Last week, I talked about some of the hard and ugly truths that buyers don’t want to hear. In this article, I will turn my attention to sellers and share with you two real life examples from my time in the business. One that ultimately led to me losing a potential client because I was unwilling to “embellish” or exaggerate the value of the home they were trying to sell.
(Don’t worry I have adjusted the specifics of each transaction in order to protect the identities of those involved.)
HOMESELLERS
The truth that sellers don’t want to hear is that the market determines the sale price of their home. I am still amazed that this information comes as a shock to most people. Most sellers believe that they and their agent determine the sale price of their home. It’s simply not true, well, not if you want your home to actually be sold. The value of a home in today’s market is determined by what a ready, willing, and able buyer is willing to pay for it.
Now I am an analytical person, which can help me and hurt me in this business because I am a slave to data. Even though we are no longer in a buyer’s market (as I mentioned in my last post), that doesn’t necessarily mean that the pendulum has swung fully into the seller’s market realm. But sellers don’t want to hear that either. What I always tell sellers is that a potential buyer, when working with a good agent who trusts the data, will not overpay for a home when the data still shows the lingering effects of the buyer’s market on comparable properties in the area. This leads to a bit of a stand-off between buyers and sellers, because most people do not want to concede their position and either lose or leave money on the table.
When I first started in Real Estate, I knew that I could use my numbers background to help me when trying to correctly price my first listing. I determined, based on the numbers that I was looking at, that a particular home would probably price well at $250,000, but being new to the business, I went to some more seasoned real estate agents to get their opinion. Most of them told me that my price was too low and that I could probably get closer to $285,000 for the home. Relying on their experience, I bumped up the value in my head to somewhere between $260-285,000 and presented those numbers to my clients. Well, we priced it at $275,000 and the house sat on the market for almost 6 months. After two price reductions (the final one putting the home at $245,000, slightly lower than where I originally thought it should be from my own personal analysis), the home received two competing offers, which brought the final sale price above the final listed price and ended up selling for, you guessed it, $250,000. I kid you not. My very first listing, and I had hit the nail on the head by using the data, but because I doubted myself, I did not trust the data. The end of the story worked out well for me and my clients. For me, because I was able to trust myself and my ability to read the data going forward, and for my clients, because they were able to sell their home, even though it took longer than expected. But because I chose to listen to other agents, who I have since learned commonly inflate the numbers, the house came very close to being withdrawn from the market.
However, being honest and trusting the data does not always work out well for me or the sellers. As I mentioned in my last post, sometimes my unwillingness to massage the numbers causes me to miss out on a potential listing because someone else comes along and promises to sell the home for more than its current value. Don’t ask me how they come up with their numbers, but this, again, is something that is frustrating to me, and should be frustrating to the consumer as well.
For example, an old friend of mine called me to discuss possibly listing their home. So I ran the numbers and unfortunately had to inform them that they would be unable to sell their home for any more than they bought it for (this was due to the downturn of the housing market and slow recovery from the housing crisis in 2008). In fact, they would probably lose money once their total costs were deducted from the sale. I think I quoted them a potential price at or maybe $1000 more than they paid for it. They decided to try to sell their home themselves (For Sale By Owner). No hard feelings for me, because I am in a similar position with a condo that I own, which I purchased in 2006.
Fast forward a few months, and it turns out that they decided to list their home with an agent after all. That agent was NOT me. Granted, they were under no obligation to use me. However, the agent they selected listed the home for $15,000 more than I would have. Sounds great to a potential seller, right? Obviously, it looked like I didn’t know what I was talking about when another agent comes along and promises to sell their home for $15,000 more than the value I had placed on it. Sadly, the home sat on the market for 6 months, and after several price reductions, the home finally sold. Can you guess how much it sold for? For $500 more than they paid for it.
I felt bad for them, not because they didn’t agree with me, but because they had only prolonged the inevitable. They trusted a professional who told them something that was music to their ears, after having had someone in the same profession tell them something they did not want to hear. I felt bad for them because I could imagine them getting their hopes propped up and then dashed with each showing that did not result in an offer. No doubt the recurring feedback from each potential buyer was that it was priced too high. Finally, I felt bad for them because even after having accepted an offer for almost exactly what they paid for it, they still had to pay the listing agent (the person who told them what they wanted to hear) and buyer’s agent to handle the transaction, which means that they actually lost money in the process. Now, they still would have lost money had they decided to go with me, but at least I told them that hurtful truth up front, which ultimately led them to go in a different direction. Instead, they spent 6 months being told that they wouldn’t lose any money but ended up right back where they started with me.
So, yeah I ended up being proven right but I don’t get much satisfaction from it. In fact, what do I have to show for it? Not much, professionally speaking. Someone else got to add that listing to their transaction history, and got to add a few extra dollars into their pocket at the expense of my old friend, even though they were wrong in their assessed value of the home. But, you know what? In a strange way, I did benefit from the experience. Ultimately, it solidifies my commitment to do what is right before what is profitable. It also helps me to always operate with integrity and trust my instincts, even though I may not immediately benefit from them.
Now please don’t misunderstand me, I am not saying that I am always right when I assess a home’s value and that other agents are always wrong. I am merely giving two specific examples of how I operate my business and how it directly effects clients and potential clients. There are several instances when a home sold for more than I thought it would. And in my business, that is a mistake I am more than willing to make, because it only benefits my clients.
The moral of these last two articles can be summed up in this final sentence:
In real estate, be watchful for those who tell you everything you want to hear. - Geoff Desiato Click To Tweet
If you took the time to read these last two posts, thank you. If you would like to know more about the core principles of my business, then please get in touch with me.
Godspeed,
Geoff
