Real estate term explanation “Chasing the market down”
If you price your Oakland County home too high you will be “chasing the market down”. What I mean by that is by the time you realize that your home is overpriced you will lower it a little bit. But by then the Metro Detroit real estate market value for your home will have dropped. So then even though you dropped your price you will be over priced for the Metro Detroit real estate market again. This will happen over and over as you “chase the market down”. You will finally get tired of “chasing the market down”. You will either pull the house off the market or you will end up letting your Michigan home go for much less than what you originally listed it at.
Let’s do a general example with a Northville home. Currently most Northville colonials are selling for about a $110 to a $115 a square foot. You have called me up and asked me to list your 2300 square foot Northville colonial. I have come prepared and showed you all the homes like yours with the same square footage, in the same shape, and in the same area that have sold for $250,000. You looked at it. But you think your beautiful Northville home is worth $290,000. After all you bought it 3 years ago for $220,000 and put $40,000 into it. You don’t want to “give your house away” You won’t get any money out of the home if you sell it for $250,000 after paying the real estate commission.
But you have to sell your Oakland County home because you got laid off and you are moving to California. I’ve known you for a long time and I don’t want to disappoint you. I tell you it is only worth $250,000 but you insist on listing it for $340,000 so you can sell it for $290,000.
So I list it for you. But only one person comes through your Northville home because there are other homes in the area listed for $280,000 very similar to yours. So after a month we lower the price to $315,000. Then in another month and a half we lower the price to $305,000. After 6 months we are finally down to $295,000. Still higher than where we should have roughly started. But now the 2300 square foot Northville colonials are now selling for $235,000. Some of the other homes that were listed at the same time have sold.
Now there are other homes listed at $260,00 and $265,000 but you won’t listen to me. You want to only lower it to $290,000. After all you already have lowered your price $45,000. So now we sit with your Northville home on the market for another 3 months and you lower it to $275,000. But again Northville home prices have fallen to $210,000.
Finally after a year and a quarter on the market some Michigan home buyer puts in a low ball offer of $175,000 off your list price of $250,000. We finally get it sold at $195,000
That is what “chasing the market down”. I have seen too Many Metro Detroit sellers chase the market down. They could not afford home value change. It was a big financial loss to them. Now they had to sell it for $55,000 less than what they could have sold it for a year and a quarter ago. This has happened over and over in this Metro Detroit market. Home buyers holding out for top dollar. You can’t do that in this market. If you truly want to sell your Metro Detroit area home and you have the financial room. Then price your home so it is one of the best values for the area.
Having a great updated house is the only exception to this rule and even then you should price your Wayne or Oakland County home with the market.
Don’t over price your home!!!! If you truly have to or want to sell!