7 Things to Consider When a House is Priced Too High

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Real Estate Agent with Online Real Estate Agent Training

7 Things to Consider When a House is Priced Too HighHow 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.

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Candy Miles-Crocker

Real-Life Real Estate Training

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Nancy Chenevey 08/19/2015 02:00 AM
  2. Praful Thakkar 05/12/2016 02:09 PM
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Rainmaker
680,180
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

The comps are important but which way is the market heading? Up or Down? Are you heading in to the peak season or the slow season? Great article!

Aug 19, 2015 01:01 AM #1
Rainmaker
3,463,317
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

I've seen people buy homes over market value because they have a long term outlook and aren't worried about an appraisal contingency. But for those people who don't fit into that category, it's wise to be very practical and more than a little conservative in their decisions on making offers on over-priced homes.

Aug 19, 2015 01:16 AM #2
Rainmaker
330,777
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Great atricle.  Your comment that pricing a house is not an exact science is so true!  We all know there is the price the seller wants, the price the buyer will pay and the price from the appraiser.  When there is limited inventory or the buyer is very specific on their dream home (single story, move in ready on a lake with mountain views) and there is only one possibility, the buyer may see more value than the appraiser.  The buyer can also decide to pay more than appraisal to get the home they want, knowing "that" home may not come along again any time soon.  At the end of the day the buyer decides.

Aug 19, 2015 01:20 AM #3
Rainmaker
1,127,166
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Every situation, every seller, and every buyer are different every time.  Each has their own motivations, ideas, and desires.  You are right to say that "too high" is a relative term - it may nor may not be depending on the situation.

Aug 19, 2015 01:34 AM #4
Rainmaker
204,629
Candy Miles-Crocker
Online Real Estate Agent Training - Chevy Chase, DC
Realtor - Real-Life Real Estate Training

Thanks for the heads up Margaret...you're the best!

 

Aug 19, 2015 02:09 AM #5
Ambassador
955,002
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

And the opinion of the appraiser sets the price as well. You could have 3 different appraisals with a wide range of values.

Aug 19, 2015 02:31 AM #6
Rainer
399,293
Thomas F. Scanlon
Borgida & Company P. C., CPA's - Manchester, CT
CPA, CFP

Candy Miles-Crocker - Well done.  Two parts art, one part science.

Cheers,

Tom

Aug 19, 2015 04:19 AM #7
Rainmaker
1,569,981
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

Pricing is definitely not an exact science. And as you indicated, there is a lot more to consider than just the comps.

Aug 19, 2015 08:43 PM #8
Rainmaker
180,868
James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Nicely done Candy from the buyer's perspective. Also, knowing the seller's   motivation can help a buyer decide to make an offer and, if so, at what price. Agents who do this well can give their buyers an edge.   

Aug 20, 2015 12:47 PM #9
Ambassador
535,149
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Candy...In a market where we seldom have two houses that are even similar it is very important that the agent understand the properties value so they can guide the buyer. Even when my buyers are paying cash I strongly advise an appraisal contingency. I want the buyers to know, as best they can, the value so they can make the right decision for themselves.

Kate

Aug 21, 2015 11:39 AM #10
Rainmaker
835,702
Dan Dee McGinnis The Pumpkin Man
HomeSmart - Phoenix, AZ

Candy

Well done, my favorite words are: Choosing the list price is choosing how long you are going to wait to get what you were going to get anyway. Because the price is determined by God or the market.

Aug 22, 2015 06:06 AM #11
Rainmaker
1,996,313
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Agents, brokers who take over priced listings are the problem... walk away, because you can not help unrealistic expectations. Taking the listing feeds the problem and clogs the information highway with bloated listings that just are not going to sell. And a waste of time and money  when you ignore this most basic fact.

Aug 23, 2015 12:02 AM #12
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Rainmaker
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Candy Miles-Crocker

Realtor - Real-Life Real Estate Training
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