Though today’s San Antonio real estate market remains strong, an excessive number of homes are starting to pile up – inventory is high. The most important factor – by far – is that local sellers are overpricing their properties. If you want to sell your property, price it correctly for the market.
Realtors see this scenario too much.
BenBuyer shops for a home and likes Sally Seller’s house. Sally’s home is charming, well–maintained and in a great location. Ben and his realtor, Roger, head back to Roger’s office to write an offer. Roger researches the comparable sales in the neighborhood. The average price per square foot is $150. The highest sale per square foot of all time in the neighborhood is $166. Sally has her home priced at $210 per square foot.
Ben is no longer interested in Sally’s home even though it’s his favorite because it’s priced way above market. Instead he makes a deal with Samuel Seller who has his home in the same neighborhood priced at $150 per square foot. Ben did not like it as much as Sally’s house but he is much happier with the deal he got.
Sally is upset at her realtor, Rhonda. She thinks her home is not being advertised enough though Rhonda and her company have spent lots of advertising dollars and hosted a nice party at the home. Sally does not understand that buyers know about her home, but they are rejecting it because it’s overpriced. Sally also does not understand that she will end up selling for less than Samuel even though her home is nicer. She will have to reduce the home further than if she had priced it correctly to start. Sally didn’t get it and she will pay for that mistake.
Why do Sellers overprice a Property?
The answer: unrealistic expectations. Put simply, almost unlike any other product, Sellers expect to make a large profit on their residence. They feel entitled to it. However, the market fluctuates and there is no reason that residential real estate has to be different than a car or a treadmill; you don’t necessarily get to resell for more than what you bought it for.
A recent New York Times article quoted Professor Christopher Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School, “Economists tend to think people are crazy because they won’t sell their houses for less than they paid for them.”
The good news is that San Antonio sellers frequently can sell their homes for more than they bought them for and make a healthy profit. The key: Don’t be greedy.
Gordon Gekko Was Wrong.
As it applies to our local real estate scene, Michael Douglas’ iconic character from “Wall Street” would have been terribly mistaken; for sellers, GREED IS NOT GOOD. Sellers who try to get more than a fair market price for their homes almost always lose and many times lose big.
Overpricing the home leads directly to selling for lower than market price. Chances are an overpriced home will not have many showings. If there are showings, buyers will reject the home once they are aware of the market. The home will inevitably stay on the market a long time, it will get stale and buyers will avoid it. Now, what can the seller do to get people in the door? The most common strategy is to reduce the price. But, since the home has languished on the market, the price reduction will have to be significant to get anyones attention. At this point, sellers are chasing the market and chances are good they will have to sell for a lower price than if they had initially priced it correctly.
They will low ball me anyway, right?
Many sellers think that buyers will make excessively low offers so they should inflate their price to compensate. This is a myth. Most buyers, if a property is priced correctly, will offer close to asking price. Buyers will ignore overpriced properties.
I’m looking for a fool to give me more than my property is worth.
Some sellers don’t care about selling – they will only sell if they can find someone who will wildly overpay for their property. With today’s wealth of information this is unlikely. And, when the seller actually needs to sell at some point, their home will have a history of being overpriced on the market for many days.
And, if your buyer is getting a loan (probably a 99 percent chance they will) their lender will require an appraisal. In today’s lending environment, appraisers won’t allow a home to appraise above market value. Their reputation and job is on the line.
If you don’t want to sell your home at a fair market price it’s just not worth it.
As Professor Mayer says, “If you want to sell your house then you list it at the market price and you sell it,” he says. “If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That’s just painful – and expensive.”
