How accurate is the price on a new listing?
You don’t have the luxury of using the days-on-market statistic to support your suspicion that the price might be too high – and you’d have to let it sit for a week or two to know for sure.
Let’s face it, today’s market conditions are ripe for over-pricing.
It is irresistible for sellers to use active listings to help determine their list price, without considering why those aren’t selling. But if an active listing has been on the market for a week or two, buyers think that it’s over-priced, because there are NO barriers to sale. Rates are ultra-low, mortgages are readily available, and buyers are out in droves.
So when you see a new listing pop on the market, and you are wondering if the price is right – compare it to the active listings. What do they tell us?
If similar homes haven’t been selling at that price, this house won’t either.
But there are caveats:
1. Determine if those active listings aren’t selling because they are hammered, or have a bad location/other defect – a special feature or two at the new listing could turn it into a barnburner.
2. Check the price reductions of the stale listings – they might be getting closer on price, but not able to generate a sale due to lengthy time on market. A new listing that’s priced about the same, but has more urgency, could garner immediate activity.
3. Are the other actives easy to show? Buyers want a hefty discount to make offers on homes they can’t see, or ignore them altogether.
4. Have the competing active listings been getting offers? Just because it is active, doesn’t mean it’s not hot. Bank-owned listings and short-sales are particularly notorious for staying active, even though they have several offers in hand – check to find out before assuming their price is wrong.
In today’s market, it is difficult for buyers and sellers to rely on solds only – there aren’t enough of them. Sellers have always been quick to discard any bad evidence, so if there are only a couple of recent sales and 5-10 active listings, they will use whatever is available to justify their price.
But you can use the active listings as a gauge because of the hyper-intensity of a pure marketplace. All participants have every data point at their fingertips, and buyers are doing their homework – if a house isn’t selling, there has to be a reason – and it’s usually the price. But consider the caveats too.
It’s up to you, and your agent, to properly evaluate what each home is worth.
Couldn’t have said it better. In a normal, active, balanced market comprised of bread and butter tract homes, a lot of folks can price accurately. The level of detail about competing product needed to price your property in this market requires an agent that will do the legwork to get that detail.
I thought the rough estimate is, if you can put 20% down on a 30 year fixed, rent it out at the local going rate for a year, and be flat or ahead by year end, the price is about right…
At least that used to be the general rule…
Ha ha, that’s a good one.
If you can find them like that, it would be a good gauge – and around NSDCC they should fit for the newer tract houses under $800,000 that rent for $1.25/sf or so.
Hi Jim,
Per our conversation a few minutes ago, we’d like to use some of the video you shot on Mitt Romney’s La Jolla house that you posted on YouTube.
It will air tonight in a short segment we’re producing on the Young Turks with Cenk Uygur program that will air at at 7pm eastern (4pm pacific) on Current TV cable network.
A lot of the problems boil down to trust. After the past 10 years of frauds, lies, deceit, greed, and everything else nobody trusts each other anymore.
A listing agent might tell a seller this is what you need to list for in order to sell. At the same time the seller might think this Realtor is just trying to low ball me into a lower price to make a quick commission.
At the same time I’m sure some of the buyers are skeptical of the this must be the bottom calls. They want a little discount to current retail to cushion a possible future decline in price. How does a buyer feel when he pays retail and a couple months later shady short sale down the street goes for 15% less than retail.
are days of lowballing over?
Not if you’re my client.
But I hear it regularly that other agents tell their own buyers to just pay the price. They get intimidated by the listing agent into thinking the seller won’t accept less.
You don’t have to worry about anyone intimidating me.
Wow…first your appearance on the libertarian Reason TV and now the lefty Young Turks. Jim the Bipartisan Realtor. 😀
I’m very surprised the mainstream media hasn’t run an expose yet on Romney’s expensive beachfront teardown project. Your post on that was the only mention of it I’d heard. They are probably saving the story until he’s got the nomination and running against B.O.
Jay, yup…I can see it now….Romney is evil because he was successful.