Home prices have continued to sink, but not low enough to dampen seller expectations. That has created yet another market fundamental that's dragging on sales, one in which buyers and sellers cannot get on the same page, some experts say.
Steven Thomas, an account manager for Irvine-based Advantage Title Inc., regularly compiles a report on the sales-to-price listing ratios for Orange County.
As of late, the ratios have become excessively high, reaching 93% and above on almost all types of property — foreclosures, short sales, low-priced homes, the mid-to-high range.
"Meaning that there is not a whole lot of flexibility in the price, with the exception of homes priced over $1 million," he said. "This illustrates how buyers looking for a deal have their work cut out for them. Lowball Larry is not going to be successful in today's market."
And Highball Harry, let's call him, is the overly optimistic seller who ignores the advice of his agent and sees his unsold home sit, and sit and sit.
"The sales-price to original-list-price ratio illustrates how sellers are overpricing their homes and need to reduce their asking prices in order to be successful," Thomas said. "This, of course, does not account for all of the unsuccessful homeowners who remain on the market, as there are 11,300 homes on the active listing inventory [in Orange County]. It is not a specific area, or price range, or foreclosure, or short sale. Overpricing has made its way into every neighborhood, every type of property."
The problem this creates is more properties sitting unsold in an already stagnant market. "Properties priced at the wrong level sit on the market until the pricing reality sets in," he said.
Overpricing quite often occurs when sellers refuse to hear a real estate agent's suggestion on price, say those familiar with the situation, and it has been a regularly occurring theme since the market downturn began a few years ago.
"The customer or client is not always right," wrote Teresa Boardman, whose article, "The real estate customer is not always right," was published July 28 on real estate news service Inman News. "People hire us because we know how to sell real estate, and we need to know when to say no."
"Anyone who has sold real estate can relate to this," Boardman added. "Home sellers have their own opinions and a confusing array of third-party information at their fingertips, and sometimes the best customer service we can provide is the ability to say no — because the customer is not always right."
Bill Cuppy, with Pier Realty in Huntington Beach, has just said, "no." It's a stance he said that has cost him the business of sellers who didn't like his suggested listing price, and in swooped another agent in a practice known as "buying the listing."
"A lot of times the seller doesn't want to hear it and they will pick somebody who will tell them a higher price," he said.
The agent with whom the seller ends up will put the property on the market at the price the sellers want and then gradually get them to lower their price, thus "buying the listing."
When the property hits the market overpriced it turns off would-be buyers, Cuppy said, referring to the "sour grapes theory." As this theory goes, a potential buyer who writes off a home as being out of his or her range will not reconsider that property.
"Once a buyer dismisses a house, they won't go back," Cuppy added.
In this market, "everybody needs to be priced within 3% to 5% of market value," said Cuppy, a former appraiser who has been in real estate for more than 20 years.
Anyone over 5% is likely to see their home sit, and even if they do find a buyer willing to pay a bit extra or their home, that sale is anything but assured.
Lenders, which are already reluctant to lend, are unlikely to approve a mortgage for an overpriced property.
"The final arbiter on price is not the seller or the buyer, it's the appraiser," Cuppy said.
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