The Perils of Overpricing

This past Sunday there was a little article in the NY Times Real Estate section that you might have overlooked: No Time For Wishful Pricing. Although the article focuses on Westchester County, it illustrates a lesson that sellers here in Sullivan might want to take to heart. The article confirms what I've often thought, that in this market, houses that are very well priced when they first come to market do better and move faster than houses that come to market overpriced and work their way down, in fits and starts, to "well priced". That first couple of weeks on market is so important, and it tends to be when a house gets most noticed. I know when I see a new listing come on the market that's "Wow Priced", I send it out right away, even to clients who might not be looking for that particular type of house. I don't tend to have the same get-up-and-go response to a price reduction, although some price drops do get my juices flowing.

Comments

[bix]

Yup, there's nothing that turns off a buyer more than a greedy seller.

Way back in the early nineties I was house-hunting on Long Island. Same situation as now -- sellers were unwilling to lower their prices. I looked seriously at several houses, even put in an offer on a few, and each time was rejected, once told my offer was insulted.

I decided not to buy. A year or so later, just for the hec k of it, I did some research and found that EVERY SINGLE HOUSE SOLD AT LESS THAN MY OFFER.

My favorite was the FSBO who refused to budge even one nickel from the asking price. I politely said to him "Good day to you sir," and ignored his phone calls asking if I was still interested. He later had to succumb too.

[DN]

Bix, similar situation occurring in my coop building. A seller priced the unit at the same record price a unit in the same line (but on a higher floor and in better condition) sold at the peak of the market. Now, they've been chasing the market with successive tiny price cuts.

[bix]

I have no sympathy for greedy sellers. Sullivan seems to be awash with overpriced houses, which is why very little sells. In addition to that, when I was house hunting in the spring I was amazed at how little sellers did to prepare their house to show buyers.

If sellers want to "maintain their price," fine. Just don't expect anyone to buy the house. If they want to sell, they have to be realistic.

[hootowl12]

I have been looking for a house now for about 4-5 months and I must say, there is nothing worth buying out there at a reasonable price. Im looking for the Monticello area, not the village, and I dont want to pay more than 150k, actually less. Ive looked at so many houses over 150k not worth 110, I cant begin to understand why these people think they are sitting on gold. I am beginning to doubt I will ever find something out there.

[bix]

I totally understand your situation, and encountered the same issue myself last spring. You are looking in one of the less pricey parts of the county, with a lot of houses on the market, so there is no reason for what you are encountering except pigheadedness.

Why not make offers based on what the houses are worth, not what the seller is asking? If the sellers are "insulted," too damn bad. You may find a realistic seller that way.

[bix]

Just a suggestion: be sure your agent tells you about new listings as they come on the market. The reasonably priced ones go fast, or at least that was my experience. The ones offered by the pigheaded, greedy idiots stay on the market forever.

[David Knudsen]

Sullivan isn't unusual by any means in terms of being "awash with overpriced houses." There's a wide range of motivation as well as perceptions, by both buyers and sellers. In any market repositioning, it takes a while for the market to settle. Regarding overpriced houses, if you can't make a deal then just move on.

One concern I have though is how a buyer makes the determination that the house they saw at $150K is only worth $110K. I'm not just picking out that example above, but rather its something I hear all the time (and not just now, with the downturning market.) Often buyers form an opinion that this or that house is only worth "X", without being based on actual, real sales data. Its really the mirror of sellers who think their house is worth "Y", when the sales data doesn't support that. I've written over and over that an offer is much stronger if you can support it with comps. Even if you're working off of the belief that the market is going down, you can still support an offer with comps and then discount them for time.

[Mister Nick]

"Sullivan isn't unusual by any means in terms of being "awash with overpriced houses.""

You're not kidding. If you like this blog you've probably already found this one too. But if not, take a look and see that Sullivan County is a model of rationality and stability by some national standards.

http://www.irvinehousingblog.com

[Reg]

rgdave hits it on the head--that's the same question I asked.

When a potential buyer says to him/herself "OK, I'm not willing to pay more than $110,000 for this house." That's fine, but that doesn't mean that is what the house is worth. That is what the house is WORTH TO HIM/HER, but not necessarily any real measure of value beyond that single data point.

[bix]

"One concern I have though is how a buyer makes the determination that the house they saw at $150K is only worth $110K"

I think that judgment can be made by seeing a lot of houses and how they are priced. For example, if you see that house X is roughly the same as house Y in terms of location, size and so forth, you can make that judgment reasonably well even without comparables.

Often there aren't comparables that are very useful, you know. That can be a BIG problem when it comes to getting a mortgage.

[Hobart Gap]

The problem is the big run-up in pricing from 2001 to 2006. More desirable properties like lakefront rose as much as 3 or 4 times. Original owners - who bought for $100K and have very low (or no) mortgage levels, have listed their properties for $420K and are anchored to those prices.

Most of them are not in a negative carry position and believe in their hearts that if they hold firm, the market will come back to them at $400K plus. Maybe not this year, but certainly next year.

Right or wrong - they are optimistic about the future and will not reduce their price until something forces them to.

[David Knudsen]

Mister Nick, I love the Irvine Housing Blog. Sometimes I wish that I wasn't actually in the business of selling real estate. Being a Realtor involves certain courtesies and protocols, which are helpful in minimizing disputes and keeping relationships running smoothly. But I have to watch my tongue, and sometimes can't be as irreverent as I want to be.

[john beck foreclosure]

yeah David i totally agree with and i must say this is also a great real estate blog keep going ... nick