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It's the Market...

     DC is a uniquely strong market and, in my opinion, serious buyers make a big mistake if they think otherwise. I repeat this statement often enough hopefully not to qualify for “ad nauseum”. Situations in which properties sell at bargain basement prices do exist but very rarely in neighborhoods with higher priced homes.

     Furthermore, it is always, ultimately, the market that prices a home. Not a hopeful buyer or seller. So the bottom line is – knowledge based on experiences sometimes quite challenging for both my buyers and me – that both buyers and sellers who try to outwit the DC market are most likely going to lose in the end.

     Residential real estate markets in this country are, in my opinion, as close as one gets to "perfect" and “free”, a la the Chicago School of Economics. According to the venerable Chicago School, a “free market” has no regulation and a “perfect market” has “perfect information”. Our markets are regulated but in relation to procedures, not price, which is decided entirely by competition. Our regional multiple listing service, MRIS, provides very close to “perfect information”, providing the entire market with almost instantly updated information on every transaction. So the market functions with its own magnificently fluid reality.

     One of the few ways a purchaser can truly get the better of a seller is if the seller does NOT attempt to find out what the market price is – i.e. if the seller is allowing the property to remain at a price that is clearly too high. He doesn't know what the right price is but wants/needs to sell. So when you bring him a low offer that's all the info he has. Your one offer becomes his only indication and hence becomes "the market".

     He could find the overall "market" almost immediately by dropping the property's price into the “aggressive” range. Thousands of Realtors see all the properties listed and when a price looks like it's well-priced, at or below market they - frequently many - encourage their clients to jump on it.

     Two notes here re short sales: First: it is my opinion that, probably because of the laboriousness and uncertainty of the process, a short sale is the one consistent way to buy property at a bargain price. And a pertinent second: at least in our area, the latest technique used by agents to generate a quick contract for a short sale is to drop the price far below the market. Within 48 hours ten, twenty, even thirty offers invariably manifest and run the sales price up – though, interestingly, still significantly lower than the property would command if not a short sale.

     Competition, often in the form of a bidding war, will tell the seller exactly what market price for the property is - an excellent argument, by the way, for dropping a property’s price rather than letting it sit on the market.

     This is true whether the seller “bought low” or not … and why I try to educate sometimes recalcitrant buyers to the fact that tax records are not often relevant. Keep in mind that during the heinous era of subprime, the seller could have refinanced every bit of equity out of the home. Also, I'm sure if you were a seller who was smart or lucky enough to buy when the market was lower you would think you deserved to benefit from that decision. Right?

     SO... All sellers can have the reasonable expectation of getting a true market price for their property. But the flip side is that all buyers have the same expectation.