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“My house isn’t selling, did I underprice it?” -The short answer is no. Here is why (and the longer answer)

“My house isn’t selling, did I underprice it?”

The short answer is no. Here is why (and the longer answer)

Invariably when a house doesn’t sell as fast as the person selling it would like, they start looking for the reason why. So they ask their Realtor, they ask their friends, they ask their family, and they ask random people on the internet. They get a variety of answers. After they listen to them all, they usually ignore them and come up with their own. Here is a synopsis of what they will hear and my assessment of each type of answer.

The Realtor tells them their home hasn’t sold because:

1. The home is over priced.

2. The condition of the home is not good enough.

3. The location is not desirable at that price point.

4. The market is working against them.

For the most part these answers will be honest assessments of what is happening. The thing is, the only one that matters at the end of the day is the home is overpriced. The reason for this is that the other three can be fixed by adjusting the asking price. Don’t get me wrong. If the seller is willing to fix condition issues, they can do that instead. But the truth is, if the home came on market without the seller doing them, they are unlikely to do so after the home is on market.

Location or market conditions can be changed, but only by one force… and the Realtor or seller cannot manipulate it. That force is time. Locations fall in and out of favor as the cycle of gentrification moves through your city. So the reasonable thing to do is to either adjust the price to the locations current value, or hold the property (and rent it out if you need to move) until the gentrification cycle smiles on your property again.

A quality Realtor will not blame the market for your home not selling unless they told you the market was not moving very quickly when they had your sellers consultation. I mean, sure sometimes the reason a home isn’t selling because of broader market forces. The thing is though, just like gentrification, those market forces move in cycles and any Realtor worth their salt is going to be aware and make you aware of them.

Friends and Family tell them that their home hasn’t sold because:

You should have used cousin Sally (who is a part time real estate agent that works in a grocery store and hasn’t sold a house in 4 years)

Do I have to tell you how ridiculous this is? I will anyway, but we will make quick work of it. Cousin Sally very well may have sold the home. Anything is possible, but it is highly unlikely that any part time person who does not work in a networking related field (because some of those PT agents sell very well for obvious reasons) is going to have the skills, drive, and tools that would be necessary to sell a home faster and with more professionalism than a  full time Realtor whose very livelihood depends on successfully selling homes. Its that simple. We love cousin Sally, but she isn’t the solution to a home not selling as fast as we like.

The internet people tell them that their home hasn’t sold because:

Real estate agents are the devil and you should have just sold it FSBO.

To be fair, you will see a lot of answers on the internet message boards. They will include the four main ones you will hear from Realtors. They will include a fresh round of cousin Sally’s…not your cousin necessarily now, but someone’s. They will include marketing tips, and things that Realtors did in the 1970’s and just aren’t effective anymore. They will include telling you that you should have more open houses. (which I will gladly do because I will attract more buyers to my pool but having an extra open house or two won’t likely sell your home). And finally there will be the anti-Realtor who makes the statement I highlighted for this section.

Before I dig into this, I want to make a quick editorial on “who” tends to make this statement. When I first started engaging these people on message boards I assumed that it was die hard do-it-yourselfers that just wanted to help you save a buck. After a little research into their past posts I sound this wasn’t true. It turns out, that most of the people making “Just FSBO your house!” posts with all kinds of inflammatory and borderline libelous statements about Realtors are actually property investors. Many of them home flippers and landlords who conduct as many transactions as most part time agents do.

Right off the bat, this should tell you they are giving you bad advice. First off, because they are assuming that you have the same breadth of knowledge about the home sales process as they do. I mean don’t get me wrong…anyone who takes the time to learn the process can sell a home, but you are likely to make errors on your first several transactions. That is the primary reason that real estate licensure is set up on a apprenticeship system with new agents being required to work under a managing broker. These mistakes can be very expensive and I assure you that the real estate investors who are encouraging you to jump out and FSBO your home made them (in most cases)…but aren’t about to tell you that.

