As I wander through the various message boards, I often read about people’s frustration regarding “over-priced houses that can’t possibly sell”. To a buyer who likes the house, and is waiting for the price to be within reason, this can be very frustrating.
What they fail to understand is that every house that is for sale, is not necessarily going to be sold by the current owner.
1) Divorce – Often in a divorce, one of the spouses is offered an option to buy out the other spouse. In a market like this one, sometimes the agreed upon price must be tested. Say the spouse who is leaving wants the buyout price to be $600,000. Let’s say they bought it for $400,000 and put $100,000 worth of improvements into it. They put it on market for $$599,000 and keep reducing the price to $519,000. Then it goes off market (this is a real case) and it never comes back on market.
Meanwhile, a buyer has been watching it, who wanted to buy it for $485,000. He’s been watching it for 7 months. He feels “used” and frustrated that it went off market before it hit an asking price of $499,950 .
Once the value was proven to be $400,000 plus $100,000 at best, the two spouses agree on the “buyout” amount, and one of them gets to stay in it. It was only ON MARKET to prove to one of the spouses that the price of $600,000 was unrealistic.
2) Passive Aggressive – saying YES and meaning NO. Husband and wife have a fight and the wife calls an agent to list the house, planning to get a divorce when the house sells. Husband signs the listing paperwork at a price at which he knows it won’t sell. He appears to be cooperating with the sale, and blames the market for the wife’s failed plans 🙂 They make up at some point, take the house off the market, and live “happily” ever after…until the next fight.
3) “Mom, you HAVE TO move” – Well meaning children tell Mom she’s too old to live in that big house all by herself. She’s tired of hearing it, and agrees to put the house up for sale. High price and awkward showing instructions. “Can only be shown with listing agent present’ or “Can only be shown on weekdays from 10 a.m. to 4 p.m. and not on weekends”.
Sometimes these homes are on market from April through October, every year, year after year, with the price increasing every year. Kids wonder why Mom’s house won’t sell, but they stop bugging her about her need to sell it.
4) Short Sale – Bank approves a sale price of $450,000. House sits on market at $450,000. No offers. Owner can’t lower it below what bank has indicated they will take. Bank won’t reduce the amount they will take, because they have an appraisal at $450,000. House sits on market until someone buys it at foreclosure. Some owners keep reducing it every couple of weeks, but mls says they can’t offer it at a “fake” price not ratified by the Bank…big Catch 22.
So when you look at the inventory of homes for sale, understand that they will not all be reduced to a price at which they will sell. Often you will not get the real story about the seller’s motivation.