How do you advise your buyer when they fall in love with a property that you both know is priced too high?
"Too High" is a Relative Term
First and foremost, be extremely careful when categorizing a property as being priced too high. Like beauty, price is in the eye of the beholder. "Too high" is a relative term. If a buyer has been looking in a particular neighborhood for an extended period of time, they have a very good idea as to what to expect in terms of price. But when it comes time to write an offer on a property, the agent and the buyer sit down and review the comparables or the comps. The comps only tell part of the story. Even though the buyers knew the neighborhood and knew the price ranges in that neighborhood, they still elected to take a look at this property they considered to be "too high". Once in the property, they fell in love and wanted to make an offer.
Consider More Than the Comps
Although they know what the comps show, they ask you for your opinion. As their agent you have them consider a few factors:
1. Seller's market vs. Buyer's market. In a seller's market comps can be less of a factor. Inventory is low and buyers are anxious to purchase. Some buyers will pay whatever it takes to get them into the house or neighborhood of their dreams.
2. Motivation to move. Have them tell you why they are looking to move. Of course they have already told you why they are moving, but it's important for them to remember their motivation. If they have to move within a specific time frame, they need to consider making an offer and seeing what happens.
3. It's the best house. When buyers have a specific style of house or neighborhood in mind, they need to consider all of the other houses they have seen that didn't meet their criteria for one reason or another. If the house they consider to be priced "too high" is the closest they've come to their perfect house, they may want to consider making an offer.
4. The "Love Factor". No matter what the comps show, if it fits all of your needs and you have to have it, then they need to make an offer.
5. The Appraisal Contingency. If they are willing to take the risk of writing their offer on the higher price and hoping the appraisal comes in lower AND the seller agrees to lower the priced to the appraised value, then by all means write the offer at the higher price. This is a huge risk and they will incur costs, but this could be an option.
6. Make a low offer. Many people think that making a low offer is insulting the seller. What's more insulting is not getting an offer. Make an offer and see what happens. The seller could be just "testing the waters" with their list price.
7. Do nothing. Doing nothing is always an option. Again, depending on the type of market you are in you may have a few weeks to "watch" the property to see if the seller lowers the price.
Who Determines the Price?
Pricing a property is not an exact science. Much like an appraiser, agents and sellers review the most recent comps to determine the list price. When a property is priced well, it doesn't stay on the market very long. When a property is priced too high based on the location and condition, it sits. While the seller and some agents think they set the price, nothing could be further from the truth. The market sets the price.
- Make the Price Reduction Count
- 4 Things to Consider When Selling in a Hot Market
- Mr. Seller - Please Don't Reject My Offer
- The Overpriced Seller
- Do Your Buyers Know How to Win?
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