Fritz Pfister

The national housing market has undergone a major correction with fewer sales at lower prices, however real estate markets are local. The vast majority of markets continue to to experience strong sales, and modest price increases or a leveling off of the rate of increase. However the majority of local markets, as the national market, continue to see inventories of unsold homes remain at record levels.

The oversupply of homes for sale, availability of mortgage money, and historically low interest rates make now a great time to be a home buyer. In the Springfield Illinois housing market the number of homes continue to sell at near record pace, however the intense competition for buyers has caused many sellers to offer incentives, lower their asking prices, and be more flexible during contract negotiations. All of which benefit buyers.

So all is good if you’re a home buyer today, right? Wrong. The inventory of homes for sale, although at record high levels, continues to see many homes still egregiously overpriced. There are agents that are known to take home listings too high. The reasons vary. Some agents tell sellers a high price to obtain the listing. Some sellers price their home based upon what they want or need to purchase their next home. Some sellers refinanced when prices were up, and now owe more than the home should sell for. Many agents have scant little experience in a buyers market and misdiagnose the value. Then there are the sellers that simply test the market, not caring whether they sell or not. I call these people players. Players are the worst type of seller you could buy a home from.

Here are some real life examples from just one of the agents I believe to take listings high. There currently is a home on the market that this agent had listed high, and sold through another buyer agent just a couple years ago. Now on the market more than ninety days without selling, the owners have lowered their asking price $10,000 below their purchase price. In my opinion, it will take another $10,000 to $15,000 drop before an offer can be expected. This is what can happen if you pay too much for a home. The agents blame a changed market, but it was obvious to this old Realtor the home was egregiously overpriced when it sold. The previous seller, listing agent, and buyer agent all made their money. The buyer, now a seller, is paying the price. The question becomes, what advice and counsel did the buyers receive when making the purchase? How did this home appraise? This illustrates the need for buyers to have representation they can trust, and not to count on an appraisal to protect them. Good credit ratings and strong down payments neuter the appraisal.

Here are two quick examples of egregiously overpriced homes on the market today. In this first example the sellers purchased the home slightly over two years ago. They have priced the home 14.5% above the original purchase price during a time prices rose about 8%. Doesn’t sound too egregious? That’s over $45,000 over the purchase price, $47,000 over the recorded county fair market value, and over $42,000 above the average selling price for the street. How do these homes get sold? Uneducated buyers calling listing agents directly off the sign or advertising? Transferring families coming from a higher priced market thinking the home is a steal? I’m sure with the listing agent’s agreement. Buyer agents hungry for a commission? As usually happens during boom markets the number of real estate salespeople increases. Now you have a shrinking number of sales being sought by more agents. This is a recipe that isn’t good for consumers.

In this second example the sellers purchased the home slightly more than four years ago. They have listed the home $77,500 above their purchase price, a 40% add on when prices rose about 12%, $74,000 above the recorded county fair market value, and over $80,000 above the average sale price for that block based upon nine sales. A couple blocks south the prices are higher, however the homes to the north don’t compare. How did this home get priced so high? Was the price established by the agent, seller, or both? You could build this home for the asking price and save money. Is this price ‘em high agent simply relying on dollar per square foot valuations, and ignoring comparable sales data? Woe be to the buyer of this home upon resale. Hopefully an appraiser will save the prospective buyer. Any agent that would allow their client to pay anything close to the asking price on this home would prove to be more interested in their commission than the interests of their client.

Yes, this is a great time to be a home buyer, but not if you make a mistake. Hire an ethical buyer agent before looking at any homes. Hire someone you can trust. Doing anything else will open the door for mistakes that can cause you significant harm. The vast majority of experienced agents will provide service that will protect you. There are agents who are all business, and money is their guiding light. Some don’t produce many sales and don’t last in the business. Some last for years and can be counted among the top producers in a market. The challenge for you is being able to tell the difference.

Your best guide many times will be your intuition. My advice is to ask for references. Special references, those who have purchased with the agent, and then sold with the agent. Harry Truman said there’s no such thing as the future, only history that hasn’t happened yet. Studying an agents history is a guide for you. Reagan also said trust but verify. Trust, verify, obtain special references, and follow your intuition. That is how you can avoid mistakes in a home purchase.

Another way would be to attend the free Home Buyer Seminar to be held at the Crowne Plaza Hotel in Springfield, Illinois on February 22ND, 6pm to 9pm. Learn the process, avoid the mistakes. Call 217-391-1811 or e-mail fritz@springfieldhome.com to reserve your seat. Free and without obligation, brought to you by many fine local businesses. Visit SpringfieldHome.com, click on “about Fritz” to see the 2007 seminar schedule, and sponsoring businesses.

If you find the advice on this blog beneficial, please forward this to your friends that are in the market to purchase or sell a home. There are a limited number of people that see this blog, you can help your friends by spreading the word. Thanks for caring.