Question: I need some sound advice about the current market because I think I'm going crazy.
Just when I already thought prices in my area were already double what the average income qualifies for in mortgage payments, I'm now even more shocked to see new listings that are $50,000 or more overpriced in desirable areas according to online valuations.
Why are seller's agents overpricing the houses, according to fair market values from recently sold homes? How do they justify such prices? Why do brokers encourage buyers to invest at these prices, when common sense tells me, if rates go up, and people are shut out of the market, there will be even fewer qualified buyers, so prices have to go down! Do brokers have any code of ethics for the crisis they're creating in this market? Please tell me something to ease my misery about the current market!
Answer: You're not crazy. There are several answers.
First, why do you think online valuations are accurate? Do online sites have appraisers in your neighborhood who reported to them recently, or do they work by statistics which may be out-of-date, inaccurate and not reflective of individual properties? Online sites work on averages assuming all homes are alike. They even compare regular homes to foreclosed homes, which is ridiculous.
Second, imagine if you were a seller. Would you hire a broker to sell the property for less than market value? If brokers are over-pricing properties then buyers won't buy. Asking prices will soon fall if buyers just say no.
Third, home values are not based on a multiple of average incomes. They are based on what the market will bear. In effect, buyers are self-selected by their willingness to purchase at a given price and their financial ability to do so. Seen another way, homes are not universally affordable.
As a buyer you must use your own judgment. If prices make no sense to you, vote with your dollars and don’t buy now. Use the services of a Realtor, someone obligated to work in your best interest as a purchaser, to better understand local trends and to spot properties that meet your requirements.
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