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Overpricing 101 for buyers

Posted by Rona Fischman May 27, 2011 01:33 PM

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There are many here that will argue that all houses are overpriced. Economically speaking -- when you look at greater Boston -- they are right. The bubble has not finished deflating here. However, demand has not dried up and the shadow supply has not swamped the inventory, leading to rapid price drops. So there is a market full of buyers who are spending what the market is still bearing, in order to get a house that suits them.

Buyers, realize that lots of sellers think his/her home is worth more than it is worth. I have seen this over and over and wrote about it before.There is wishful thinking. “My house is the nicest one on the block.” “I’m in the very best neighborhood.” “Garages aren’t worth that much, so my house is worth as much as that one (with the two-car garage.)” It is part of the reason that open houses draw nosey neighbors. The neighbors can then play the wishful thinking game of “That house sold for $400,000; mine is worth $30,000 more.”

Add to that what I mentioned yesterday:

1. Sellers remember their property at its top value. If you think about it, you are probably anchored that way in relation to the top mark in your retirement account, or your highest salary. For sellers, they still recall their highest refinance appraisal or highest local sale.
2. Sellers also see the amount they have come down from asking price as loss. Even if the original price was irrational, the seller is anchored there. Buyers, your job is not to get anchored there, too. This is the same trap that consumers fall into when they shop the “30 percent off” rack at the high-end department store. Many times, the original price is not in the range where any consumer would have bought it.

As buyers, my advice is to not get caught up in the asking prices. Think of them as a guide to see what you might be interested in and able to buy. That’s all the price is there for, in my opinion. When I hear people bragging about getting $10,000 or $30,000 off asking price, I cringe. In so many of those cases, that buyer paid market price, or more.

Buyers, have you let asking prices anchor you? Seller, have you felt regret every time you lower your price?

This blog is not written or edited by Boston.com or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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