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The Horrors of Over Pricing Real Estate

Home Sales for Greater Milwaukee

Home Sales for Greater Milwaukee

I’ve seen a lot of excuses Sellers come up with to over price their homes for sale. I have seen people List their homes for sale and over price them, thinking they can take the Listing to the bank and use that as an alternative to an appraisal. This never works. I find out their motive when they call me and say they have to take it off the market to refinance their home. Instead of being honest and seeking advise, they run across some video on the Internet and think they found a magic bullet that is going to help them out smart the world. All they accomplish is wasting a great deal of my time, theirs and the Lender they are working with.

The most popular mind set Sellers fall into when over pricing their homes is thinking their home is the best on the market. In this case I offer to spend a day taking them out to view the competition. I send them a list of similar homes in the area, tell them to choose a few we will view together and see which offers the most value for the money. I have been through this dozens of times. Not one Seller has taken me up on the offer to go out and learn. In other words, to walk a mile in my shoes, see the details I see, gather and analyze all the facts in a comprehensive manner. I have never seen one Seller dig in their heals and change the current market… no matter how hard they try.

Over my years I have seen Sellers chasing the market. This occurred over the previous 5 or 6 years. As prices fell, Sellers waited and waited for a rebound. Months passed before they were convinced they had no choice but to drop the price on their homes for sale. Almost every time Sellers chose a price at the very top, or exceeded market prices. Why? They refuse to give up the mind set in the previous paragraph.

How do we apply this knowledge to a market like we see now with run away price increases? How can Sellers be satisfied they are getting top dollar in any market? I look at the market this way. Look at the market in a business like manner, the same way appraisers and lenders will. The fact of the matter is, in a Buyer’s or Seller’s market, look at the actual SOLD comparable units in the local Real Estate market over the past few months.

To put this in logical terms. In one local market Buyers were paying on the average of $170,000 to $179,000 for a home. You are selling a similar home. You see new Listings with prices at $185,000, $190,000 and a few hitting $200,000. Now think like an appraiser and lender. Are they looking at asking prices, or actual sold prices on similar homes?

Take this a step further. You accept a full price offer from a qualified Buyer at $200,000. The Buyer takes the offer to the lender, who orders the appraisal. This is standard practice, no way to get around this.

The appraiser of course visits your home, takes a look around … what are they looking for? Appraisers are looking for items that dramatically effect the value of the home. Both good and bad. Sellers may think a new ceiling fan increases the value of their home by $10,000, but an appraiser will not take such a minor detail into consideration. They have seen thousands of ceiling fans. The kitchen you update 10 years ago… is it worth much more than you paid for it? Appraises may look at your home, maybe 1 other home in the area they appraised a few months ago, but chances are slim. So appraisers are making a decision based on viewing 1 home., maybe 2.

What is the appraised value going to be when comparable units in the area have sold for $170,000 to $185,000? Some where in between based on the actual condition of your home. If the selling price is $200,000 it means the Buyer has to bring at least $15,000 to the table to close.

Reality sets in. In Real Estate we have to deal with facts and figures some where in the process. Some Sellers are quicker learners than others. Almost all Sellers have to try to see if they can sell at a new record high, but remember, that will take a Buyer with a new record high in a down payment. Something you need to consider when setting the sale price on your house.

Look at these facts on another level. Do you really think you can trust a sales person insisting they have some special gift to sell your home above market price? Ask them one question and see how the expression changes on their face. Ask them if they plan on assisting in the down payment for the Buyer when the appraisal suggests a loan equal to current market conditions. Maybe they have some magic fairy dust to sprinkle on Buyer’s money and double their down payment over night.

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