Buyers ask me every day, “why homes selling for such high prices”? As an active real estate agent in the Seattle Area, I’ve seen so many situations where homes are selling for 5%, 10% or even 20% over the list price of the home. In the past year, we seldom see homes sell for less than the seller’s list price. As a matter of fact, the average SOLD price for most homes is as high as 107%. Why are homes selling for such high prices? People look at several reasons to rationalize the situation.
- There aren’t enough homes on the market. We have less than a month of inventory in several hot price points which of course causes competition and drives prices. A normal balanced Market is a 6 month supply of homes.
- It’s hard to keep up with the current appreciation rates of 1% or more a month when pricing homes for sale.
- Too many Buyers have come in second in too many offer situations and in their frustration, will pay anything for the home just to get out of the buyer loop.
While these points are valid, there is one central reason that homes constantly sell for more than the list price. Real estate agents, most without fault, price the homes at a lower price than they could have. This theory proves out by the fact that there just aren’t that many appraisals coming back to the bank lower than the purchase price. Of course, there are some low appraisals. In cash offers, which is now fewer than 10% of the purchases, there usually isn’t an appraisal. However, the bulk of the purchases are well over the list price and they appraise at value. So, why are real estate agents listing properties at a price lower that they know the home will sell for?
There are two principles in play here.
- First, in a normal or balanced market, if we slightly under price a home there will be more traffic viewing that home and a better chance of getting a full price offer or better. Also, if w e price the property 7% over the current perceived market value of a home, it will just sit until the market catches up with the price and we are back in the same position.
- Second, Real estate agents don’t have a crystal ball. This is a tough market in which to accurately price homes. They really don’t know what the home appraisal will show. No one does. In most cases, they do their best to get the price right and for those few agents that purposely underprice the homes … shame on them!
The list price is always just a suggestion. Market value for the home is the price the Buyer and Seller agree to, the appraisal backs up and the sale closes. Also keep in mind that the next home listed in the neighborhood will use your closed transaction as a comparable for pricing. Soon you will be saying, “I’m so glad we bought when we did!”
So bottom line to Buyers, you must take an honest look at the home and how it and its price compares to the others you have seen. Your agent will assist you to interpret the current SOLD prices in the area and how they affect the value of this home. Listen to your agent. You chose this agent because you trust them to be your guide through the home buying process. Be open to all strategies, even those that seem a bit reckless, that might make your offer look more beneficial to the Seller. Remember, ultimately the decisions are yours, the risk is yours and the responsibility is yours.
I hope this article will bring a little understanding to what seems to be an insane market. Contact me immediately, if you are ready to buy or sell a home. My clients are better prepared because we take the time to process and prepare. This eliminates weeks of mistakes. Also, feel free to contact me for more information about this market and how it affects both Buyers and Sellers.
Posted by Tom Perry affiliated with Realty Executives Brio in Bellevue Wa. Tom stays in tune with the real estate market and the trends that drive it. His buyer and seller systems are well thought out and produce result for his clients. His clients learn that the best results achieved by planning, systems and thoughtful execution. Contact Tom when it’s time to start your planning to buy or sell real estate anywhere in the Seattle area.
Article posted by Tom Perry, Realtor, licensed real estate agent, Realty Executives Bri o, Bellevue, Wa.