Pricing a Home - What were they thinking?

By
Real Estate Agent with The Shane Steely Group and Keller Williams Key Partners, LLC

Ok, so the home across the street is for sale now.  The nice old lady passed away a couple of weeks ago and her only heir from TX came in, sold off everything inside and listed the home w/ a family friend.  My teammate Tom and I walked through it shortly thereafter and were dumbfounded as to how the asking price could be $320K, when the home itself is worth MAYBE $225K (and that's only for the land).  You see, as we walked up to the front door, I noticed A LOT of structural cracks in the brickwork.  When we entered, there were cracks in the walls the width of my pinky, which tells me there is a structural issue.  We're not talking just a couple of cracks....but a lot.

It is sad, but the home will eventually be sold at a much lower price, be torn down and a custom home will be built on the lot.  Not that it's a bad thing, but the thing that gets me is more time than not agents go into a home, promise huge returns, and deliver little.  We call this "Buying the Listing".  Of course, I do not practice this, nor do I allow my team.  Reason?  Honesty.  Example, a year ago I spoke w/ a potential listing.  After my review of her property; an evaluation of the supply and demand for her home; and a detailed market analysis of the existing homes in her neighborhood, I came up w/ an asking price of $259,000.  Ironically, a competitor came in before me and suggested her asking price be $270,000, which was $15,000 more than the last home sold...which was only 2 months ago.

Now, in the real world a bank lending money to a buyer for this home is going to question the 6% difference in price compared to a home of same value sold just 2 months ago, in the same market (no bubble).  There's an issue right there.

Now, compare the fact that the homeowner pays approximately $1600 a month in mortgage/insurance/HOA.  By going with the agent who said to list at the higher price, she sat on her home for 6 months before it was under contract, but at a much lower cost (around the pricing I suggested).  At the 6th month mark, she had paid in almost 10, 000 in PITI.  Therefore, selling her home at the $259K from the start, thus getting it sold w/in the first month or 2 would have netted her more money in the long run (as she wouldn't have been paying house payments/taxes all those months). 

So what does this mean?  If you're considering selling your home, don't be fooled by those agents that say you can make SO much money by going with them.  Look at the details such as last home sold, pricing of existing homes in your subdivision and consider your monthly payments.  Selling it quickly at the RIGHT price will ALWAYS net you more money in the end. 

If you have any questions about this topic or are considering selling or buying a home, don't hesitate to contact the Shane Steely Group!

Comments (2)

Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Shane, You are absolutely correct. Giving Sellers false hope is not only dishonest but it's against the NAR Code of Ethics. Pricing is critical in this slower market. I met with a seller several weeks ago who has a 2 year old house. National builder. There are 45 of the exact same model on the market priced from $245,000 to $255,000. His listing had just expired with his third Realtor. He was priced at $389,000!!! He has gone from $399 to 395 to 389 he just relisted with his 4th Realtor at $369,000. He wasn't interested in listing with me at $249,000 even though he only paid $145,000 2 years ago and is close to being foreclosed on. Maybe I'll get him next round.  
Aug 08, 2006 05:07 AM
Peter Andres - Lic. in FL & NY GRI,SRES,CNE
REALTOR - The Villages, FL

Shane, try this approach: Mr. Seler, your home was listed and expired. Usualy when a home doesn't sell it's because of either

  • Being overpriced
  • It wasn't marketed agresively or correctly
  • lack of communication with your agent

I can suggest that you have your bank appraise your house. Tel them you were thinking of refinancing or selling the house. They will send an appraiser and give you an unbiased opinion.

Aug 26, 2006 12:38 PM