Who sets the price of a home?
Okay real estate insiders, I have a question for you. Who sets the price of a home? The seller? Nope. It’s the buyer that says, “I want to pay X dollars for Y house.” Yes, a seller sets a price, but in the end, there has to be someone ready, willing, and able to purchase the home.
Because of that, why are we letting sellers dictate a sale price? Why do we continue to allow some agents take listings at ridiculous prices in order to buy the listing (which is a NAR violation)?
It’s the buyer that sets the price
So, to that end, I propose the elimination of an asking price. Then, a good real estate agent can do their job by researching what someone should pay for a home, the overpricing listing agents and their sellers will not be able to make up unrealistic numbers anymore, and the mortgage lenders will realize that value is what someone is willing to pay at that date in time. Impossible? No. Improbable? Probably. But, let’s take a shot at it.
How this would work
Say your client wants a three bedroom, two bath colonial in the Repel School District with at least a one-car garage and swimming pool.
You, as the agent, then research the sold listings and then the MLS for the type of house, not the price.
You can also hire a certified, quality appraiser to help you go deeper if you need their help!
Then, your buyers will put in an offer based on reality and the seller will get an offer, again, based on reality.
Yes, I know, there are tons of details, but I am an idea guy. You can help me by coming up with the ideas and see if we can make this move forward.
Make it so
It makes everyone’s life easier, it makes the good agents stand out, it eliminates the bad listing agents that constantly overprice, it puts sellers and buyers into reality pricing, and it helps mortgage companies know values.
As Captain Picard would say, “Make it so.”
Jonathan Dalton
June 17, 2013 at 3:48 pm
> You, as the agent, then research the sold listings and then the MLS for the type of house, not the price.
Ummmm … we already do this for our buyers. I think that came up around day two.
> You can also hire a certified, quality appraiser to help you go deeper if you need their help!
Ummmm … because in an imaginary world, appraisals are unbiased evidence of a home’s intrinsic value and not just one person’s opinion of value often colored by whether the appraiser a) has a brain and b) had a fight with his spouse and hates the world.
> Then, your buyers will put in an offer based on reality and the seller will get an offer, again, based on reality.
Ummmm … have you worked with a buyer recently? I listed a short sale, priced right on the number of the last two sales. Call that “market value.” Received an offer at market value less $30,000, another at market value less $75,000. Somewhere, the buyer and his/her agent skipped the other two steps.
We’re not selling homes on Beezid, Fred. Tell me how many other retail items you see where there is no price set by the seller. Off the top of my head, I’m not coming up with much outside of the two guys on American Pickers rifling through some hillbilly’s garage.
MattThomson
June 17, 2013 at 4:19 pm
I’m not sure if you’re being serious here. Is the basic premise of your argument that seller’s and listing agents are unrealistic, but buyers and selling agents have the market nailed?
You’re wrong about value. True, sellers don’t determine value. But, contrary to your argument, neither does a buyer saying I’m willing to pay X price for Y house. Value is determined by what a buyer will pay AND what a seller will take.
So, similar to what Jonathan commented, if a buyer is only willing to pay 80% of fair market value, the seller should just take it? Is that really your argument?
Hank Miller
June 18, 2013 at 8:56 am
Great idea, but as we all know it’s far too simplistic to work. There are a mountain of reasons why and it starts with agents willing to say yes to any price just to list, buyer agents just putting folks in homes just to make a sale, owners that are convinced they “have to get X”, buyers that are convinced they have to pay “Y” and appraisers that are simply writing to keep underwriters from ripping them apart.
Simplistic view but also not far off when everything is boiled down. There are too many influences in a real estate transaction to have it be as simple as a garage sale transaction. And with our friends in Washington getting more and more involved, it’s just going to get worse.
Guest
July 25, 2013 at 9:20 pm
OK, so I like this concept. A lot. It would require an awful lot of unified momentum to happen in real life, and our industry is as fractured as our government.
Two big challenges I see to making this happen: First, how to deal with the cognitive dissonance of sellers, who aren’t willing to list their home unless it’s at X price (where X = market value + 15%). In those situations, the rational offer amounts of buyers should help get them to “face reality as it is, not as [they] want it to be.” (credit: Jack Welch)
The other challenge is the not-so-serious buyer who has the same disconnect from reality and would be approved for $200,000 and ask an agent to show such-and-such property, whose actual market value is somewhere around $350,000. In other words, it would lead to a lot more wasted time among agents. And when it’s their collective will you’d need, it’d be hard when that would be the negative byproduct.
Having said that, you may know that in Austrailia it is typical for homes to be listed within a broad range, which helps give SOME indication of where the value may lie, helpful for both buyers and sellers to get a basic sense of things. Then it is on the market and available for viewings and inspections for 30 days, at which time it is then auctioned it off in a public auction. Now THAT is an accurate and efficient way of determining market value. No more time pressure on getting in your offer first, on wondering why your buyer didn’t get the house, the seller doesn’t have the tough choice of either (a) capitulating to the offer from the buyer of the moment or (b) holding out with faith that someone else will eventually come around. The seller knows they got market value, for they see everyone who does (or doesn’t show up) and know that no one else was willing to pay any more than the auction winner.
The combo of range pricing, 30 day marketing periods, combined with auctions at the end, is a wonderful concept in my mind, and one that I think would be easier to pull off in real life. You wouldn’t even need the whole industry to migrate all at once; you could still have this strategy operate within the existing culture of list prices and required fields in MLS systems.
Aaron Lewis
July 25, 2013 at 9:21 pm
OK, so I like this concept. A lot. It would require an awful lot of unified momentum to happen in real life, and our industry is as fractured as our government.
Two big challenges I see to making this happen: First, how to deal with the cognitive dissonance of sellers, who aren’t willing to list their home unless it’s at X price (where X = market value + 15%). In those situations, the rational offer amounts of buyers should help get them to “face reality as it is, not as [they] want it to be.” (credit: Jack Welch)
The other challenge is the not-so-serious buyer who has the same disconnect from reality and would be approved for $200,000 and ask an agent to show such-and-such property, whose actual market value is somewhere around $350,000. In other words, it would lead to a lot more wasted time among agents. And when it’s their collective will you’d need, it’d be hard when that would be the negative byproduct.
Having said that, you may know that in Australia it is typical for homes to be listed within a broad range, which helps give SOME indication of where the value may lie, helpful for both buyers and sellers to get a basic sense of things. Then it is on the market and available for viewings and inspections for 30 days, at which time it is then auctioned it off in a public auction. Now THAT is an accurate and efficient way of determining fair market value. No more time pressure on getting in your offer first, on wondering why your buyer didn’t get the house, the seller doesn’t have the tough choice of either (a) capitulating to the offer from the buyer of the moment or (b) holding out with faith that someone else will eventually come around. The seller knows they got market value, for they see everyone who does (or doesn’t show up) and know that no one else was willing to pay any more than the auction winner.
The combo of range pricing, 30 day marketing periods, combined with auctions at the end, is a wonderful concept in my mind, and one that I think would be easier to pull off in real life. You wouldn’t even need the whole industry to migrate all at once; you could still have this strategy operate within the existing culture of list prices and required fields in MLS systems.