Pricing a house in a dead market

I’m in possession of a document entitled, “10 Best-Kept Secrets for Selling Your Home”. The author is unattributed but I believe I’ve either seen it or something similar penned by Barbara Corcoran, who knows everything there is to know about selling NYC real estate and by extension, NYC types who end up buying in Greenwich. Regardless, the writer’s top secret is absolutely terriffic.

Pricing it right.

Find out what your home is worth, then shave 15 to 20 percent off the price. You’ll be stampeded by buyers with multiple bids – even in the worst of markets – and they’ll bid up the price over what it’s worth. It takes real courage and most sellers just don’t want to risk it, but it’s the single best strategy to sell a home in today’s market.”

I like this idea because right now the biggest problem facing sellers is motivating a buyer to commit. Buyers feel, with good reason, that prices are dropping and there is no urgency to buy now when things will be cheaper in a few months. But most buyers are actually ready to buy, so if a house comes on that is a genuine bargain – not something marked 20% off some imaginary price stuck on three years ago – they will be interested. I know that, if I saw such a listing come on I would immediately send it to all of my buyers in its price range and tell them that it was an excellent value. Multiply my reaction by 100 other agents, and it’s easy to see why your house would be the center of attention in the real estate world. Hey – it’s got to be better than what’s happening with most listings now, where the seller takes his (inflated) value of what his house is worth, adds maybe 15% to cover negotiating room, commissions and taxes, then puts it on the market and is totally ignored. What have you got to lose?

4 Comments

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4 responses to “Pricing a house in a dead market

  1. Bedouin

    I think a natural tension arises with this issue. Of course this is excellent advice in general, ie this will work to sell the home quickly at a decent price say 80% of the time. But if you are the seller and this strategy backfires and you get of lest say 10% less for your house than you might have. Then you, as the seller lose big on a big asset in your portfolio. It’s not a big loss for the agent but it is a big loss to the seller. Now as the seller if you look at it as an insurance policy against your home sitting on the market for a long time perhaps both the seller and the agent can happily follow this plan…

  2. Anonymous

    Every seller and buyer should have a appraisal done. For broker to determine mkt value borders on criminal. Brokerage firms should be held liable for mispricing ( spelling). Imagine the dollar value of all the wasted time because of brokers overpricing.. not that some appraisers are better than others, but in general you will get a more accurate read on current market from certified appraiser, not a sales person / broker. We need someone to file suit against brokerage firm to set this thin straight

    • christopherfountain

      I disagree, Anonymous. Most brokers have a pretty good idea of market value but the sellers have an inflated opinion and, where the system breaks down, many brokers take the listing at the seller’s price. A waste of time for everybody, but there you have it. A seller who insists on a price and then sues his broker for agreeing to it doesn’t strike me as a good idea.
      On the other hand, there are certainly brokers out there who deliberately inflate their professed market value solely to “buy a listing” (and if there’s a term for it, you know people have done it. These people deserve our scorn and maybe a legal sanction, but I don’t know you’d separate them from the third group, the just plain dumb and ignorant who truly believe the crap they’re spewing. So use a good broker or, as you suggest, hire a good appraiser. Trouble is that these days, as an appraiser will tell you, there are so few sales that it’s hard to tell with any degree of exactness what a house is worth.

  3. christopherfountain

    Bedouin, the risk of loss really isn’t there. remember that a seller retains the right to refuse any and all offers so if (a) only one offer comes in, he can decide to accept it, reject it or see if he can negotiate a better one; (b) no offers come in, he’s learned that his opinion of market value is wrong; or (c) multiple offers come in, he can accept one of them or none of them. The seller remains in control, all through the deal.
    My brother Gideon tried this on his own house years ago, ignited a bidding war and got a price for his place that screwed up comparables in central Greenwich for years.