I realize I might be opening a can of worms here. But I’m very curious, what does “priced right” really mean? And could it be part of the reason for the downward trend in the market? Or, at least, contributing to it.
Here’s part of the reason I ask.
My next-door neighbor recently listed their home. And two days after the agent’s sign went up, I noticed a new sign-rider that said, “Priced Like an REO.” I thought to myself, “Oh, no. What are they doing?” So, I just had to go out and grab a flyer to see what they were up to. And sure enough, they had it listed almost 20% below FMV. And I’m not talking about what other people have been asking, but what has sold and recorded within the past several months.
Well, sure enough, in little over a week there was a SOLD sign. And then a week or so after that there were contractors already working on the house - which suggested that it may have already closed escrow. Could it have been a cash deal? We’re talking expensive homes here!
Anyway, on three of different occasions, I was relaying this story to agent friends of mine, and they all said, “Well… if it’s priced right, it will sell.” That’s when it hit me.
Priced right? That home wasn’t “priced right.” It was low-balled, that’s all. Anybody could do that. And if the price is low enough, anybody could sell it too. Even a FSBO.
But it also absolutely killed the comps in our neighborhood. We’re in a little pocket development, with maybe 50-60 homes total, and the surrounding homes are very different and can’t really be used in comps. So, even a single sale can have a huge impact on appraisals.
So, while our neighbor may have succeeded in quickly selling their home, they also succeeded in driving the prices down for our entire development.
Which brings me back to my original questions. What does “priced right” really mean? And if it’s merely low-balling the price, couldn’t that be perpetuating the downward trend?
I really am curious as to what agents think. So, thank you in advance for your comments, insight, and input.
Good morning Michael. Tough situation. If the seller is satisfied, I think it was priced right.
I do know how you feel,
Ken
Hi Michael, Whenever I think of "priced right" it always goes back to a basic economic supply/demand curve. So "priced right" to me, simply means, how soon does the seller need a closing. Comps will forever be our friend and foe. Have a great day!
Great Post, Thanks for the information. Keep up the great blogs. Very interesting. I enjoyed reading your blog.
Thank you all for your comments. I appreciate it.
Mike: Good question! I think it’s a bit of a moving target. But I tend to look at what tile companies report, because those are the one that have actually closed and recorded.
Ken: I agree. It is a tough situation. But don’t you think that many times what a seller may be satisfied with is way off base? Either too high, or even too low?
Michael: I like the “How soon does the seller need a closing?” approach. And you’re right, comps are always going to be friend or foe.
Steve: Thanks for the detailed response. I’m starting to see from your response, and those of others, that “priced right” has more to do with the seller’s situation and other factors, more so than just the property.
Jerry: Thank you for the compliment!
J Manno: You’re most welcome. Thank you for the comment.
Michael~ I have to agree with Diane's point. Usually a low list price will wind up with multiple offers which will then determine a fair market price. The fact that there are contractors over there could also mean that the interior of the house was not in great shape.
Good post. Very thought provoking. For what it is worth... I think that "priced right" means that the seller has priced it to bring the right balance of Return-on-Investment and selling time on market to meet their needs. As neighbors and agents we are often hoping that FMV brings the highest sale price possible, but sometimes that is not the objective of the seller... sometimes they just want out fast at any cost, and it seems to me that someone who hangs a sign that says "Priced like an REO" just wants out yesterday,
Diane, Pam, Lisa, Steve
Thank you all for stopping by, and for your comments. I appreciate that.
It seems that the consensus from all the responses is that being ‘priced right’ is definitely a moving-target, which I knew. But I still can’t help but believe that it’s a bit of a self-perpetuating cycle.
Thanks again everybody.
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