My house is worth...

One of the first things I hear when discussing the price point at which to list a home is, ”My house is worth more than that!”

I had clients, an older couple (Jim and Gail), who wanted to downsize.  They weren’t strangers or friends really; I guess acquaintances I had known for several years.  They had lived in their home for about 15 years.  They did not have to sell but wanted to because they had seen a home they wanted to buy.  There was plenty of equity in the home that would allow them to price it to sell and allow for flexibility.

What followed during the listing appointment was a relatively heated discussion between the husband and I.  Jim kept insisting that their home was worth $350,000, not the price I recommended, which was $320,000.*  I had showed him the hard numbers, the comparables in the neighborhood, what had sold and where it was in relation to his home.  I showed him what was on the market, what listings had expired and which ones had come back on the market.  All that supported a $320k listing price.

Jim’s thought process was a bit different.  He pointed to the landscaped backyard he had done.  He talked about the renovations and updates that had been done (10 years before).  There was a litany of reasons he had to “support” the notion that the home was worth $30k more than the market would allow.

This type of situation is where things can become delicate.  Try to force the issue and you lose the listing, and if you don’t advise your clients correctly, you’re doing them a disservice.  Damned if you do, damned if you don’t.

Eventually we compromised…it would be listed at $350k for two weeks.  If there was no listing activity then we would revisit the listing price and adjust it down.  I made sure that I notated on the listing agreement what the recommended list price was.  This covered me and ensured that Jim and Gail knew where we started.

After two weeks of zero showings I went back to their home to discuss lowering the listing price.  They agreed to lower it…by $5000.  So now it was going back on the market at $345,000 and we would revisit after two more weeks.  Two weeks after that, with zero showings, we dropped the price another $5k.  After that second price drop, we put an offer in on the home they wanted to buy.  It was a full price offer, contingent on them selling their existing home but not asking for any closing costs or any other concessions.

I heard back from the other listing agent within an hour asking about my client’s existing home: how long had it been on the market, where was it, what was it listed for, etc.  She was doing her due diligence before submitting my client’s offer to her clients.  An hour after that she called me back and told me her clients had refused my client’s offer and they would not entertain any counter-offers.  When I asked why she told me it was because my client’s home was not likely to sell at the current list price of $345,000.

Needless to say Jim and Gail were not happy to hear that, not at all.  Jim got more irate when I told him why.  He went on a tirade about how the other agent didn’t know what she was talking about and how the sellers had their head up their a$$.  His words not mine.  On and on he went until he vented himself out.  As much as I wanted to gloat, and tell him “I told you so” I did not.  It would have been unprofessional and uncalled for, besides Jim was smart enough to know it anyway.

The conversation that followed Jim’s outburst was very productive.  Jim and Gail REALLY wanted that other house so they agreed to drop the list price of their house to $320,000.  I called the other agent back and told her what Jim and Gail had done.  She told me that as soon as the price change had reflected in the MLS she would advise her clients to accept the offer.

Within the next 10 days my client’s home showed six times; resulting in one full price offer that was accepted and ratified.  Jim and Gail opening up to correctly pricing their home resulted in their home selling for full price and them getting the home they wanted.

The important thing to keep in mind is that just because you, someone who has a huge amount of time, energy, money and yes, love, invested into your home, and believe it is worth a certain amount, buyers are not likely to see it the same way.  Agents are not likely to either. 

Agents screen homes for their buyers.  If the home does not meet specific criteria then it will now show up in a search.  Jim and Gail’s home list price was so far beyond similar homes that it never showed up any searches.  If it doesn’t show up in a search, agents are not going to be able to show it.

Even if it shows on search results, the price alone would prohibit most agents from suggesting it to their buyers.  Why is that?  There are several reasons for this, some are that the buyer would not be approved for that amount or would not want to spend that much, the appraisal would not come in so it wouldn’t close, or the sellers would be offended when a low-ball offer was made.

There are a lot of emotions that both buyers and sellers have.  One of the huge benefits that agents bring to the table is objectivity.  Keeping clients grounded is a key ability any real estate agent must have.

While I always keep my client’s wishes and emotions in mind when listing their home, I am committed to getting the best deal for them in any given circumstance. 

* Not actual numbers: round numbers are easier to illustrate the point.