Both sellers and buyers have the potential to unconsciously set unrealistic expectations preventing them from achieving their real estate goals. Understandably, the differing perceptions held by sellers and buyers are an ever-present reality, but there are advantages to be had in acknowledging the competitive motives of both sides from a neutral position.
Aspiring sellers customarily anticipate they’ll receive a full price offer when they place their homes on the market. However, for a seller to accomplish their goal of selling at, or close to, their asking price, a seller’s home must be competitively priced according to market conditions.
There’s a dynamic that comes into play when sellers make incorrect assumptions with regards to the value of their homes. From over-confidence that a property will sell, to concern that it won’t, owners of overpriced homes are often forced to acquiesce to offers lower than they might have otherwise accepted had they appropriately priced their home in the beginning.
There are distinct differences between what the market will bear and subjective valuation. In effort to ensure a home’s proper market position, sellers should have a comparative market analysis (CMA) performed to determine a price range conducive to market demand. For some sellers, a home’s actual valuation can be an unwelcome wake-up call, as they may be forced to come to the realization their perceived value is less than originally believed. However, that’s not to say the reverse isn’t also true, as sometimes a home is worth more. Regardless, a CMA is an invaluable resource when it comes to establishing a realistic price point and serves to remove subjectivity.
An overpriced home typically languishes on the market and may ultimately sell for less than it otherwise would have had it been priced correctly when listed. An appropriately priced home is better positioned to sell in a shorter amount of time than properties which are overpriced and then systematically reduced. Understanding sellers are motivated to receive the highest and best offer possible, sellers are usually best served in competitively pricing their homes at the onset of their marketing efforts.
Another concern of overpriced homes is their ability to appraise. A buyer’s commitment to purchase at an amount exceeding valuation may ultimately result in contract’s termination due to mortgage lending constraints. Pricing a home slightly below the competition can be an effective means of edging out other comparable properties. Further, such marketing strategies also serve to alleviate appraisal concerns.
With that said, sellers have a significant amount of control when determining the terms and conditions they’re willing to accept. Yet, they should also knowingly be prepared to entertain certain concessions. Sellers who immediately reject competitive offers, in the off chance of receiving a higher offer, often sell at a loss. The wait for a higher offer is often overshadowed by ongoing expenses encumbered in home ownership. When in doubt, a seller has the option to submit a counter-offer.
In contrast, homebuyers customarily aspire to purchase a home for the lowest price possible. Yet, this shift in dynamics also comes with its own unique challenges. Whereas a seller is tangibly aware of other sellers, the effect of other prospective buyers in the marketplace aren’t always immediately apparent. Homebuyers rarely see their competition until a multiple offer situation occurs. It is in these circumstances when a homebuyer truly becomes aware of the influence of others. The submission of an uninformed offer can result in unanticipated repercussions, and potentially the loss of a home.
When homebuyers begin their search their confidence levels are typically high; however, like sellers, overconfidence can lead to ineffectual decision making. Understandably, prospective homebuyers seek to purchase at a discount. However, over time, buyers who’ve consistently lost negotiations and become fatigued by the process, may be prone to impulsively submitting offers on homes not meeting their needs.
Arguably, each real estate market has its own competitive characteristics. And, while it’s natural for most homebuyers to begin their search online for the best possible deal, buyers shouldn’t succumb to thoughts of purchasing at unrealistic prices. Substantially undervalued purchase offers typically won’t be accepted and will only serve to frustrate would-be homebuyers. Preparing a compelling offer, respective of market conditions, is a far more effective means of attracting a seller’s attention and ultimately acquiring the right home.
Properly informed homebuyers are prepared to negotiate when the right opportunity is presented and they’ll do so from a position which is based on knowledge. There are times when a bidding war with other prospective homebuyers may be appropriate, but only when predetermined pricing thresholds have been established.
Both sellers and buyers benefit from the counsel of a real estate professional knowledgeable about current market conditions. An informed representative has the ability to advise their client on the complexities of selling and buying homes. However, both buyers and sellers must also remain objective, setting aside preconceived notions about improbable gains. There’s value in having well-informed agents working both sides of the transaction to ensure fluidity is maintained. Removing unrealistic expectations and acknowledging the needs and viewpoints of both sides can position buyers and sellers to make educated and informed decisions fostering mutually beneficial returns.
Sean and Aimee McDonald, realtors with RE/MAX North Lake Tahoe, can be reached at 775-250-8335 or firstname.lastname@example.org.