If you have been thinking about selling your home, now would be a good time to talk with your Realtor. As of Jan. 28, there were only 97 properties available for purchase in San Benito County. The lower priced listings are selling very quickly. The higher ranges are taking longer. This means it is especially advantageous for buyers looking to move to a larger home.
Your Realtor will prepare (at no cost to you) a comparative market analysis. You will see what homes similar to yours are on the market now, are in escrow or have previously sold. From the ones that have sold recently, you see what your home is worth.
Often, clients come to us Realtors with unrealistic expectations of their home’s value. It makes for an uncomfortable conversation. “As you see, the comparables indicated your home’s value to be $400,000.” “I want you to list it at $460,000. That’s what I paid for it, plus I put in air conditioning.”
So you see the conflict. The Realtor knows that list price it too high in the current market. The seller firmly believes his or her price is reasonable and fair.
Should the Realtor take the listing? My answer, backed by 20 years of experience, is no. And here’s why:
The most interest and activity surrounding a listing comes when it is new on the MLS (multiple listing service). The Realtors will tour it and people will find it on their search engines and want to see it. When the property doesn’t compare favorably to the others in that price range, interest will lag. People who could buy the house and would love it won’t even see it, because they will be searching in the price point they can afford and it will not be there! The best opportunity for sale will be lost.
Some agents will take an overpriced listing. They will use it to advertise, and hold it open hoping to meet potential buyers unrepresented by an agent.
But here’s the truth: The client has already said he or she does not value the Realtor’s experience and expertise. Seriously, when you go to the doctor and find out your blood pressure is way too high, do you say, “Let’s just leave it out there and see how it goes”? No. You take the advice your physician gives you and act on it.
The price will have to come down before the property sells. So imagine the listing has sat for fou months with no showings. The seller agrees to lower the price to (say) $440,000. The seller feels they just lost $20,000…and they probably think it is the fault of the Realtor, ignoring the fact that the home is still priced $40,000 over the market rate. The seller is holding out for that one buyer who falls in love with the home and will pay anything to purchase it.
So let’s imagine the unlikely scenario where that does happen: A buyer comes in with an offer of $440,000. The transaction begins trotting along: Inspections are done; the loan is underway; smooth sailing for all.
But whoa, doggies! Here comes the appraisal. Lo and behold, the property appraises for $400,000. What happens then? The lender will not loan on more than the appraised value. So there is a shortfall in the numbers of $40,000. At this point in time, the buyer will need to come up with $40,000 in cash (here, it’s in my back pocket) or the transaction will fall apart. OR, the seller will have to agree to change the purchase price to match the appraised value. Someone is not going to be a happy camper.
When you overprice your home, you actually help other home sellers get their properties sold. Buyers will see yours, and see the other one, and realize it is a better value. In addition, your home will probably become known as “the overpriced one on South Seaside Drive."
Once your home has been on the market for a long time, buyers will think there is something wrong with it. They will often assume you must be getting desperate. Both of these will lead to lower offers coming in for your home.
When looking for an agent to list your home, it is in your best interest to choose the best agent, not necessarily the highest listing price. An agent has no control over the market, only over their marketing plan. Choose the Realtor carefully and then listen to his or her advice.
It’s a good life.
Nants Foley is a Broker Associate (CalBRE 01222234) at Flora Real Estate Group in Hollister. You may contact here with questions or ideas for topics at [email protected] or 831-801-5110.