Occasionally I'll read an article or hear a comment along the lines of "...the Realtors are driving the prices up" or recently, in the case of the Chapman University proposed expansion, "...the Realtors are making big bucks selling houses to Chapman University". I touched on this in a prior blog post, but here's the bottom line:
In Old Towne Orange, basic supply and demand is a huge factor in the price that prospective buyers will pay. We have a limited number of homes for sale, a great location for quality of life and for commuters, and an overall unique environment that attracts buyers. So prices go up -- Realtors aren't driving the prices up. I was in Washington DC last week and looked at a couple of real estate ads just for fun -- by DC standards, living in Orange County is affordable:
- Realtors don't dictate prices. The market (willing buyers and sellers) dictate prices. We educate our clients on the price at which we believe their property will sell, and then they determine the price at which they would like us to market and advertise the home. The market will quickly tell us, in true Goldilocks fashion, if the house was priced too high, too low, or just right.
- Realtors do not select who purchases the home. The owner of the home makes that decision, based upon the offer or offers in front of them. Price is only one of many factors that determine whom the seller chooses to purchase their home, as there are a myriad of factors to consider in any offer. Is the offer contingent upon the sale of another property? Is the offer cash or is financing involved? What is the preferred escrow period? is the prospective buyer an owner-occupant or an investor? Is the prospective buyer strong financially?
- Realtors (the listing agent) have a primary fiduciary responsibility to the seller of the property -- all offers must be presented to the seller -- Realtors do not pick and choose which offers the seller considers (i.e. only investors, only owner occupants, only Chapman University parents, non-Chapman parents, etc.).
- Check and Balance on the offered price -- Appraisers conduct appraisals and are a check and balance in the system to protect the lender's potential interest in the property, as well as insure that a buyer is paying close to market price for a property (and not more). In many cases the appraisals are close to the price offered by the buyer -- or in some cases there is a sizeable disparity between the offered price and the appraised price. If the buyer elects to continue with the purchase at the offered price in spite of a low appraisal and it closes, paradoxically now that price becomes a legitimate comparable for the next sale in the area.
In Old Towne Orange, basic supply and demand is a huge factor in the price that prospective buyers will pay. We have a limited number of homes for sale, a great location for quality of life and for commuters, and an overall unique environment that attracts buyers. So prices go up -- Realtors aren't driving the prices up. I was in Washington DC last week and looked at a couple of real estate ads just for fun -- by DC standards, living in Orange County is affordable:
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