Although most brokers know better, home sellers often think they can get more than market value for their homes. A group of professors from Longwood University in Virginia provides evidence of the futility of this expectation. They suggest that an overpriced property justifies a longer-than-normal term on the listing contract. Professors Bennie Waller, Ray Brastow and Caitlin Hooe analyzed home sales in Southeastern Virginia from 2004 to 2007. They measured the percentage that a property is overpriced as the percent difference between the original listing price and the final sales price.

The study’s second major finding was the effect of overpricing on time on market. Each 10 percent the listing price exceeded the final sales price translated to an additional month of marketing time. Sellers intent on getting the highest possible price may be willing to wait longer, but asking prices sometimes decline as time on market increases, so the additional time may not provide a higher price.

Other Findings from the study included:

• Larger homes take longer to sell

• National franchises tend to sell properties faster

• During periods of tightening monetary policy, when interest rates are rising, properties tend to sell in a shorter period. These periods represent strong economic growth, which is good for housing markets. The rising rates encourage buyers to speed up their buying decisions.

• A seller can try to speed up the broker by insisting on a shorter-than-standard listing term, but that will not lead to a quicker sale if the property is overpriced, atypical of the market or if the economy is slowing.

• Atypical properties tend to be overpriced because they are difficult to value using current market data.

• Male brokers tend to take shorter listing contracts compared with female brokers. This seems to reiterate that men are overconfident as mentioned in the compensation versus-performance study.

Results also indicate a significant relationship between the length of the listing contract and time on the market. For the Virginia data, each ten days added to the listing term extended the marketing time by eight days. The authors suggest this reflects the lack of urgency on the broker’s part when the listing expiration date is extended. It could also indicate that brokers demand longer contracts when presented with harder-to-sell properties.

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