Joe Foster's Blog

Certain things must behave in certain ways. We, as consumers, have witnessed things as observers over time that have just become accustomed to “the way things are,” and real estate home sales have a few sets of these rules as well. Today, I’d like to outline the Four Irrefutable Rules of Home Pricing that are evident in any type of market.

Four Irrefutable Rules of Home Pricing

1. Sellers are the highest bidders on their own home - In any type of market, sellers have a tendency to ask too much for their property… until they get serious. When inventory stacks up, over-priced homes in the inventory end up confusing buyers, causing them to be even more cautious than normal. Typically, overpriced homes are shown very rarely and even if shown, no offer is presented. These Sellers think “Why won’t somebody make an offer” yet they don’t understand that their home does not compare well with other homes that are priced correctly and priced at the same amount as theirs.
2. Serious Sellers Price Their Home To Sell - Perhaps the greatest task of the real estate broker in helping the homeowner is determining the Seller’s motivation. Serious Sellers price their homes to sell. If a serious Seller is not priced correctly, they lower the price and remain open-minded about future price reductions.
3. Homes “under contract” tell us little - I always like to take a little peak at how many homes are “Pending” (meaning “under contract”), yet I also keep in mind that very little can be concluded from any one contract in particular. The fallout ratio (homes under contract where the contract never closes) is roughly 50% for Realtors and nearly 90% with For Sale By Owners!!! So, just because a Seller down the street who was asking $400,000 for the home received a contract on the house does not mean that it will actually close, nor does it mean it sold for $400,000.
4. Homes that sold tell us where the market …. WAS - The average time it takes to get a home closed, after a contract is ratified, is 48 days. Considering that most Realtors and Appraisers look at comparable home sales (from the past 6 months) as their comparison to the subject property, most of this data is based upon a decision that was made somewhere between 2 months ago and 8 months ago. Think about it, if we look at a home sale from June, it probably went under contract in April, meaning 5 months ago. Is that really current information? Do you really think a buyer cares what was happening in the market in April when they go out to make a buying decision today? So all that “sold” data gives us is history.

As a Real Estate Agent, I always keep these four rules close at hand and encourage my clients to do so as well. If you ever have questions or concerns about your home’s value, feel free to contact me for a free market consultation and analysis.