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Tearing Down A Brick Wall: The Problem With Sellers

You know the saying…Can’t live with ’em, can’t live without them.

…when the masses believe something is a good idea [1], it takes a sturdy soul to resist the trends. We just saw this in the recent housing boom. Buyers are more closely associated with this group behavior and sellers are happy to oblige. The flock or herd mentality reigns.

The same is true in the opposite scenario. Buyers have been quick to react to weaker market conditions, but as evidenced by their pile-on behavior a few years ago, then tend to overreact and expect a large discount on their purchase. Sellers are the “other” half of the buyer-seller equation and they are creating havoc by their unwillingness to realign with current market conditions.

My old rule of thumb: sellers take about 3 quarters to readjust to weaker market conditions. Thats been thrown out the window since its been 5 quarters since the end of the housing boom (mid-2005) and seller resolve remains relatively strong.

This has been one of the reasons that certain vulnerable real estate markets haven’t seen a significant price correction. Although buyers don’t have a sense of urgency, sellers are in denial about weaker market conditions. The result? Sales activity drops sharply until someone or both budge for their position. Brokers are frustrated because they have limited flexibility with today’s sellers [Realty Times] [2]. They gear up for the sale with advertising, open houses and other marketing strategies but if a seller isn’t ready to enter the market realistically with the right price, the effort is largely a waste of time and money.

Why is the seller so firm in their resolve to remain firm on price?

The solution? Brokers need to continue to educate the sellers on the accurate value of their property and simply don’t take the listing if its not priced within the realm of reasonableness. The other solution is simply to wait for sellers to adjust. But be patient, it may take a while.

Update: Here is an additional link on the seller disconnect with the housing market: In Face of Housing Slowdown, Homeowners Remain Optimistic [REJ] [4]