The Wheeler Group, Inc.

To better understand the methodology involved in pricing real estate, one must first look at the current market conditions. Just because a home “costs” this much to construct does not mean it is worth that much money. The price of a home is determined, often, but the sales of comparable homes in a given area. This means, if the real estate market is tanking and homes are being sold at lower than market value, the market value will lower. (We have certainly seen that in the past 18 months!)

Forced Listings Versus Non-Forced Listings

There are two types of real estate listings – the forced and the non-forced. The forced real estate listing is offered by a homeowner that MUST sell their home. The sale could be attributed to a new job or a move to a new location, or it could have something to do with selling the home to escape foreclosure. No matter the reasoning, the homeowner is in a position to sell their home for a price lower than the market value in order to get the home “off their back” so to speak. Sometimes the home owner has had to relocate due to a job transfer and the house is being sold by the “company” and they are ready to move it on.

The non-forced listings include homes on the market because the seller WANTS to sell the home. They may be contemplating a move or thinking about job relocation, but by no means are they feeling forced to sell their home. Many higher end real estate listings fall into the non-forced category. However, there is a link between the forced and non-forced listings that could call for a price “reset” on higher end homes.

Resetting the Market Value

The market value of a home is directly linked to the sales price of homes in a given area. I remember one real estate agent telling me a story about an exclusive neighborhood with $400,000 and $500,000 homes that felt the effect of one below market sale. A new homebuyer moved into a home without knowing a crucial fact about the home’s history. When the new owner was told about this history, they listed the home for sale well below the market value. The home sold and instantly the surrounding homes were worth nearly half of what they were just a day before.

When the forced listings contribute a huge percentage to the total home listings in a given area, there is no “quality” protection given to ANY home, even if the home is a higher end piece of real estate worth a million dollars or more. Eventually, the non-forced home listings will take one of two actions – the price will be “reset” based on current home prices or the home will be removed from the market.

Forcing a Price “Reset”

There is nothing saying that a potential homebuyer cannot offer less for a home than the listing price. As a matter of fact, most real estate agents will suggest the potential buyer offer a lower price unless there is heavy competition for the home. The time to get that piece of prime real estate for lower than market value is NOW. While the high end real estate market may have held on to their 2006 prices to date, the time is quickly approaching when a price “reset” is inevitable.  If you have a home in the “high end” market be sure to look at all your options and always attempt to “think out of the box”!

This entry was posted on Thursday, January 14th, 2010 at 9:46 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.