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Overpricing- A Horrible Way to Sell Your Home

I was doing a CMA for a prospective seller on some townhomes in Hopkins this week.  While the comparables that have sold in the last 6 months have sold in the high $120k’s to low $130k’s, several had listed in the $140k’s and even $150k.

I understand that some sellers “can’t afford to sell their home at that price” and by putting it on the market that much higher than comparables, they won’t have to worry about that because no one is going to make them an offer.  Consequently, if they’re stuck with a house that won’t sell, so why even list it?

I (nor any other Realtor) can make a market that doesn’t exist.  If you’re ridiculously overpriced right now the best thing you can do is to definitively decide if you want to sell or you want to stay. 

If you want to sell, you MUST be priced competitively.  If you can’t do that, then you must stay and it’s better for you to just sit on the sidelines of this market for another 1.5-2 years, at which time pricing may improve enough to make a difference.

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2 comments
Aaron Dickinson
Aaron Dickinson

To assume that agents and brokers didn't bring up the potential pitfalls of buying at 100% financing I think takes a little more than a leap of faith. Real estate agents and brokers do not have a crystal ball and so consequently we don't know how the market may be in 2, 3, or more years down the road. Today I tell buyers that it isn't a good time to buy for them unless they are looking at staying in that home for at least 3 years, preferably 5. I've had several choose not to buy specifically for that reason. I've got a client that's a great example of where my advise is only worth so much. He bought a condo with 100% financing on a 2-1 rate buydown (but a P&I payment) because at the time of his purchase he was just out of college. Well, he decided to refinance into an interest-only loan to keep his payment the same and today owes the same as he did when he bought nearly 4 years ago. With the market in his development, he'll likely get only $2000 more for his unit today than when he bought it, and he'll still have his closing costs to pay. How is his poor decision after the fact(which he admits) my fault? The Department of Commerce is going after agents for recommending to buyers to purchase Owner's Policies of Title Insurance, saying that real estate agents are not licensed to sell insurance and so recommending it is illegal, even though it seems like a good idea to me in almost all circumstances. For me to assume I know how to best invest their money seems like I'd be practicing investment advice without a license. Most of the people in my business I believe feel the same as I do: that it is our duty to help educate consumers and to do our best to provide them with the big picture, but that we cannot predict the future and do not know enough about our specific clients' situations to give them all the advice they may need from a financial standpoint... that's a role for an investment advisor/financial planner.

DAL
DAL

Your comments confuse me on this topic. Real estate agents and mortgage brokers were happy to make deals the past 5 years using financing tools that most of them didn't understand themselves. Anything to get the deal done including 100% financing. Then, the market drops out from underneath and some people want to move, some need to and others can't handle what they got themselves into. But also, the people they hired, realtors and loan officers, don't appear to have done much to advise them. Now, supply and demand are out of balance and forclosures will make this even worse. Pricing is dynamic and is more than just looking at the most recent sales. Sellers who managed their assets well will be able to hold their property, which by the way will be longer than you suggest for a rebound, and based on current values possibly achieve a more historical ROI using current prices as their initial investment.

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TwinCitiesRealEstateBlog.com is not a Multiple Listing Service MLS, nor does it offer MLS access.
This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.