Rot- To become damaged, weakened, or useless because of decay.
A home that sits on the market unsold experiences "Market Rot". The homes position in the marketplace becomes weakened, people wonder what's wrong with it because it has not sold. People view the house as useless..."No one else wants it, why should I".
An overpriced home will sit on the market with very little buyer activity. Selling a home is a numbers game. You have a finite number of buyers who are available in a price range. The more buyers you have viewing the property, the more likely you will receive an offer.
The following graphic shows the relationship between the pricing of home and the percentage of interested buyer's that may view the home and how that effects the houses market time.
Fair Market Value- Fair Market Value is the price agreed upon and in which the money and property exchange hands between a home buyer and home seller. Fair Market Value is a price in which the general buying public would be willing to pay. Both buyer and seller must be willing and informed to buy/sell the piece of real estate in a arms length transaction. A transaction where neither party is desperate to sell or buy and where the property is given reasonable exposure to the open market.
Basically, the value of a home in which you will sell.
The other thing to keep in mind is if you are much more than 5% over priced, your house will not compete in that price range.... it will be lacking in size, amenities or other features. Many of the buyers that will look at an overpriced home are the "wrong buyers"
Following is an example of why pricing it right can net you more money or why less is more. These two homes could not be more identical. On the market during the same time period. Same neighborhood, built the same year, exact same lot size, specs identical, identical layout and condition.
The second home did have a one car garage and should have been worth $5-7000 more than house 1. The mistake that house 2 made was at the time these homes were on the market a 1 bathroom home in Haverhill MA had never sold for over $280,000. These were both 1 bathroom homes.
When buyers are coming to see the home 2 and it is priced over $300,000 what are they expecting?..... more than 1 bathroom!! The house can't compete.
House 1-On the market for 37 days- Sold for $257,500,
asking price $265,000 no price changes.
House 2-On the market for 9 months as a fsbo asking price $320,000
On the market for136 days with a real estate agent, sold for $252,500 original asking price $279,900 multiple price changes.
The owner of house 2 gave up about $10,000 or (3.8%) because improper pricing and creating "market rot" for the home. Pricing is critical and should be considered very carefully. As you can see asking more doesnt make you more, in fact, it can make you less and create a whole lot more work.
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home pricing: Fair Market Value and how it impacts Buyers and Sellers - 05/08/09 01:23 PM I have been reminded over the past few weeks that buyers and sellers need to understand fair market value and how it impacts a succesfull sale or purchase of their home. Fair Market Value is the price agreed upon and in which the money and property exchange hands between a home … (2 comments)
home pricing: Price to Sell- or pay the price later.... - 04/07/09 07:52 AM Pricing your home properly is the single most important aspect of selling your home. No amount of marketing in the world will sell an overpriced home. It is very important to know what the Fair Market Value (FMV) of your home is for that period of time. Fair Market Value is … (4 comments)
seller: Negotiate to Win- 5 Powerful Tips for Sellers - 03/29/09 11:24 AM I was reminded this weekend how fiesty sellers can be when it comes to receiving low ball offers on their home. The immediate reaction of a many sellers is to automatically reject a low ball offer. Rejecting an offer, in many cases, can just shut the deal right down. Remember … (47 comments)
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Kevin Vitali is a home marketing specialist and has a proven track record of getting results. If you have a home to sell call Kevin at 978-360-0422.
I pride myself in the quality of my work while helpingbuyers and sellers make dreams come true.
Real Estate Services in the northeast Massachusetts, around the Merrimack Valley, Southern New Hampshire including the towns of Andover, Billerica, Boxford, Chelmsford, Dracut, Georgetown, Groveland, Haverhill, Lawrence, Lowell, Merrimac, North Andover, Newbury, Newburyport, North Reading, Rowley, Tewksbury, Tyngsboro, Westford, Wilmington, West Newbury
If you are looking at a possible foreclosure, don't wait.... I can help Massachusetts Short Sales.
Follow the market...not the price you wish, you "have to have",,,,and listen to the realtors SOLD comps....ahhh.....that IS priceless ! Best prosperous wishes for the new year !
Kevin.....there's no point in listing an overpriced turkey.....it's a waste of your time and the lack of a sold sign in front of the house is not exactly a pat on your back....have a merry Christmas and a prostperous 2010.
Great points here, Kevin. I love the term "Market Rot". It's so much more descriptive than "stale" or the many other terms used to denote homes which have been on the shelf too long.
Tom- I heard that from some one else.... but it is so appropriate what happens to a home when left to "ripen on the vine". You reach a point where price changes have to drop below fair market value to affect the buyers.
Kevin,
Great Post. Great example of how pricing sells the home.
Thanks for sharing,
Matt Naumann
Kevin the graph says it all my friend. Part of the problem is there are too many agents that don't have the skill necessary to get a listing without telling the seller what they want to hear.
Kevin,
Very good post, concise information that is well presented.
You said it all in a nutshell. Great post. Who wants to " buy" a listing. I think it give the realtor a reputation which I wouldn't want.
The information you give is just what we need to teach our prospective sellers. They hear it. do they listen?
Tom, thanks for the great post. I guess "Market Rod" will be a part of my conversations with FSBO's starting tomorrow :-). It just makes overpricing it look so dirty ... I love it