Avoid the "reverse bidding war"

For over 5-6 months now, I've been watching a hugely over-priced listing in an area that I work in, to help me determine if it's as hugely over priced as I thought it was, or whether I was mis-reading either the market, the neighbourhood, that house or any of the above combination.

Thus far, this house has been *reduced* by over $300,000 in the time it's been on the market - all by the same Realtor, by the way. (that doesn't make it a bargain - it was never worth that much!)

What happens when a house like that first hits the market is that other homeowners, who feel they have a comparable home or live in a comparable area expect you to price their house in a CMA (Comparable Market Analysis) in the similar range. But as I have to remind homeowners, it's not what a house lists for, it's what it sells for that matters. I can list ANY house for one million dollars but that doesn't make it worth that much! Until a buyer agrees *and* pays that amount, it's wishful thinking.

So what happens when a Seller deliberately goes "fishing" to hugely over-price their home in the hopes that they find someone who hasn't done their homework on surrounding prices and makes them an offer?
The house sits on the market.
And sits.
And becomes known in the business as a "stale listing".
Even Realtors don't show it because it's not in line with local comparables.
So finally the Sellers agree to a price reduction. But relative to how wildly out of range it is, it's still not realistically priced.
So the Sellers have wasted all this time on the market (but not *in* the market) with an unrealistically priced house.
In the meantime, the market itself has been changing. It's been turning more to a Buyer's market.

And then the real kick-in-the-teeth occurs.

Another house in the immediate neighbourhood comes on the market in direct competition!

There are few things worse than that to happen to a Seller.
Unless of course, that competing Seller happens to be *very* motivated.

So the first Seller had all this time on the market, in a decent Seller's market and squandered it.
And now direct competition to their own listing has appeared.

Could it get worse?
Sure.
Suppose the second Sellers are really motivated - I.e. they're splitting up and want a quick sale to divest their assets? Or suppose it's an estate sale and the executor is looking for a quick sale to wrap up the estate?
Now they're going to be lowering their price in the hopes of landing one of the fewer Buyers currently on the market.

Now if the first Seller gets more serious about selling, they're going to reduce their price to compete.
And now the reverse bidding war is on.
Two Sellers, trying to out-lower the price on their house, to attract that elusive buyer.

And when a Buyer appears with a savvy Buyer-Agent, they're going to notice what's been going on with the prices of these houses. And out comes the dreaded low-ball offers to see which Seller is hungrier.

So now, the original Seller is likely looking at selling their place for considerably less money than if they had
a) listed it realistically in the first place months ago,
b) with no local competition and
c) in what was a stronger market.

No one can predict which neighbours are planning to list or when.
No one can predict the changes in a market.
One has to consider ALL of the variables that affect housing prices when they list and it's up to a responsible, informed Realtor to help provide that information to their Sellers to help them get the best price for their house.