I don’t often pick fights with others, particularly my local Realtor association, and don’t intend to. What I am doing is posting a “letter to the blogger” from one of my favorite commenters who raised some valid points. The story referenced is one in the most recent Real Estate Weekly; I would link directly to the story, but the site doesn’t offer that option. At your leisure, check it out.
From the article:
We have identified four stumbling blocks to getting the real estate market moving again.
Factors holding the market back:
1. Too many listings
2. Overpriced listings
3. Scared first-time buyers
4. Buyers waiting for the market to hit bottom
These are all very true.
I agree the following statement does little for Realtors’ credibility – there are no guarantees in anything. Ever.
Psst! Hey, want to hear a big secret? How would you like a tip for a sure-fire investment that will double its value every 10 years?
However, real estate is widely to be a sound long-term investment. What we are seeing also is that buyers (and sellers) are finally re-recognizing the intrinsic value of housing.
And the email from the reader –
I suspect you might not be terribly eager to pick a fight with your own Chal/Albemarle realtor colleagues, but I just read the new essay on CAAR.com by Judy Savage and it’s a doozy.Â She starts out by guaranteeing that house prices will double every 10 years — a “sure-fire” bet, she says.Â Well, that’s just nuts — there is no such thing in the investment world as a sure thing, there are just investments with different risk/return characteristics.Â And then she, and CAAR, lay out a plan for “balancing” the market.Â The upshot of the plan is to jawbone sellers into lowering their listing prices, and buyers into buying.Â Well, the two goals are at war with one another.Â If the announced policy of realtors is that listing prices are too high, that sends a message to buyers — wait!Â In the end, none of this is likely to make very much difference.Â The bursting bubble psychology has taken hold too firmly for browbeating to work.
I’d wrap the whole thing up with one final observation.Â This whole thing reeks of an attempt at market manipulation by realtors.Â The housing market is a *market*.Â The value of a house is not determined according to what realtors think it should be.Â The value of a house is what a buyer is willing to pay.Â And the CAAR plan is likely, if anything, to marginally depress buyer willingness.
Now is truly a great time to buy for many, many people, as interest rates are very low and prices are moderating. For others, renting may very well be the best option.Â It is each Realtor’s job to advise his client of the state of the market, the risks involved and help them determine whether the purchase or sale is right for them.
I see the letter as a call to action for Realtors to do what we should have been doing all along, but now with more urgency. As seller agents, it is our duty to advise sellers as to what the fair market value is. To do otherwise accomplishes three things –
1) Doesn’t sell the house
2) Makes the Realtor seem ineffective
3) Contributes to the glut of inventory
4) Doesn’t sell the house
Setting asking prices for too many used to be an exercise of asking the sellers what they wanted to ask, rather than doing legitimate statistical market analyses. No longer. One recent example of sellers’ psychology is this, and I’m changing the prices for the sake of anonymity:
Property has been on the market for 18 months. It started at $425,000 and is now priced at $375,000. The seller purchased it for $300,000 five years ago, and now owes $350,000 due to the home equity line. Market value is right around $335,000. The Realtor has advised her client of the state of the market, but he won’t lower the price or accept an offer that is in line with the current market. The seller says that he would rather let the property go to foreclosure than take out a loan to cover the difference between the selling price and what he owes.
When sellers are setting market value based on what they owe rather than what the market will bear – What is the Realtor to do?
* AC – Thank you for the email. I would have asked you for permission to post your letter, but I don’t have your email.