Are you Nuts? (Pricing Your Property & other huge mistakes Sellers might just make)

Last summer I gave a pretty typical number of listing presentations and was passed over a pretty typical number of times along the way for other real estate offices. I listed some, I didn’t list others. This happens. Its part of the business. If I were planning to sell my home (and I didn’t do this for a living) I would certainly want several different opinions about the value of my home. Afterall, I am not selling a used car. Or a coffee maker.

There are many things that factor into the value of a home and as a seller you owe it to yourself to listen and make the best decision for you and your family. However, be careful. There is ALWAYS someone willing to make you a pitch, and the best advice I can give a prospective seller is to listen, not talk during a listing presentation. You may just find out what your house is worth rather than find out that the Realtor you are about to hire will list it for just about any price that seems to make you happy. And if you just want someone to list it for the price that makes you happy, you might as well list it for sale on your own, because you have already tainted the two most important aspects of hiring a professional broker to sell your home; The Market Evaluation &  the brokers extensive knowledge in a complicated industry.

Be weary of Realtors who ask you what you want for your house.

Be weary of Realtors who ask you what you want for your house.

Despite the complexity of the market, and the vast difference between a median $300,000 home and a $1,000,000 luxury home, there are some standards in the real estate business and they are the things that professionals are supposed to understand. The closer to the Median your home is, the easier it is to establish an asking price, but it is also the most challenging price range because it is the most cluttered with comparable properties. The further from the Median, the more complex, and more subjective the evaluation becomes because there are fewer and fewer comparable properties. The buyers in this range are also more discerning. However, comparable sales are what establish the value of your home on the open market, and they must be carefully scrutinized when listing your home for sale. The market we work in is constantly fluctuating and changing course. We assess value based on the most recent and reasonable comparables – that is, the properties most like your home that have sold in the past 6 months. This is a data-driven industry and there is most likely data that supports a reasonable asking price from your home. The numbers rarely lie.

Be weary of Realtors who ask you what you want for your house.

By and large, buyers are more educated than sellers. This is not a hard and fast rule, but the person who is making a significant investment generally does their homework, whereas someone who has watched their investment grow over the years and is thinking towards retirement generally wants to get the greatest return on that investment.  So if that seller turns to their prospective Realtor and says “I’d really like to get $400,000 for my house” frequently the Realtor has an easy time agreeing. You’ve done all their work for them. Giving good news is the easy part, and it can be addictive when you are in the profession of selling and buying homes. Keeping people happy is fun.

While it can be overwhelming, especially if you live in an active market, you should want your Realtor to provide you with some comparative sales data. This is how the bank will assess your home for the prospective buyer, it might not be a bad way to start the process. When people go out on their own and say they don’t want to pay real estate fees, they are frequently missing the point. This is one of the great benefits you get from hiring a professional – someone who does this for a living and actually knows what your house is worth. Compared to others that have sold. That’s why they call them comparables.

Don’t be offended by Realtors that don’t tell you what you want to hear.

This might be your guy. The greatest compliment I ever got was from a gentleman I met standing at the bus stop waiting for our children to get home from school. (It’s rural Vermont. We get in the car and drive to pick up our kids from the bus that they take home from school). Anyway, he was new in town, and this was a few weeks after school had started. Little did we know that our daughters were already friends. I introduced myself and he said “Oh, you’re that no-nonsense Realtor”. Thats right. I dont mess around in the fantasy of my prospective sellers. I care a great deal about the profession I make my living in, and even more about the clients I work for. And because of all those things, I tell them my opinion of the value of their home, and if they disagree I invite them to call another Realtor. I even bring along a few phone numbers. I know that there is at least a 50% chance I will never hear from them again. I also know that there is an equal chance that the property will be listed on Wednesday with another Realtor for the price that they wanted me to list it for. I’m OK with this professionally. Marketing properties is difficult, and even if a seller tells me that they are ok with it sitting out there over-priced for a little while, I have only a small window of opportunity to sell that house before it grows stale and gets over-looked by new buyers. At the end of the Listing Contract most sellers only remember that I didn’t sell their house, not that I told them I felt we were listing it above market value in a crowded price-range with properties that were better.

Professional vs. Philosophy.

One of the benefits of owning my own business is that I can freely express my opinion about the business I chose to work in, and the only one I need answer to regarding that opinion is myself. And write on the subject I do. I stated above that I was OK professionally with someone not hiring me because I would not over-price their property. I meant that. I believe what I believe. However, I am NOT OK with the philosophical approach that many in my profession take regarding one of the most important tasks that they are hired to perform; to properly price and sell homes. One of the 6 fundamental obligations that real estate professionals have is to take reasonable care to get their client the best price. In some cases this means getting them more than their house was worth. However, the industry has changed. For the better, I believe.  People are generally not over-paying for homes. In fact, the slow nature of the housing recovery is evidence enough that people are returning to the market in an historically cautious manner as compared with their behavior a decade ago. This means that the days where people over-paid for an investment that would theoretically always be worth more are over. Hiring a professional to tell you what your house is WORTH is essential in making an educated decision about whether this is the time to sell or if this is the price to sell it for. When the real estate professional tells you what you want to hear, the honeymoon ends fast, and frequently with a loud thud. I believe that it is bad for the industry to test market properties at prices that skew data that is valuable to understanding the market we work in. It is bad for the housing recovery because it slows the pace of sales and restricts access to comparable data critical to pricing homes and lending money. It’s bad for the economy because we balance on the debt that investors have hedged on the value of our homes. But most important, it’s bad for the consumer in the marketplace; the buyers who either overpay or remain on the sideline when value is scarce and the sellers who can not find buyers in a recovering market because they made the simple mistake of trusting the broker they hired to sell their home.

The Great Recession was a do-over for the real estate industry. Ordinary Americans lost trillions of dollars in personal wealth due in large part to the simple practice of speculating on the future value of their homes. As professionals in this industry we owe it to those we work with and for to get real and assess property values responsibly, instead of participating in what could broadly be described as a fraud of the very people who participate in the industry we make a living in. The greatest adjustment in the past 70 years occurred over a 5-year stretch from 2006-2011. The professionals in the real estate industry made a killing during the boom. So did the bond traders who packaged and sold terrible securities that were based on the fictitious values of homes that were, in many cases, already tumbling in value. Real Estate professionals are eager and highly motivated to start the next big wave, but take caution. Waves always come crashing down.