It's easy to notice, hard to see
Lance, who is now a regular here, wants to know if you are seeing sharp declines in asking prices.
Put aside for a moment the issue of whether or not this particular seller's agent misbehaved... Am I the only one here who is not surprised to see the asking price for a property cut by 15-30% since last year? I can provide many similar examples if people don't think price reductions of this magnitude are really happening. The credit bubble popped last summer and real estate prices are tanking. Is nobody else seeing this?
I have been consistently saying that asking prices are not real. Some are too high, some are intentionally too low, and some are pretty close to what the property should sell for. One of my tasks as a buyer’s agent is to help the buyer know the difference and to negotiate accordingly.
So, for the record: Rona sees that many asking prices come down dramatically from the original asking price before they sell.
However, sharp declines in original asking prices are not necessarily an indicator of a declining market. Suppose a listing is 10 percent overpriced, and comes down 5 percent for a sale; it is still selling at 5 percent over the present market price. Inflated prices are an indicator of continued denial of the changes by sellers and their agents. Sale prices are the only price measure that matters. Period.
When the market was rising, asking prices went up like a rocket. The prices come down in a more inconsistent manner. This is true of all sales. Think about how the gas prices go up all together, but come down inconsistently.
Overpricing a property, IMHO, is a disservice to the marketing. In my experience, those are the homes that frequently sell for less than they could have gotten if they had been priced competitively from the start. As a buyer’s agent, I look for such properties, because I have a better chance of getting a good price for my clients.
Sellers, if you realize that you overpriced, do you regret it? Did it hurt your bottom line in the end?
Buyers, did you get a good deal on an overpriced listing?
Please, please..let's talk about the business of this, and not the personalities!
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Many, many years ago, I got quite a deal on my first condo precisely because it was overpriced at first. No one looked at it for a long time, and I didn't either. Only after some dramatic price drops did I venture a visit, and loved it. Similar units that summer sold for more, but they hadn't lingered on the market so long that peak season had passed. Homes sell for the highest prices in the spring, so an ambitious asking price is just going to make a seller miss their best opportunity.
Incidentally, several of the newer real estate sites show reductions from asking price in nice, bright, red letters next to each listing. Pretty hard to miss the pattern this spring when you can see that.
"However, sharp declines in original asking prices are not necessarily an indicator of a declining market"
You're wrong.
If a majority of the properties have a decline in the asking price, that's a strong indicator of a declining market.
When the original price was listed, it was fair. In the time the property has been on the market, average prices have fallen. Thus to stay fair/price competitive, there needs to be a sharp decline from the original asking price
Michael,
Rona makes an accurate and fair description. You took her quote out of context.
I’ll agree with Rona on all counts here (I’d better check my meds). You cited an earlier post where the question implied that a falling asking price for a single property suggested a falling market. Of course it does not. The equation has two variables, time and price. Even in a market trending upward a property becomes stale quickly after it gets listed. It commands a lower asking price with time simply because every prospective buyer wants to know why no one else wanted it. At showings, the first question, before the major, substantive questions, is, “How long has it been on the market?” I know the consensus here is that such a question is a means of measuring the distress of the seller. Were that assumption true, I would get more offers on old listings that had come down in price. The opposite is true. New listings get the most offers and for the best price relative to the market. Marcus (#1) got a good deal because he was not distracted by the “staleness” of the listing.
A story that fits here is that I helped a buyer on a property that had come down 30% due to the seller’s chasing the price down for nearly eight months ($2 million range). They “stole” it for at least 15-20% below market value in 2004. Did these buyers learn from the lesson? Nah, they want to list with me now for what we all agree is a high number so as to “see what happens”.
This blogger might want to review your comment before posting it.
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