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Avoid listing your property too high in a local market

By Howard Sanders • April 16th, 2010

The first quarter of 2010 is coming to a close, as have the Olympic Games, so let’s have a look back over the last three months regarding the real estate business on Pender.

As I have mentioned in previous blogs, the real estate market on Pender has been fluid in the last couple of years. Many sellers, thinking that the Olympics would bring potential buyers to BC, started off the year listing their properties high and most of these are still on the market without offers. In fact, of the 10 sales so far this year, 80% were either listed last year or were listed after a sale had already been negotiated. The two remaining sales were listed in 2010 and have sold for fair prices, but less than list.

Since the beginning of 2010, some sellers on Pender have been telling us that they ‘want to test the market’ when they list at a price higher than we recommend. This is one strategy, and can work in cases where the seller is not in a hurry to sell, or has a property that is unique within the market and therefore has no competition. The problems arises when this ‘let’s test the market’ strategy becomes the norm within a local area. If one market becomes overpriced, and buyers have choices, they will go somewhere else. Either that or it will only be low ball offers that come in, resulting in hard negotiations that most of the time go nowhere. With a tightening in the financing requirements to purchase all real estate, particularly rural bare land with existing structures such as trailers or other structures that have no occupancy permits and where at least 50% down is required, banks are going to want appraisals and are not going to finance a buyer if a property is listed for way more than the appraisal. A better strategy for sellers would be to listen to your realtor and list your property within reason of the existing fair market value, being prepared to reduce slightly if a good offer came in but holding close to your list price when negotiating. This way, the local market reflects the fair market value of the real estate inventory at the time and will encourage more buyers to the area.

Creating real estate bubbles in local markets is easy to do and it affects all aspects of that market. Sellers have to wait longer for offers, those offers are generally are a lot lower than the list, and the final sale price ends up close to the original realtor valuation. In the meantime, however, it has taken months to sell an overpriced property when it could have taken weeks or even days. 80% of buyers look to the internet to find property nowadays and the way they do it is by searching. If you list a property too high within search parameters, for example the buyer is searching online for properties between $300K to $400K, and your property is really only worth $275K but listed at $320K, you will get not get any interest because there will be better options for the buyer within that searched price range. It’s as simple as that. Real Estate markets are changing quickly at the moment, so a house down the road from you that sold at a certain amount last year will not necessarily sell for the same amount this year because of the fluidity of present conditions.

In an up market, a seller’s market, the same rules apply but in reverse, the danger then being under-listing a property and not getting the fair market value. Pricing properties is what realtors do. We eat, sleep and drink the market we work in and know within reason either what price a property will sell for or what it is worth to a buyer. When I list a property I want it to sell as fast as possible for fair market value, a bit more if I can get it (there are always buyers that fall in love and will pay over the odds to secure the deal but these are rare), but most sellers want to move on as fast as they can when they put their home up for sale. Price it right and it will sell, price it low and of course it will sell even faster sometimes with multiple offers driving up the price (one strategy in a seller’s market), but price it too high and it’s almost a certainty that it will sit there until that price is reduced and reduced to what it should have been in the first place.

It can be an expensive lesson to learn. So trust your realtor, we do have our client’s best interests at heart and are most happy when a deal is brokered where both parties are satisfied by the transaction.

Howard on Pender Island – Call 250-222-4663

 

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