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Overvaluation in a Falling Market

Posted by: katalysis

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We’ve said before in these pages that agents who deliberately over value properties to get them on their books do no one any favours. It’s bad enough in a rising market but then the culprits are often spared their blushes because rising prices eventually make up some of the ground so as to mask their initial unrealistic assessment. However, in a falling market agents who do this not only damage their own Clients prospects of a sale at a reasonable price (not to mention their expectations) but run the risk of adding to the tendency for Bubble psychology to develop. If a house starts off over priced by 20% what do people think when it sells for 25% less than the original asking price……answer “its lost 25% of its value. Time to panic.” Wrong! Its real value has declined 5% which is not great news but no big deal.
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