There is nothing more vexing in this business than coming up with a good list price… one that the sellers like, one that the Realtor thinks will sell, and most importantly, one that a real buyer will actually pay. It’s a balancing act. You throw something out there, expose the heck out of it, see what happens, and reduce as necessary.
The stock market is far more efficient. If stocks don’t sell, prices go down. It’s automatic. So what if our MLS operated that way? You put your house on at whatever inflated price you want, and every day it doesn’t sell, the price goes down $1000. If it’s priced well, you probably won’t have to wait too many days before getting an offer. If it’s overpriced, it simply ticks downward every day until it comes down to what the market will bear.
Okay, I may be going a little overboard here, but I think it’s a brilliant plan. Sellers get to test the market with whatever crazy price they want and watch daily as reality slowly brings them back to Earth. If the price dips much below what they’re willing to accept, they can always pull the property off the market and wait for better days. If the price descends below their comfort level and the sellers finally get an offer which is perhaps considered lowball, they can always counter.
Buyers wait and watch on properties of interest, knowing that the price will drop every single day, also knowing that as the property becomes a better and better deal, there might be other buyers out there ready to pounce. This creates urgency, and urgency will cause the buyers to act.
What do you think? Am I crazy?
Reno Ignoramus
It’s not an untried idea. Several months ago I posted about seeing this very thing happen. There was a house for sale, FSBO, off of Plumb Lane, on Watt Street I believe. The FSBO seller had a great big sign on the front yard with the original asking price. Every day, he went out and crossed off the previous price and marked the new price, which was $1000 lower. After sveral days, he had a long line of descending numbers with a line through them. He effectively created a sense of urgency, especially as the price dropped into very favorable territory. And yes, the house sold.
smarten
Sorry Diane –
I think you’re crazy.
The only properties you can possibly compare to stocks are multiple identical units in a single condominium or PUD development and the numbers are so small, you can’t possibly expect them to control the rest of the market.
Further, sellers won’t agree to continue dropping their sales prices. They will reach a number under which they’re simply not willing to sell. If they were forced to sell, no matter how low the price, maybe then it would become interesting.
Further still, property sales tend to be seasonal. You can have the greatest home at the greatest price and the number of people looking to buy in mid-December is dramatically lower than all other things being identical, in July-August. Less demand translates into lower prices which sellers won’t accept if in their minds, they’ve already dropped their price to levels they feel are below market.
Finally, I think the real estate market already works the way you perceive if homes were bought and sold like stocks. The reason we have a glut of inventory is because sellers are NOT willing to sell at what the market will bear. So they might as well pick some pie in the sky sales price and sit while they’re ignored. If/when they get motivated, they’ll either be forced to lower their sales prices or take their properties off of the market.
Actually, the market to me is just like eBay. By and large few deals on merchandise with unrealistic reserve prices.
Let me suggest a counter proposal. First, eliminate sales commissions [they’re really already on the way out]. The more unrealistic a seller’s price is, the more work his/her agent is forced to do and if the agent is paid on a piece or hourly basis, the cost to unrealistic sellers would escalate [and be due and payable whether or not the property actually sells].
Second, structure fees on the MLS so those listings taking up space because they’re priced unrealistically have to pay more in listing fees. Start charging home sellers re-listing fees every 5-7 days [due and payable whether or not the property sells], and they’ll get realistic.
I think I could come up with some other suggestions but this post asked the question whether you, Diane, were crazy? I think you are!
MikeZ
The MLS *is* like the stock market.
Sellers issue a limit order to sell and buyers issue a limit order to buy.
And, sometimes, neither order is filled.
NAS
Diane-
I like your stock market analogy. If the P/E (price/earnings) is sky high, a wise investor would think twice before throwing their money at it. And, never (ever) chase after past performance.
Think about it.
DaveInLosGatos
Ditto smarten: when I first read the part about “eliminate sales commissions” I could just see the cringes in the background. After reading further, the comments really sense. Econ 101.
2sleepy
why not a business model where the commission starts at 5 or 6% and goes down by some amount every month the house doesn’t sell? If the agent can’t convince the seller to price the house so that it will attract offers, maybe they should walk away from the listing?
DaveInLosGatos
Yikes! I only pressed “Post” once, I promise 😉
RGJ
I read the tone of MANY of the discussions posted here as the Real Estate agent must talk sense into the seller to select a more resonable asking price and reduce their expectations.
I think that VERY OFTEN, the agent has the same unrealistic expectations and out of touch with the market.
For instance, I see at the top right of this very page a changing advertisement of local homes for sale. I see that one of these is the listing on Morning Song Trail in Arrowcreek…. this is one of Diane’s fellow Chase International agent’s home. It was listed in the fall for $1.499M and so far has been reduced $125K and counting. Who is counceling her on the local property values. A comparable home two houses down from this listing sold for $1.15M just weeks prior to this one being listed (that would be a difference of $50/sqft).
I think many people (including many realtors) have a realistic view of declining real estate values except when it comes to THEIR HOME!
That being said… Diane, I REALLY value this blog and read it very often! Great Job! Thanks
2sleepy
I agree RGJ, which was the less than explicit point of my suggestion that RE commissions drop the longer the house is on the market, perhaps it’s time for some agents to do a reality check themselves. I know of one personally who still maintains that houses in SW Reno appreciate a minimum of 40k a year…should that realtor’s client be penalized or made to pay more because the agent lives in a fantasy world?
Todd Tarson
Some agents are already offering a flat rate fee for their side of the commission (listing side) and are charging sellers up front for the marketing costs per month (buyer broker commission is 2.5% to 3.0%).
Offering is the key word here. Sellers don’t often take an agent up on this because sellers don’t want to pay an extra $100 to $800 a month (depending on the advertising they prefer) on top of their mortgage while the home sits overpriced on the market.
There is little to no risk by employing a Realtor.