I did an evaluation a couple months ago for a large 1-bedroom condo in my own building.
I quoted a price of $319,900 which I felt was somewhat generous.
Today, that listing hit the market with another agent, which is nothing new to me. But the price? A whopping $339,900…
I’ve always maintained that real estate is so unique since there is no fixed-value for the asset.
You can log on to GlobeInvestor and check the price of your shares of Research In Motion every minute of every week-day, and find out the price of your asset to the exact penny!
But with real estate, the values fluctuate behind-the-scenes. You know there is price movement, but until a property is subject to a transaction, there is no identifiable price.
As part of my business, I routinely do free property evaluations for home-owners. This act is somewhat self-serving, however, since I anticipate that some of these owners will turn into sellers down the road, and I will benefit from my “free evaluation” by listing the property for sale.
In the summer, I did an evaluation for a unit in my own building on King Street for a young man that said he might be selling around Christmas time. His condo was a 1-bedroom-plus-den, and since there was no outdoor space, he had a small solarium as well. This effectively made his unit a unique “one-plus-two.”
I quoted him a price of $319,900, which I thought was totally fair. I use the word “fair” meaning that he should be happy to receive $319,900 for his unit, and I believe that a prudent buyer would be willing to pay this amount.
A few months passed, and a similar yet slightly superior unit came out in our building for $329,900. I thought this was the perfect litmus-test for the price I had quoted of $319,900, and sure enough, this other unit sat on the market for two months at $329,900.
It still sits on the market as we speak.
I figured that if the $329,900 unit continued to sit on the market, a more realistic price for it might be $319,900, which would in turn move the price of the unit I had evaluated at $319,900 down to around $309,900.
Fast forward to yesterday afternoon, and I noticed a very “familiar” unit as I browsed the new listings on MLS. Of course, it was the unit I had evaluated during the summer, and the price at which it was listed was just ridiculous.
I told the seller that a $319,900 price was “fair,” but realized in the past few weeks that a price of $309,900 was more realistic. So what did this seller go and do? He went and listed it with another Realtor for $339,900.
Now let me state emphatically that my opinions here are not borne out of spite—Realtors lose out on listings all the time, and it’s a part of the business.
But whether it was the listing agent “buying the listing” by telling the seller it was worth $339,900, or it was the seller being greedy, it’s a bad idea no matter how the price came about.
Over-pricing a property is the single largest mistake a seller can make.
Many sellers figure, “What’s the harm? If I don’t get the price, I’ll just reduce it in a few weeks.”
But this is exactly what NOT to do!
Buyers and their Realtors are well-informed, and there is a stigma attached to a property if it’s been sitting on the market for six weeks when four similar properties have come and gone in that time. By the time you reduce the price, people will have already been skipping by your property as they browse MLS listings for months.
“Oooooh yeah, I remember that unit. It’s been out a long time. There must be something wrong with it.”
Many people DO judge books by their cover, and if something has been out for six weeks and nobody has bought it, why should YOU even bother checking it out?
The reality is, you’re not fooling anybody by over-pricing. People are just too well informed! If your property is worth $319,900, nobody is going to pay $339,900 just because you cross your fingers and hope for the best.
Information and data on historical sales is readily available when sellers are preparing to list their properties, and it should be used to help them determine an accurate list price.
In July, I sold a 2-bedroom, 2-bathroom unit in this same building for $350,000 on the nose. How then could the unit I priced at $309,900 – 319,900 be purchased by a prudent buyer for $340K when a much larger 2-bedroom unit is just $10K more?
‘HOPE’ is a four-letter word in real estate, just like many of the words we were taught not to use.
Sellers routinely hope that a buyer will defy all logic and step up to the plate to severely overpay for the property.
But you know what? It never happens.
There is no fixed-value with real estate, but there sure is a range. And if condos in building-Y with X-features have been selling for “around” $285,000 – $295,000, then why, oh why, would you price your condo at $320,000?
Many sellers figure, “I’m not in any hurry to sell, so if it takes two months for me to get the extra money, then I’m willing to wait.” But this statement is predicated on hope just like the others. For this statement to make any sense, you’d have to assume that there is a buyer out there that is willing to pay substantially more than the prevailing rate, whether it’s the 1st day your property is on the market, or the 60th day.
If you could get a mortgage for 4.99%, would you accept a rate of 5.39% for the same product somewhere else?
Over-pricing is a monumental waste of time for both the seller and the agent. It’s a pointless battle that you will never win, and it’s a massive inconvenience. If you could sell your place for $300,000 in a week, then why have people trek through your home for two months and go through the guessing game only to get $300,000 two months later?
In the end, over-pricing your property will actually help the sale of other more reasonably priced properties. Your property will become a bench mark against which similar properties will be compared.
And finally, even if you were to “re-list” the property at the same price to try and take away the stigma of being on the market for 45 days, Realtors have access to the history on MLS and you simply won’t fool them into thinking the property is “newly listed.”
There are many things you can do to help the sale of your property and there are many things you can to do inhibit the sale as well.
Why shoot yourself in the foot before you even step out the front door?Back To Top Back To Comments