Marathon Sellers Race Reality

Sales are slowing in many markets. Unfortunately a visible number of sellers refuse to believe that market trends apply to them. Peter G. Miller comments.
By: Peter G. Miller: Realty Times
A new species of real estate owner has begun to emerge: the marathon seller. Maybe you have them in your community, owners who believe in real estate exceptionalism, the idea that their homes are growing in value while real estate prices all around are stalled or falling.

These owners truly believe that somehow their property is unique and different, a home so wonderful that general sales trends are irrelevant

Compared with last August, in my area we have evolved from a strong seller's market to something which has more balance. Prices are up a touch, but not up insanely. Days on the market have doubled, unit sales are down 20 percent and instead of paying premiums, some buyers are getting "seller contributions" at closing.

How can you spot a marathon seller? Here are some clues:

    • The home has been on the market 400 days while local properties typically take
      88 days to sell.

    • A look at the MLS in August shows a home with snow.

    • The property has fewer visitors than a forgotten cemetery.

    • When the listing expires no broker steps forward to instantly re-list the
      property.

    • When finally re-listed, the property has a higher price - even though it could
      not be sold at a lower value.

Much of what we're seeing in today's marketplace has no relation to reality. Immovable prices seem designed more to enhance throbbing egos and party-talk bragging rights rather than produce sale results.

Surely it makes sense for sellers to test the market, to select the highest possible price they realistically think they can get. But marketing tests should not continue eternally. After a reasonable time on the market - the term "reasonable" being different for different markets and different properties - owners should have some sense of what's real and what isn't.

Unrealistic prices not only lead to marathon selling periods, they also produce excess costs. There are mortgage and utility payments to be made each month as a home languishes on the market, plus the tax bill grows.

Worse, if a replacement home has been purchased and the first property remains unsold, there may well be two mortgages and two sets of taxes and utilities.

Given that many households can barely tolerate one set of ownership costs, doubling such expenses hardly seems attractive. A house with expenses of $3,000 of month that stays on the markets for months on end means the eventual sale price has been effectively cut by thousands of dollars.

Longer selling times also change broker economics. The old expression is that brokers who are not careful "can list themselves into bankruptcy" by taking on too many homes that do not sell - or do not sell within a reasonable period. Why? Because each property must be advertised and marketed and such things are not cheap.

Owners, having once established in their minds what a property is worth, sometimes see any lower price proposal as a "loss" when that's not the case.

For instance, imagine a home that will not sell for $750,000 - but it might sell for $700,000. To the owners who dreamed of the first price, this is a $50,000 "loss" even though they never had a sale at $750,000.

In an environment where prices are rapidly rising you see buyers more willing to take a chance because there's some certainty that replacement buyers can be found if necessary. But slow the market and both the math and philosophy of home buying changes. Buying is more risky because a quick re-sale at a good price is less assured.

Slower markets also change the math and thinking needed to be a successful seller. Alas, some sellers have yet to understand that when the marketplace slows it slows for everyone.