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Wednesday, January 14, 2015

More Than Ever, Overpriced Homes Sell for Less Than Underpriced Ones



[Published Jan. 15, 2015, in the Jeffco editions of the Denver Post's YourHub section and in four Jefferson County weekly newspapers]


The longer this seller’s market goes on, the more obvious it is that a home cannot be underpriced, it can only be overpriced — and those overpriced homes often end up selling for less than the underpriced homes, if they sell at all.




Last year I listed a home for $580,000 while an almost identical home was on the market nearby for $625,000.  Before we could hold our first open house, I had multiple offers and it went under contract for $618,000, a price that the seller of the other house might or might not have accepted — but my listing got the offers.
 
I had the same scenario happen this past week.  I advertised a home for sale in the 500’s, but lowered it to the high 400’s before putting it on the MLS.  We had over a dozen showings the first day, and our first offer was for $30,000 more than the listed price.  If we had put it on the market at the original price, I suspect it would be sitting on the market with few showings and no offers.

I also like to tell the story of a home that another broker listed a few years ago for $1.2 million.  After it had languished on the market, the listing broker convinced the seller to lower the price to $600,000.  Within days it was under contract for $1.1 million.  A very gutsy move, and it worked!

Sellers too often fall victim to the belief that because it’s a seller’s market they can dictate a high price for their homes. Those are often the homes that end up not selling at all.

Another common mistake by sellers is to calculate how much they invested in the home and expect to recapture that investment upon selling.  The hardest task of a listing broker can be convincing a seller that the market doesn’t care what was spent on the home.  The market only cares about supply and demand and what a willing buyer will pay.
 
This is particularly true with money spent on purchasing a solar PV system for one’s house.  If you do decide to invest in rooftop solar for your home, I suggest you lease rather than purchase.  This way you put no money down for the system and pay less in monthly lease costs than you would have paid for the electricity generated.  Then when you sell the house, you don’t have to try to get real value for the solar PV because you didn’t pay for its installation. Instead you just have to convince the buyer to assume the lease — which should be a no-brainer.

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