The good news is that there are buyers out there, especially since the passage of the expanded home buyer tax credit which now offers a tax credit for current homeowners who want to sell their home and buy another primary home (see details HERE).
The problem is that some of those people thinking of selling their home don’t understand how home purchases and mortgages work. That causes them to be tempted to price their home too high when they list it. I call this the “waiting for someone to show up with more money than brains” syndrome. Fact is, that just will delay the sale of the property, if it sells at all. If the case of the tax credit, not selling soon enough means you’ll lose the tax credit because of the time limits. There are two main reasons for this.
- Most buyers will be working with a “Buyer’s Agent,” an agent whose responsibility is to help the buyer find the best property at the best price. No, they won’t try to jack up the sale price just to get a few more dollars in commission. First, they have a fiduciary duty to their buyer client to help them get the best deal. The second reason for this is tied to the point below.
- Unless a buyer is going to make the purchase with all cash, then there is a lender involved. If you think about it, at closing, the lender owns most of the house, with the buyer having equity equal to their down payment. The lender sends their appraiser (who actually works on behalf of the lender. not the buyer) to appraise the value of the house relative to the local market. If the house does not appraise at a value at or above the contract price, then the lender will refuse the loan unless the buyer is willing to make up the difference. The lender does not want to be stuck with a big loan on a property that was over-priced, in case the borrower defaults on the loan. So, to go back to point #1, the buyer’s agent will advise the buyer not to agree to pay too much because the lender will refuse the loan in most cases.
So, like I said, there’s just no point in listing too high. When agents are looking at sold properties on the MLS, we can see the entire history of a property’s listing. It is not unusual to see properties that sold 10, 15, or 20% below their original listing price, and see that the seller kept dropping the price for a year or two, always being behind the curve of price changes, until they finally got desperate and set the price in line with the market, when it then sold. Some of them waited too late and were forced into a short sale or foreclosure.
Pricing it right with the current market will get it done and cause much less stress on the seller. By the way, I can help you set a proper listing price based on research I do on recent sales and current competition.