Twice this week I’ve seen owners take their homes on the market in hopes that there will be price improvement in the future.
In both cases, the sellers asked that we try to sell well above market price “just for a couple of weeks” in hopes of a lowball offer. In both cases, I made the mistake of relenting in the knowledge that if I didn’t take the listing, someone else would. I tried to couch my acceptance by explaining we likely won’t get traffic and will not receive any offers on an overpriced home, hoping this would safeguard against the almost inevitable letdown when there were no showings. It didn’t.
In both cases, the sellers told me “we know what our home is worth.” Except they don’t really know what their home is worth, not in 2007. They’re still looking at 2006 prices, maybe from earlier this year, and not accepting the reality that the market has declined.
If you price your home higher than the prevailing price in a declining market, it’s nearly impossible to catch up to the market. It can be done, of course, but psychology gets in the way.
No matter we as agents say, sellers begin calculating their net off the initial listing price. Even if it’s a $450,000 home priced $100,000 above, all calculations begin at the higher price. Any reductions from that price are considered losses, though nothing truly has been lost. The original list price never was going to be realized.
Many homeowners find it difficult to reduce their price as the market erodes below them. It’s even harder for those who had hopes of a higher net (or a net at all) to pull the trigger on the needed reduction.
Revision to the mean is a concept best handled graphically and hopefully later this week I’ll have time to put together the graphs. But for those who would pull their home off the market waiting for the rebound, consider this …
“Normal” market appreciation is somewhere in the 3 – 5% range annually. Given the market continues to slide, for each 3% the prices drop, that translates into a possible extra year of ownership waiting for the recovery you seek.
Now consider the belief that your home is worth 10 – 15% more than the prevailing market price. Barring another 2005-like escalation in appreciation, how long will you be waiting before you see your price come back?
The reality is if you need to sell now, sell now. But do so with open eyes.[tags]Phoenix Arizona, Phoenix real estate, real estate pricing[/tags]