Thursday, March 4, 2010
If you’re thinking about putting your house on the market, anticipate lots of showings. And if you get an offer, it will be lower than you probably expected.
If you’re serious about selling your house in this buyer’s market expect it to take a lot more showings and most likely a lower offer. Most people are well aware of the fact they probably won’t sell their house for what they had hoped. But is their expectation where it needs to be based on market data? In my personal experience I’m still seeing a lot of unrealistic pricing from unrealistic sellers.
When I list a home my responsibility to that seller is to drive as much traffic through that home as possible to get them an offer. Their responsibility is to make certain the home is show-ready and priced to sell. I can’t make a seller price their home based on my recommendation. I can advise, educate and coach them based on my knowledge and experience but if they’re not ready to hear what I have to say, it’s going to be a longer and harder battle to get that sold sign in the yard.
So what happens between the time I list a property I know is over-priced until we eventually get priced correctly? There will be a lot of hand-holding and updating relative to comparables and data supporting the correct price. What most sellers don’t understand is they would actually get more for their home if they priced it correctly at the onset.
Unfortunately, the majority of them don’t understand that philosophy and want to allow for room to negotiate. That “room for negotiation” is probably costing them time and money. Many still think its worth more than it is even though the data doesn’t support that philosophy.
Let me give you an example of what I’m talking about; I had a listing that I just closed in February for $320,000. When I originally met the seller last July (2009), based on the comparable data at that time, I told him to list the property for $349,900.
My seller is a well-educated, respected physician who has since moved out of the area. Even though he’s a well educated doctor, he’s not educated in the field of real estate, never has been and after what we went through to get the house sold, I’m sure never wants to consider delving into buying or selling for quite some time.
He wanted to start at $364,900 so we did, to no avail. We started chasing the market after roughly 60 days of showings with feedback all indicating we were over-priced. At day 65 or 66 he decided to revise the price (at that point we missed the window to get a fast offer which ultimately means a better price) to $357,000 only to go another 30 days (now 90+ days on the market) with still no offer, yet still getting a lot of showings.
He decided to revise to $349,900 and traffic picked up heavily; we got under that $350K benchmark and started attracting buyers that were not seeing the property because he was teetering above their cut-off point of $350K. Realize we’re now almost 100 days on the market and values are consistently dropping; so originally when the comps showed $349,900 as the price that fit the bill now the comps are showing $339K range.
After 100+ days in a market where values were dropping fast there’s no time to contemplate getting right on price. It’s key to get right on price out of the gate or you’ll be chasing price until it sells or until you pull it off the market because you can no longer afford to sell.
In this situation the seller had to sell; he had already relocated and had an empty house. Because it was empty I suggested he stage it; smart investment of a few thousand dollars that statistics show will help sell a house upwards of 35 percent faster and pull more money than a non-staged vacant property. He agreed to stage the home while we sat at the $349,900 price point. Still, no offers. We’re now at roughly 120 days on the market and looking like an old listing. So our option once again, based on feedback from tons of showings, was to revise the price.
At 120+ days on the market we’ve now revised to $342,500 (odd price point) but the seller wanted that price so I rolled with it. Now our comparables had drastically changed. We had a foreclosure in the data now as well as a short sale. With that said we continued to sit and he started to get desperate. He lowered to $334,900 and then again to 328K where he finally got an offer at $320K about 150 or 160 days on the market.
There’s a valuable lesson here for all sellers: Price it correctly right out of the gate. Had he priced it at $349,900 when we originally listed the home his chances of getting close to that were extremely high because he would have been at market value without a foreclosure or short sale driving down his price point.
If you list your house you have to understand real estate agents want to sell it for the highest dollar amount possible; their commission is driven off the selling price. Listen to them; they know what they’re doing. If you don’t have the confidence they know what they’re doing, then why did you list with them in the first place? Don’t say it’s because they were a friend or family member and you felt obligated. Nothing wrong with listing with a friend or family member but they better know what they’re doing and you should view them as a business partner in a big business transaction. This is not about sandwiches and coffee. This is a big investment and you want an agent who can represent you in a business capacity.
Based on the example I cited, my seller finally humbled himself enough to tell me he should have listened. I didn’t need to hear that; but I was glad he came to that realization. Hopefully it will help him somewhere else down the road.
Joan Tabash-Curbow is a native St. Louisan with more than 20 years business experience. Her business acumen and strong communication skills allowed her to more easily transition into the residential real estate and distressed sales market in 2004. Curbow is co-author of "Should I Short Sale My Home?" Her real estate contact is CurbowGetsItDone.com. E-mail her at joancurbow@kw.com
Comments
ldffly (anonymous) says...
Oh brother! I know this guy from old. I had a situation almost identical to this one in Kirkwood a couple of years ago. Unfortunately, most sellers don't believe the pricing advice of the real estate agent. Anyway, my response to most potential selling clients for the last few years has been, "I'm sorry, I can't sell your home for that price." Be cordial and then walk out the door.
March 4, 2010 at 8:04 a.m. ( permalink | suggest removal )
gumby19 (anonymous) says...
I think this story is typical real estate agent garbage. The agent wanted the listing so bad that he/she did not advise the seller properly to begin with because they were afraid to lose the listing. My personal experience is that the agent runs "comps" from your area, then wants you (the seller) to suggest a listing price. You can never "pin" down an agent when you ask them - "what will my house sell for?". They don't know - there are too many variables. They are great at revisionist history though.
March 4, 2010 at 5:41 p.m. ( permalink | suggest removal )
ldffly (anonymous) says...
Gumby, I can tell you what it won't sell for and I always do. I have had two overpriced listings in my career. In one case, I was pressured to take it by the office. The seller client wouldn't even listen to me when I told him that the house next door failed appraisal. The other listing, the one referenced in the above post, was a situation where I was the assisting agent. The lead agent was friends with the seller. He and his wife wouldn't listen to my pricing advice or the other agent's.
I mean it when I say I do not advise overpricing. I give a price opinion and give detailed neighborhood pricing info. In spite of that, most of the time, the seller wants too much then I walk. Nobody needs overpriced listings.
Robert Schneider
Blue Ribbon, Realtors
March 4, 2010 at 10:04 p.m. ( permalink | suggest removal )
jcurbow (anonymous) says...
Hey Gumby,
If you would have read the article you understand the seller was advised properly out of the gate and throughout the entire process. The business came as a referral and the seller is a great guy! This type of situation is the norm. The outcome in many of these situations is an expired or canceled listing because the seller never properly gets advised and the agent took the listing to get calls off signage.
Robert,
I understand your philosophy but I have to tell you I can't pick them! Unless the seller is so far off, I'm going to take it and even in the situation I reference it's driven by a market we've never seen before. Thus, you can't predict it!
March 5, 2010 at 7:34 a.m. ( permalink | suggest removal )
kevincottrell (anonymous) says...
Great discussion - and realistic situation. St Louis suffers from chronic over pricing of listings - hence the fact that 40-60% of listings are rejected by the market and fail to sell. It gets worse the higher the price point in the market with a larger % of listings failing to sell. Actual stats for St Louis County can be found here. www.stlouisrealestatetoday.com/st-louis-real-estate-market-stats-data/ See Total Market Overview Reports.
If the market had more agents who would stick to their guns and not accept over priced listings - even if they go to another agent then fails to sell it - the market would improve over time. Having worked in large markets in FL, TX and CA previously its very interesting to see what a huge issue this is for St Louis - average listing has 2.3 price reductions before it sells here.
March 6, 2010 at 9:23 a.m. ( permalink | suggest removal )