Which brings me to their motivation for encouraging you to sell FSBO. Everyone has a motive behind their actions… and I personally believe that humans can only be counted on to act in their own perceived best interest. So what would the perceived best interest of a property investor be in encouraging someone to sell their property without professional representation be? My best guess would be, that having a home seller without their level of experience or a trained professional Realtor at their side would give the property investor a significant opportunity to take advantage of that seller in negotiations, the contract process, and/or (especially) the inspection and disclosure process. I could be wrong, but based on the situation and looking at likely motivation that is what I see.

Back to the purpose of the article. Would selling the home FSBO make your home sell faster? No. I mean it might sell faster, but it won’t be because you didn’t use an agent. I mean when you consider the level of marketing assets that even a bad agent has… unless you run an ad firm you don’t have that kind of reach. Also, when you sell FSBO your home is not typically listed on the multiple listing service…which mean that even if you are doing a bang up job of marketing, the 4500 or so Realtors in the MIBOR (Metropolitan Indianapolis Board of Realtors) don’t have immediate access to the home, or the information about your home like they do all the ones that have been listed by a traditional broker. This means that even if they are willing to deal with selling a FSBO (and most are honestly), they do not have the tools available to them to do it effectively. None of this adds up to a quicker sale via FSBO.

After listening to all of this, the seller comes back to the thought that has been bouncing in the back of their mind all along.

“My house isn’t selling, did I underprice it?”

Why does the sell keep thinking they (and their Realtor) underpriced their home? Quite frankly, its a very human issue. Ego. We all believe we are the best, and that “we” extends to our property, and our decisions.

During the home selling consultation, the Realtor likely asked the seller how much he thought their house would sell for. The seller replied $X.XX. Afterword the listing agent went over the comparable properties in the area with the seller. (I personally run them with three different methods to give a broad cross section of data and to ensure there are not pricing anomalies that might render my information invalid). Depending on what the market data say, the Realtor told the seller that the property was worth $Y.YY. This amount could be more, less, or even the same as what the seller thought. For the sake of this article, Y=X-20%… so obviously the seller is disappointed. After reviewing the data, the seller agrees that their first price was probably a little hopeful and agrees to price the home at X-10%. Still 10% higher than the agent is recommending and more importantly, 10% higher than the market will bear.

So what do you think happens next?

That’s right, the house doesn’t sell. In fact, if it too far out of market, it won’t even get showings.

So what does the seller do? Simple, they ask their Realtor, they ask their friends, they ask their family, and they ask random people on the internet why their home isn’t selling. Then they disregard those answers and they go back to their original price and they think that people are looking over their house because they think something must be wrong with it to be priced so low.

Now don’t misunderstand me. If a $150,000 home is priced at $50,000…buyers are likely to skip it (or not even see it, because they aren’t searching that low to weed out garbage houses)… but even then, some buyers will be bargain hunting and you will see activity. That is not what we are talking about here though. We are talking about a home that is allegedly underpriced by 20-30% (when in fact it is over priced by 10%).

So what does happen when a home is underpriced by 20-30%? Well in a sellers market, that situation is almost always going to end up in an auction situation where the sellers agent requests the highest and best off from all of the MULTIPLE OFFERS that the seller is receiving. Currently in Indianapolis, this is happening very frequently and sometimes the seller isn’t even taking the highest offer because the selling prices are higher than ANY appraiser will appraise the home for so they have to take the highest cash offer in order for the sale to close. Don’t take my word for it, ask title companies, lenders, appraisers, or other Realtors. Underpricing a home (especially in this type of housing market) will not hinder the sale of your home. On the other hand, over pricing it will keep people from even looking at it.

So there you have it. The market will dictate what your home sells for, so even if you think your Realtor wants you to list it too low… have a little faith in what they do, they need your home to sell (and to sell for the most money) in order to make a living. Their motivation is in line with yours. Or at least mine is.

So If you want to work with a professional Realtor who studies the markets and will work to make sure your home actually sells for the best price… call Robb at 317-657-8059 or email robb@yourrealtylink.com to set up your home selling consultation today!

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