Apr 28, 2008
Seller’s Loss — A Realtor’s Perspective
28 Apr 2008
Posted by VAR
I really love my job! I deal with people every day, and when my efforts are successful my clients are happy. I deal with agents every day too (yes, they are people too), and there aren’t so many who are happy these days. Some people who are trying to sell their homes in today’s market aren’t happy either. Everyone wants top dollar for their home and, in their perception, they aren’t getting it. Frustration ensues, and a feeding frenzy of negativity between agents and sellers surrounds them like a huge, dark cloud. It just doesn’t have to be that way.There are several things that sellers can control when placing their home on the market.
- Timing – Most of the time sellers can control the time of year their property is to be introduced to the market. Some times are better than others.
- Price – Completely controlled by sellers. Realtors may recommend a range in which to price but the listing price is solely controlled by the owner of the property.
- Condition – I always recommend areas of improvement when preparing a property to list. Sometimes a home needs paint, sometimes cleaning, sometimes a whole lot more than that, but sellers control the maintenance and condition of the home. If you have a property for sale and it is messy or cluttered, only you can correct that.
- Terms – When an offer comes in, your tolerance level dictates whether it is acceptable. Most of the time a counter-offer reflects what you really want, but sometimes sellers aren’t ready for what they see. An offer can start a chain of events that takes time, but the events are sometimes consolidated into 24 or 48 hours. Not good! Read on.
There are also a couple of things that are controlled by the market. They are simply beyond a seller’s and agent’s span of control:
- Competition – Houses are placed on the market every day, and pricing these days is sometimes not reflective of actual market conditions. Nevertheless, it’s out of our control. We don’t decide the prices of other homes. We instead want to use them to your advantage.
- The Economy – We cannot control interest rates, the media, or general buyer sentiment that results from economic issues.
What do agents control?
- Promotion – We control how to market your property for sale, where and how to advertise, and use our networks to help get your house sold. My marketing plan is similar in some respects to that of other Realtors, but I am a lot more personal about it. List with me to find out just how aggressive I really am…but I digress…this isn’t about me! I want to write about seller’s loss!
So, out of all of these elements and so many variables between them all, who controls how quickly a house sells? Is it the agent? Sometimes, but he controls only one element of the sale. Is it the seller? Sometimes, but she controls only four of the elements of the sale. Is it the market? Sometimes, but interest rates and the economy wiggle every day. Is that crystal clear to you?
Let’s look at the primary element of any given home sale; the price. If your home is priced right, given all of the other variables in the home sales equation, it will sell. I promise!
Let’s say seller x lists his property at $700,000 when everything comparable to him in his neighborhood is selling for $600,000. The property has all of the upgrades and sparkles during any showing, but no one wants to step up and buy it. Or, seller y, in the same neighborhood, has received good advice from a Realtor, has been shown the trend in prices in the neighborhood, and prices just under the critical mass of homes for sale or sold in the neighborhood. It has the same upgrades and shows just as well as seller x’s home. Both seller x and y have built up equity in their home over the years and have room for negotiation in any offer. Over a period of several weeks or months, seller x’s agent asks for a price reduction, and is met with resistance, while seller y’s home sells. Why the resistance by seller x?
Loss. Loss not unlike losing a family member. Seller x sees money that he wants to spend on his next home, maybe his retirement home, diminish. That makes him mad!
Let’s review the stages of loss as they apply to real estate.
- Denial – Despite the market conditions around him seller x continues to think that his home will fetch a higher price than everyone else’s. He’s been shown the data over and over again, but just won’t accept it. The market is telling him something, and his agent is the messenger. Seller x continues to hold out, knowing sub-consciously that reducing the price is the right thing to do.
- Anger – Continually, gently reminded by his agent that the market is telling him that a price reduction is in order, seller x gets mad. Anger is a secondary emotion, a projection of the underlying issue, so say psychologists and one college professor of mine. Seller x doesn’t want to reduce the price and takes it out on, you guessed it, the agent.
- Frustration – Seller x’s agent may be right. A price reduction might get more showings and get an offer on the table, but seller x will be “losing” a lot of money as a result. What’s the best approach to take? Will seller x try again next year? How can, or will, seller x handle the loss? Still angry with his agent, he considers firing him to try again with a different agent, but the market isn’t changing the message, and the agent and the market message has been consistent.
- Disappointment – Now we’re in transition. Seller x is beginning to realize that he’ll have to deal with what could be a big monetary loss. He’s held his property for years and bought it a fraction of the sales price, and will likely walk away with a big profit even after a price reduction, but he still doesn’t like it. Seller x really wanted more of a profit.
- Acceptance – Seller x has accepted market conditions and his agent’s advice. He reduces the price so an acceptable level and sells the house.
Now, there’s yet another variable. Suppose your house is overpriced and an offer comes in at the market price? Talk about knee jerk! In the scenario I’ve described in detail the seller had time to reflect and analyze the information. He didn’t like it, but he had time to deal with loss. He worked through the stages of loss, came to terms with it, and moved on. Now, Mr. Seller, you’ve been on the market for two months, and an offer is on the table in front of you, significantly less than you hoped for but in line with the current state of the market in your neighborhood, and you are mad! The clock is ticking and the buyer wants an answer. Heaven help the seller’s agent, who now has to help work you through the stages of loss in one night! How many of you sellers out there are still ticked at your agent because of this scenario? I already know the answer, by the way!
I recently drove through a neighborhood in Northern Virginia to preview four properties for clients before showing them. They were in the $420K range. As I drove around I noticed two For Sale By Owner properties across the street from each other. The curb appeal of one was fabulous, so I stopped to pick up a flyer. The owner of the FSBO property across the street was outside and came over to chat, and she told me that she owned both properties. I asked her the prices of each…one $100K over the comparables I just previewed, the other $150K over. WOW! When I told her about the comparables she grinned at me…you know, the kind of grin that conveyed that I didn’t know what I was talking about. I’m just a dumb Realtor who doesn’t really know the market. Never mind that I’m in a house somewhere every day, and looking at market trends every day. I then showed her the listings to the four comparable listings I had just previewed, which were on the passenger’s seat of my car, and her grin went away. I gave her my card and let her know that when she was really ready to sell I would be happy to help, but I knew I would never get that listing. Over time I noticed an agent’s sign on one of those FSBO properties and looked it up. It’s still $100K over the market comparables.
Denial truly runs deep sometimes, but the owner at least took a step in the right direction and hired a professional that might know the state of the market in that neighborhood. If that agent is good enough she’ll work them through the stages of loss and get the house sold over time, while those seller paid mortgage payments keep adding up. I, on the other hand, will forever be the bad guy to that particular owner, the object of anger, frustration and disappointment until the house is sold. I’m okay with that; I’ve given their agent a more educated client. That’s business!