Jul 6 - Sellers and Property Value

by Don Havre - The Real Estate Firm

We continue to see about 25% of the residential market doing a price reduction monthly. If a Seller establishes a price well above market value and then does a series of price adjustments, history has shown that many of these homes will eventually sell for less than market value. Why [ Read More ] is this? The answer is that the homes become market worn because many Buyers want to see the fresh inventory, not those that have been on the market for an extended period. The perception is that these homes have been rejected by others... so why should they view them.

Among the many reasons for Sellers overpricing properties are (1) they need the money to purchase the next home or simply break even on the sale of the existing property. For those who have re-financed and spent the equity on new cars etc., this is situation is very common. (2) Sometimes home owners have made an over-improvement and they are attempting to recapture their costs. One must be very cautious when making improvements, especially additions.

(3) Others originally paid too much for the property. We frequently see where a Buyer purchased a property without representation only to discover later, they paid too much. This situation can sometimes be true of "By Owner" purchases. Simply because an Owner is selling by them selves, does not make it a good deal for the purchaser. (4) Probably most important is that the Seller lacks factual market data or does not know how to interpret the data. If the information is available, many try to establish price based upon $ per square foot. If one takes a smaller home and determines the price per square foot and applies this factor to a larger home, the results are misleading. Among the many reasons are the Seller is counting land value twice.

As a Buyer one must be focused and remember none of these reasons affect the current market value of a home. [ Hide Article ]