Open house dreaming

I think that our market is still being filled with new listings that are over-priced. Part of that is the refusal of sellers to get real, some can be attributed to agents “buying” a listing by deliberately lying to would-be sellers (okay, let’s use the softer term and say, “letting their optimism get the best of their judgment) and, in some small part, the complete lack of certainty of what’s coming at us. I was at a house today with another agent and, after we’d seen the place and were walking back to our cars, I said, “asking price should be $500,000 less: $2,495,000.” The other agent, a very good one, said, “oh, no, that’s much too low,” so I asked her what she thought it should be priced at and what it would sell for. After a certain amount of consideration, she finally concluded (a) that it was going to be on the market a long time, (b) that maybe $2.650 was a better asking price, and that it would probably sell at $2.495. So she ended where I began – my guess, today, is that it will sell for $2.3 million but here’s the rub: neither of us know. Not long ago, I could make a pretty good estimate of a house’s value, with the occasional whopper of a miss. Today, I’m sort of, kind of confident about guessing present value (limited, of course, by the lack of 15 recent nw to use) but I really have no idea what the market will look like in June. My fear is that it’s going to look really, really ugly. But I don’t know that.

So I’ll keep an eye on this place and report back when, and if, it sells. Then we’ll know.

6 Comments

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6 responses to “Open house dreaming

  1. FlyAngler

    Chris:

    Doesn’t your discussion with the other agent present the real dilemma facing new sellers: How do you price a home in this stalled and illiquid market with few completed sales as comps?

    If the seller thinks that $2.5mm is a price they could accept, do they list it at $2.5mm or higher? That is, if a seller knows no one is paying the listed price these days, how much of a cushion do they have to build into the listing?

    Or, from a buyer’s perspective, how do they bid versus a listed price? If they see a property they like listed at a too-high $3mm but could be a buyer at $2.5mm, do they bid $2.3mm in an effort to compromise upward? But, at 76% of listed price, do they risk “insulting” the seller?

    Quite the dilemma.

    • christopherfountain

      It’s a poser, alright and one I don’t have a good answer to. I’d think sellers should always err on the side of listing closer to their acceptable price, rather than higher, in this market, but buyers are already discounting asking prices. For instance, I recently saw a price reduction of $100,000 on a $2,290,000 house but, since I’d already assumed that the seller would go for a bid of $2.1 million, formal notification that he’d now accept $2.190 did nothing for me. So?
      Similarly, I’d recommend a bid of 75% of asking price to a buyer, but as Mad Monkey so aptly demonstrates, people are terribly emotional about their home prices and you do indeed risk offending a seller and poisoning the well.
      It’s the uncertainty that’s causing this, and all I can suggest is that sellers try to set realistic prices, buyers go ahead and probe for bargains, and everyone let the chips fall as they may. And maybe we’ll have some stability a few months from now, allowing everyone to adjust to a new reality, whatever that turns out to be.

  2. Retired IB'er

    Chris wrote:

    “Today, I’m sort of, kind of confident about guessing present value but I really have no idea what the market will look like in June. My fear is that it’s going to look really, really ugly. But I don’t know that.”

    I can’t remember when I first started to read/post to your blog. If memory serves, which often is a crapshoot, I think I’ve followed your site for at least 7 months, but more like 9 months. During that time, I have been consistent in my views (and not to pat myself on the back, accurate as well).

    There is no question in my mind that the economy is in a world of hurt. Indeed, the world’s economies are in a world of hurt. Just a few of today’s headlines: MSFT to slash 5,000 jobs, jobless claims surge, housing starts tumble, regional banks still suffering as credit problems soar. I could go on, but I will not.

    The punch line is: the housing market is not going to get better anytime soon. Forget June, any improvement will come years from now, not months.

    My advice is to plan accordingly. Still, free advice is often worth what you pay for it.

    • christopherfountain

      That’s what comes from being a fan of St. Bart’s, IB’er – you have nothing to hide!

  3. W.

    You must price to trend, not comps. Any “comps” that are out there are based on contracts signed 3-6 months ago. Prices are moving down 2 to 3 percent per month, at least. So if you come out of the gate priced optimistically like your competitor agent suggested, you are just wasting time and costing your client money. The buyers that are out there have seen everything already and you have one chance to grab their attention before your place is just another overpriced listing rotting among the others. Pricing to sell immediately is the best strategy, and this means going 5-10% lower than the most recent comps.