John's Florida Real Estate Blog

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Another Seller Shoots Himself in the Foot When Overpricing His Home

I want to relate to you an incident that happened yesterday that is a perfect example of how many home sellers are creating problems for themselves and their agents.

I got a call from a local man who had received one of my postcards in the mail. He and his wife will be moving in a few months and they wanted to see what their home here in Zephyrhills would sell for. I pulled up county records of recent sales and prepared a Comparative Market Analysis (CMA) using the multiple listing service. Comparable homes in that specific subdivision had sold for from between $135,000 to $182,000 over the past months. Average sold price is $155,000. Keep in mind that those homes that sold at the higher end of the range were updated and a couple of them had inground swimming pools.

I toured the home, and it was not without its problems. The home had only two bedrooms and two baths, which can be a handicap in a market where most buyers want a minimum of 3 bedrooms. The master bedroom was painted a very dark rose color and the carpeting in the home, though new, was a bright blue sculptured type more often seen in homes in the 1970's. The kitchen had the original wooden cabinets which had been painted several years ago and were now showing a lot of wear. The applicances were older and their age was apparent. The home was filled with too much furniture, none of which seemed to complement anything else. No updating of the home was evident. This home was not a disaster, but it would not show well at all.

On the plus side, the roof, air-conditioning unit, and irrigation systems had been installed less than 5 years ago. It did have a two-car garage, though the door would not meet today's tougher standards. The garage was also crammed full of stuff. The lot size was slightly larger than most in the subdivision, and that does add some value.

When I went over some of the easy and cheap cosmetic fixes the owner could do to get a better return on his investment, the owner said he was not going to do anything, and that the buyers could fix it the way that they wanted to. But he would not change anything! This is not an attitude that makes a seller rich. It only makes potential buyers start to add up the fixes they need to do, worry about the unseen problems that may exist, and offer far less than the asking price based on their fears.

Based on all of this information, I told the owner that the most reasonable price for his home to be listed at would be around $160,000 (He bought it in the mid-1990's for $80,000). He said he felt it should be closer to $185,000 or even $190,000! Part of his mind-set was based on the one home that had sold in the $180,000's and the two that were on the market currently at that range. Relying on the one exception and on current prices is not a good idea. There is always one crazy buyer who will pay too much and that does not happen often. And current prices of active listings are often way out of wack. That is why the currently active home in the subdivision priced at $190,000 has been on the market for 441 days, and is now stale. They had started at $225,000! Sellers often rely on what neighbors say they have sold their homes for. Often people "inflate" (to put it politely) what they say they made on their sales, when a check of the public records shows they actually sold their homes for considerably less.

Also keep in mind that within a one mile range of this subdivision, there are newer subdivisions built within the past 5 years where there are larger 3 & 4 bedroom, 2 bath, 2 car garage homes, with all of the latest architectural designs and hurricane codes, and these homes are selling for from $175,000 to $199,000. Why would a buyer pay the same price for a 25 year old home that would need kitchen & bath renovations, new carpeting, new paint inside and out, in an older subdivision? Remember, there is currently a home in this older subdivision that has been on the market for 441 days and is priced at $190,000! Hello!!!!! Big clue here!!!! Buyers will not pay that much for a home in this subdivision.

Since the owner refuses to make his home more desireable by painting or fixing minor items, and since he wants an unreasonable price, will I take the listing? No. I told the owner that ethically I could not tell him that I thought he had much of a chance of selling his home at his higher price. Of course oil could be found under the front yard or a nut could show up and pay way above the home's actual value. But the chances of that happening are slim to none, and it would not be honest to lead this seller on by lying to him. Also keep in mind that when the prospective buyer goes to finance his purchase, the lender will send out an appraiser who will use the same information that I used to set my recommended price. It is very unlikely that an appraiser in this market atmosphere will stretch his estimate $20,000+ to reach the seller's asking price. The local comparable properties will not support that. Past performance is the best predictor of future performance, and recent sales in that area did not support a price anywhere near what he wanted.

Now this seller may call other agents. He may even find one that will take his listing at the high price. Though I hate to lose a listing, this is still better for me since when the house stagnates on the market perhaps he will realize who was telling it to him straight, and who let him hold on to his delusion just to get the listing. It also savesme a lot of time and money. Though I spend pretty lavishly on my listings, there has to be a reasonable chance of the home being purchased by someone. I advertise a lot, in print and on the internet. But if a house is overpriced, even putting the ad on an elephant and parachuting it out of an airplane at the Super Bowl will not bring buyers since they realize the price is not good. Ads get the information out in the public view. However, if when the buyers know the price they do not like what they see, their interest in the property is dead. That means no showings and no offers to negotiate. In the end, I would much rather have the seller yell at another agent because no one was touring the home and there were no offers, than to have him angry with me. I like to have happy customers, but when a price is so outrageous, that outcome is not very likely.

Many of my friends in my office and in other offices in the area have told me that they too are turning down listings where the owners have unrealistic ideas of the values of their properties. On the other hand, I also know some agents who do take these listings and have rosters of 30+ homes, none of which are selling because the market does not justify the price.

My prediction is that this particular home will set for quite a while, perhaps go "stale", and eventually when circumstances force them to do so, the owners will end up having to sell for less than the price I recommended. In the meantime the owner will have to pay property taxes and insurance costs. Those add up. Speaking of insurance, many companies take a dim view of insuring vacant properties. Something to consider. Also, vacant homes are prime candidates for vandalism and break-ins. A reasonable price that ensures a quicker sale is the way to go! I will try to keep my eye on this situation and let you know how it turns out.

My best advice to you is to get a good agent and listen carefully to his advice and concerns. He or she is there to help you market your home for the highest reasonable price. Overpricing your home in our current "buyers market" is a sure way to make both the sellers and the agents very very unhappy!

John Elwell - REALTOR

CENTURY 21

Bill Nye Realty, Inc.

813-783-4444

Licensed in Florida

 

Comment balloon 0 commentsJohn Elwell • June 05 2007 07:53PM
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