Posts Tagged ‘overpriced homes’

Making an Offer on an Overpriced Home

Wednesday, July 14th, 2010

You see a home you love, but the sellers have it way overpriced. If you walk away, you could be walking away from owning a fantastic home. However, if you put a realistic offer on the home, you could be in for a straight rejection or a supreme battle.

Why Buyers Shy away from Overpriced Homes

There are many reasons why homebuyers shy away from the overpriced home. First of all, they want to avoid a fight; or, at the very least, they want to avoid offending the seller. It may be quite an embarrassing situation for the buyer to be caught in.

Many buyers assume that sellers with an overpriced home already know the home is overpriced and that there will be little room for negotiation. If you knew a Coppell property was overpriced on purpose would it even make sense to waste your time putting in an offer? You would probably also assume that the sellers have received a low-ball offer at some point along the line, and that they already rejected it.

Should you still make an Offer?

So the question becomes: should you still go after an overpriced listing?

The best way to find an overpriced listing is to examine the number of days the home has been on the market. Next, ask your agent to perform an analysis on the home and to give you an estimate of what the home is worth. One of the most important things to realize is that, more often than not, the sellers are not even aware that their home is overpriced. Many times their listing agent is afraid of offending them by telling them that their home is overpriced!

Because of the condition of the real estate market, and the number of homes that are on the market at any given time, it may be a really good idea to make an offer on an overpriced home. It is important, however, to come armed with the information you obtained from your own market analysis. A great way to get the ball rolling is to offer the sellers a large earnest money deposit to show your interest.

Finally, understand that, although the seller may have turned down other low-ball offers from buyers, you could be entering the picture at the right moment when the seller is ready and willing to sell the home for less than the asking price. In other words, never assume anything when it comes to buying an overpriced home!

Overpriced Properties Take Longer to Sell

Thursday, December 18th, 2008

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.

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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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