Tuesday, November 8, 2011
Wednesday, November 2, 2011
Where the real estate industry is wrong
Many of my colleagues know that I'm generally very tough on myself, as well as our industry. I'm not afraid to dish out tough love when I sincerely feel it's called for. And here's such a case.
You don't need me to tell you that it's simply a tough market to sell a home; especially when you get into the upper pricing tiers. It's a well known fact that many of the properties that are on the market today are just not going to sell; at least not the first time around anyway. There's certainly enough blame to go around as to why this is happening. But I don't think that we need to go very far to find one of the culprits; it's the real estate brokerage industry.
From real estate school to company training to continued education we're taught a very methodical, quantitative, and easily repeatable formula for determining a property's market value. We're conditioned to rely on it, and then we in turn use it to recommend a list price to the home seller. Problem is..............it's wrong!
It's wrong because we're relying on yesterday's data to determine today's market value. What a home sold for 6 months ago, 6 weeks ago, or even 6 days ago has absolutely no bearing on what the next buyer will be willing to pay. So to price a home based on those factors is a losing proposition that more often not leads to overpriced properties that languish on the market, sometimes for years, and often at great expense to the homeowner.
Many of the home sellers that I work with are surprised when I show up for our initial meeting without a list of recent sales. They're surprised because that's what the last agent, who coincidentally failed to sell their home, brought with them. Yet what I bring to the kitchen table is far more important; their competition!
You don't need me to tell you that it's simply a tough market to sell a home; especially when you get into the upper pricing tiers. It's a well known fact that many of the properties that are on the market today are just not going to sell; at least not the first time around anyway. There's certainly enough blame to go around as to why this is happening. But I don't think that we need to go very far to find one of the culprits; it's the real estate brokerage industry.
From real estate school to company training to continued education we're taught a very methodical, quantitative, and easily repeatable formula for determining a property's market value. We're conditioned to rely on it, and then we in turn use it to recommend a list price to the home seller. Problem is..............it's wrong!
It's wrong because we're relying on yesterday's data to determine today's market value. What a home sold for 6 months ago, 6 weeks ago, or even 6 days ago has absolutely no bearing on what the next buyer will be willing to pay. So to price a home based on those factors is a losing proposition that more often not leads to overpriced properties that languish on the market, sometimes for years, and often at great expense to the homeowner.
Many of the home sellers that I work with are surprised when I show up for our initial meeting without a list of recent sales. They're surprised because that's what the last agent, who coincidentally failed to sell their home, brought with them. Yet what I bring to the kitchen table is far more important; their competition!
Subscribe to:
Posts (Atom)