This phenomenon helps to explain how some homes are still for sale and did not sell throughout the busiest real estate sales period in years. (I want to say decades, but let’s be honest, I’ve only been doing this for seven or so years).
The idea is that a Seller lists too high, and anyone interested views the home and quickly moves on to a more valuable purchase. The overpriced home sits, and the longer it sits, the less it values it, especially in this market. Months go by, and the Seller decides to come down in price. The price still isn’t reflective of market value, and now there is a stigma surrounding the home. What is wrong with it? More time goes by, and the Seller comes down in price again, but it is too late. The days on the market have added up, searchers online are tired of seeing the duplicate listing repeatedly, and more people are asking what is wrong with it.
That brings us to the fall and winter months of the Edmonton real estate market. There are a lot of these listings. These homes are absolutely a mixed bag. We were in one where a new agent got the listing, and the price was reduced by 60K. That old stale overpriced listing is now desirable. We were in many more where the prices of the homes were still out of line with market value, and the owners and their agents were still hoping against hope their price was now in line, and the right buyer was just around the corner.
We engaged one family. They had a harder-to-sell home. Here is how it looked.
- Bungalow <1,000 sq.ft.
- Highly desirable south-central neighborhood
- corner lot with only side yard, no back yard kitchen window looked at the wall of the neighbor’s house.
- Partially renovated, only two bedrooms up, quirky basement. Purchased in the last decade in much the same condition it is today with a basement reno.
- They paid in the mid 300s, are now asking the high 400s.
It was one of those listings where your client asks you to view it, and you die a little bit inside saying yes as you can see straight through the internet that this listing makes no sense. We went through it, and the buyers loved it. They asked what I thought, and I agreed it was a lovely home. It had been on the market for 60 days, looked expensive, and lacked any features that would appeal to the area’s target market. I adored the buyers, so I was glad when they asked me to negotiate on their behalf.
The negotiation went something like this. “We love your home but feel like you are priced high; we are willing to pay X number of dollars. We are professionals who live locally, are preapproved, and can provide a sizable deposit while we pay to have the home inspected.” The agent’s response: “based on the comps in the area, we are countering 10K under the list price.” And she provided what she believed to be comparable sold listings. Our opinions varied largely; here is how it went. The agent provided us six listings, four that sold in the last six months in the area and two that were for currently for sale.
This was our response:
These three “comparable” homes you provided are over 20% larger, extensively renovated, have three bedrooms upstairs with traditional backyards.
They sold for $396, $401, and $374 per square foot. Your folks are asking $500 a square foot. We offered $459/Sqft because the buyers love the home.
______ listing isn’t comparable, and it’s been for sale for 208 days among a lot of other things.
_______ listing can’t sell either.
________ listing supports your price. A bigger, better lot, but worse garage and finishings.
There was a bit of back and forth. We concluded that if renovated homes in the area are selling for +/-$400 per square foot, these homes have popular floor plates, lot configurations and sell quickly. $ 459 per square foot right before the snow flies with a three-week possession is a gift for everyone.
The Seller’s nor their agent budged or even acknowledged they may be out to lunch on price. One of the buyers commented that even when “low-balling” the Seller’s, the Buyers were willing to pay too much. Negotiation dissolved.
I do not pretend to know everyone’s motivation for a price, agent selection, or whatever. I can say it is worth it to shop area to become familiar with what is for sale, what is selling, and how much. A little research and experience go a long way!