Pricing Your Home Competitively in a Sluggish Market
We tend not to pay too much attention to real estate experts or forecasters. This is such a huge, diverse industry you just cannot draw conclusions based on what is happening across town, much less across the country. I have always believed if you keep your blinders on and stay focused on what you are doing, you will do well no matter how strong or slow a particular submarket is. At the same time, it is hard to miss all the buzz about the housing market slowdown. I am seeing two things that concern me ...
more and more overpriced homes (at least in my opinion) are coming onto the market and staying there and
many (but certainly not all) sellers just don't realize this is not the market we experienced last year or even the year before.
Although we are still on track with last year's sales volume (almost $25 million), this is by far the slowest April and May I can remember. I'm not smart enough to explain why this happening. Interest rates are not bad and the economy appears to be strong. But something is going on.
A lot of agents I have never seen before are starting to appear with listings. I'm not sure if those agents understand the competition in this area, specifically the impact the semi-custom builders like David Weekly, Drees, and Paul Taylor are having on the true custom home market. Those are great builders and they are just loading up their new homes with so many nice features. They can still significantly undercut the prices of true custom homes. They are building gorgeous $400-$700K homes and putting pressure on even the newer three, four, or five year old custom homes (not to mention the custom homes that are older). Everywhere you look, there is a new development going up, and with very few exceptions, those lots are already accounted for by these semi-custom home builders. There is no question in my mind this is the main reason the market for the true custom homes out here has softened.
We are carrying about $16 million of inventory, mostly in Allen, Fairview, Lucas, and Parker. If we are seeing a significant slowdown in activity, you can bet the other Realtors are too!
What Does this All Mean
If you want to sell your home by the end of this peak buying season (the end of August when kids are all back in school) you had better be realistic on your pricing.
Every seller wants to hear a Realtor tell them their home is going to bring top, top dollar and sell quickly. Who wouldn't want to hear this? Many Realtors believe to get a listing, they have to price the home to make the seller happy whether they really believe they can sell it at that price or not. They just assume every other agent is going to do the same thing and they darn sure don't want to come in with the lowest price. And besides, if they get the listing and the home doesn't sell, it isn't going to really hurt them.
I can count 5 times over the past year when we interviewed for listings and lost them to our competition. With every one of these listings, we knew the sellers were interviewing other Realtors. We also knew going in those Realtors were going to throw some big numbers at those sellers. Those Realtors probably had a good idea they were going up against us for the listing (which is tough to do in this area). They cannot compete with our track record, experience, and tremendous marketing program, so there are only two things left if they want the listing ... they either have to give the seller an exaggerated opinion of value or cut their commission.
I have no idea if they did the latter, but I can guarantee they threw some ridiculous numbers at those sellers. Our opinions of value on these homes came in a full 20-30% lower than our competition. We just scratched our heads in amazement, but never doubted ourselves, our pulse on this market, or our integrity. We monitored those homes to see what happened with them. Not surprisingly (to us anyway) ... not one of those five homes sold a full year later! Furthermore, I would bet none has even had an offer! So who really got hurt? The sellers of course!
Why Would Any Realtor Intentionally Take an Overpriced Listing?
That one is easy to answer ...
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they need signs in the yard both for exposure and to "fish" for buyers. They may not be able to sell that home to someone who called on their overpriced listing, but they can take those buyers to a more reasonably priced home and make the deal on that home.
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The Realtor is hoping they can outlast the seller. After the seller has had 3-4 months of inactivity, no showings, and no feedback, they usually come to the conclusion that their home is overpriced. That's when they drop the price. If the Realtor still has the listing, they are in a good position to finally sell the home.
One of the three promises we make to every seller is we will never intentionally overprice a home to "win" a listing. And we won't! We will give you an honest opinion of value and support it with true comparables.
Tom Grisak Estate Homes Realtors, Inc - Texas License # 0329533
Your Realtors for Allentexas, Fairviewtexas, Lucastexas, McKinneytexas, Murphytexas, and Parkertexas