the price in 30 days - in most cases that is too late. Overpriced homes end up chasing the market downward and usually sell for less than market value due to the length of time on the market and numerous price reductions. Great post. Congratulations on the feature.

Feb 13, 2010 07:47 AM

Paula Hathaway, REALTOR, LBA

Douglas Elliman Real Estate - Southampton, NY

...A Local Expert in all The Hamptons

Wayne: Thanks for your support--we all need to get it when it comes to proper pricing!

Bev: Thanks for taking a stand! It is so improtant that we realize how powerful we are in the eyes of the seller---we do not have to bow down and say "whatever you say Mr. or Mrs. Seller, I will do as you say"...we are here to counsel them in the big decision to list their home!

Matt: That is why it is so important to do the research before we talk to a seller---we have to know the proper pricing or we should not be in the business---what could be more important as an agent than pricing to sell? Thanks for commenting.

Kathie:That 30 days includes the KEY selling time! Why not price it properly at the beginning and then raise the price---makes just as much sense doesn't it--only in that case you may have it sold the first go around!! Thanks for reading and commenting.

Feb 13, 2010 02:53 PM

Anonymous

Great post. If you can't get it at the correct price, wait and the listing will come to you after the overprice listing expires.

Mar 03, 2010 02:35 AM

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