Apr

1

The Real Estate Market: Cutting Prices

Filed Under Deer Park Real Estate, Sellers |

So as a real estate agent, when I go to peoples homes and discuss the market, I get the feeling that the homeowner(s) either doesn’t understand what I’m saying or they just don’t believe me because I’m a lying salesman. The funny thing is, I’m not a car salesman. These aren’t cars I’m selling off of a lot. I’m a real estate professional who has all the numbers, both locally and nationally and my lot is the neighbhorhood.

I have to price homes according to what the market is calling for. The market is made up of buyers. I’m not buying your home and it’s not 2004. The message to most of my homeowners who are hiring me to sell their home is the following:

“If you have to sell, cut your prices aggressively now.”

And that’s a quote from Business Week, February, 2008!

There’s a big problem in the market right now and I see it constantly. Many real estate agents are taking listings that are just blatantly over priced. And some more than $60,000. This is bad for business. Let me explain.

As a real estate agent, I am not going to show a home that is over priced. Why? Think about this. I’m the real estate agent and I would show any prospective buyer anything they want to see. Let me repeat that - I’ll show any prospective buyer anything they want to see. And there you have it. I don’t set the market value, buyers do and they know what they want to pay, period.

When other agents over price a home that bad, it does the neighbhorhood no good, because it indicates to their neighbors the wrong information (i.e. “Well if their house is priced at X, then my house has got to be worth XXXXX.”) Homeowners price their home as high as they can, as they should. However, seeing a neighbor hit the market at a certain price, may give them a totally warped sense of the value of their home.

Owners who attempt to sell their own home, usually get their information from 2 or 3 houses in the area. Their data is 6 months old and they just slap a price on it. Now as a homeowner, that’s fine. Most likely, they’ll get hundreds of calls from real estate agents and after a month or two, will list with an agent, hopefully with me (and thus at a good price).

The bottom line is, we as real estate agents and brokers, need to price our inventory correctly. We need to stop taking listings that are over priced. Currently, I have a listing that is over priced - oddly enough. However, the situation is a little different. The owner is of an ethnicity that is very proud and stubborn and they do not speak english so their daughter translates. The owner is in a position where if he sells, “It’s okay.” If he doesn’t sell, “I rental.”

So we priced it about $35,000 over what the data told me was market value. Now, 2 months later, we’re dropping the price to where we should have been 2 months ago. So we’re “chasing the market.” You do not want to be in this position as a homeowner. It’s no good.

How do we not “chase the market”? Simple, we cut prices now. Right now. Real estate agents stop taking listings too high and then say to other agents, “Hey, we’ve got to do what we’ve got to do.” Honestly, that’s what an agent just recently said to me when I went to an open house. It was a house in West Babylon that I had an appointment with in February and I priced the home at $379,000. I sat with the owner, followed up with them and gave them all the information they could possibly want. I told her how Coldwell Banker far surpasses all the competition and how I, as an agent, am full-time and provide the best services possible.

Well another agent came in and priced the house at…whatever the homeowner wanted which ended up being $425,000. That’s $46,000 more than my highest price. You see, I gave the owner two options and told her that the highest price she could go was $379,000 and that most likely, a better price would be $365,000 for a quick sale (30 to 60 days).

Unfortunately for the owner in this situation, they chose very poorly and will not sell their home. They will expire six months from now and the day they do, I’ll be knocking on their door. I will not show this house because - no buyers will want to see it because buyers know the prices and the buyers will not want to see it because…it’s over priced. Buyers already know this - I don’t need to tell them.

So cutting prices now is the answer. If you are a homeowner who wants to sell because they need to sell, you must cut your prices now. Call your agent and tell them you want to reduce your price now. With competition high (lots of houses on the market), supply is high and when that’s mixed with a low demand (not as many buyers out there willing to pull the trigger), you must adjust prices downward. It’s simple (and very tough) economics.

I’m not into being the bearer of bad news for people. I don’t like it. And I will fight for every penny I put into a homeowners pocket. Don’t forget, the more they make, the more I make. Everytime I have to lower a price, I make less money…on all my listings. Because when I lower one homes price, I have to go and lower all the rest, or at least try.

If you want a free comprehensive value assessment of your home, please call me at 631.587.1700, ext. 51.

(c) Copyright www.tommcgiveron.com

By Tom McGiveron


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1 Comment so far

  1. Frances on April 9, 2008 2:14 pm

    Tom,
    I liked this article, very interesting and forces people to see a very down-to-earth view of a real estate agent. You’re right, you’re not a car salesman - you are there to help the owner sell their home, and with that help if you’re successful, you get paid.

    On the more important point, it’s a typical greedy thing people do - they want more money. If they’re willing to wait for it, or to go down eventually so be it. Just makes your job harder…

    Nice article, I enjoyed reading it.