Why over priced listings don't sell and under price listings sell for more
Every so often, I have a listing celebrate an anniversary. I hate anniversaries. No broker wants to have a listing that doesn't sell for a year. Every year-old listing has a story of old offers they regret not accepting and a journey of chasing the market. Recently, I had a year-old client dismiss my recommendation of a price reduction with the words "you just want to make a sale."
Well, duh. That's what you hired me for, isn't it? The rub here, is that the house has an offer on it, but he doesn't like the offer! On a $450,000 listing, we have an offer of $400,000. I suggested that we reduce to $425,000 in the hopes of getting a more reasonable buyer who might be willing to pay $425,000. He rejected the idea with the above-referenced glibness. This isn't the first time this has happened. Last year, I sold a $575,000 listing for $528,000 because reducing to $550,000, even with two offers on the table of below $525,000 at that time was an anathema. Here's what these people don't understand:
Overpriced listings, if they get offers at all, are more likely to get offers from lowballers.
- Reasonably priced listings are more likely to get offers from reasonable buyers.
Lowballers pay less attention to asking price and make offers on homes that fit their criteria for what they think the house is worth. Asking price isn't a big consideration. They assume everything is overpriced and don't care if they insult or annoy. It's business. Reasonable people consider asking price as part of their criteria and seldom look over their price point. They are more indicative of the conservative, cautious buyers that make up the bulk of the market in this economic climate. They aren't interested in making a killing as much as they want to avoid making a mistake.
If a listing has been on the market for a longer than average time and has a low offer far below asking price, it makes sense to lower the price to a reasonable price point in between to attract more eyeballs that often didn't see the home because it was listed higher than their maximum. Not every buyer offers 80 cents on the dollar. Overpriced people think that is the case, because their only experience with offers comes from a different breed: the lowballer. And because they don't lower their price, they either die on the vine or are forced to take less than they might otherwise get.
But what do I know? I only do this for a living.
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- J. Philip Faranda, Broker-owner, J. Philip Real Estate, LLC. 2010 Vice President, Westchester-Putnam Multiple Listing Service.
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