Pictured lot: Beach Rd. Keaau, HI 96749
Listing agents have a contractual duty to get sellers as much as they can for their property. In researching sales data, our multiple listing service (Hawai`i Information Service) reported the average sales price on Hawai`i Island during the first three months of 2022 was $864,119. This is pretty much aligned with the current average asking price of $885,041.
The Price is Right
The issue of pricing is supposed to be a cooperative effort between seller and agent. Often, sellers understandably become strong willed. Pricing should be determined by comparing similar properties which have sold over the previous three months.
It’s precisely the same process an appraiser goes through to confirm value. It’s not a complicated concept and doing the math isn’t terribly difficult. In general, pricing should be fairly straight forward.
But My House is Special…
And yet, as simple as it sounds, sellers can be very creative when trying to justify how their property differs from comparable sales and the competition. Their rationalizations are generally the source of disparity between the asking and eventual sales price.
In the past, sellers expressed the need to get more money from the sale in order to continue on to their next project. These days most price-propping is based on what the owner “thinks” a buyer will pay. Of course, the same sellers who believe gold plated faucets or a palm lined drive will push their price into the stratosphere are the same ones who usually have inside information from the coconut wireless about a neighborhood sale that will surely justify their price.
Using active listings or unverifiable sales in order to establish value is about as valid as trying to price based on “potential.” Really??? Don’t all properties have “potential”? Assigning value to un-permitted spaces or an unauthorized use does not prop up value either. Creating a tropical paradise adds value, but beautiful landscaping is like new flooring. It probably helps the property sell faster but adds minimal value. Truth is, there are few deviations when it comes to pricing real property.
Improper pricing results in a “short” appraisal which is usually followed by a failed sale. Inventory is very low and so a buyer’s choice should stick. Few purchasers are so enamored with a property that they are willing to pursue a purchase regardless of price. Unrealistically priced properties don’t even generate showings. Realtors® know when property is overpriced. In fact, we have a duty to any buyer we represent to let them know if an appraisal might be an issue…if we even get that far.
Time is Money
Our job is often a race against time. We have a limited amount of time with most buyers during a normal 7-10 day visit. Showing overpriced listings wastes time and benefits no one. It frustrates sellers and it disappoints buyers. It wastes time and money of everyone involved. A competent agent can help ensure pricing is done correctly. Even in a rising market, an agent who sets unrealistic expectations by agreeing to list above market value is setting the sale up for failure. Honestly, it’s best to just price the property for what it’s really worth!