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Sellers: Pricing Your Home to SELL...

Are your real estate agents providing you with the information that you need to hear, or aren't you listening to them?

Two months ago, a young fellow gave me a call about the price of a home that had recently disappeared off the MLS® System market. He thought that I was the agent that had listed it for sale since he had "googled the address" and, as usual, my website was the one that had always come up first in the ranking. [It's a common mistake, but it is really hard to understand why people make it. The MLS® System is where we share each other's listings and have permission to market them throught IDX websites provided we disclose who the listing brokerage is and we don't modify ANY of their data. (It's called a reciprocity agreement). Every MLS® home listing for sale should show up on every agent's websites since it is extremely rare that we would ever bring a buyer to one of our own listings. But, that's another topic.]
Anyway, back to this story...
This fellow wants to know how much the home sold for. Well, I had to explain to him that the home actually didn't get sold; the listing had been terminated early (on February 14th) by the seller and the listing would actually expire in a few weeks. I explained to him that the home was listed for sale for $384,900 but that price "looked quite a bit high to me." He offered, he thought so too. His house was only a few doors down in the same condo complex and was much nicer. His home was finished much nicer and he was just finishing a bathroom reno before he wanted to list his home for sale too. So of course I asked, "So Mr. Seller, what do you think your home should sell for in today's market?" His answer, "Well, it's worth at least $360,000." I thought to myself, "Hmmm. I wonder if there is a possibility to list this fellows home for sale." Then he says, "If you have a buyer, bring them on by. And I'll call you back when it's time to officially list it for sale."
Here are the stats that I had for the complex:
That is absolutely all the activity on the complex. Expired listings and Active Listings. Not a single one has sold on the resale market. For a point of reference, all these units are almost identical in size, all 4-level splits (meaning there are lots of small sets of stairs), two bedrooms, some have a single garage and some have a double garage, but the living space above grade remains the same. (The homes with the single garage have instead of a second parking spot, either a vacant basement space or some have finished it with a basement den or possibly a below grade bedroom if the window is big enough.) Some have been upgraded with new paint and newer carpets. Because of the age of the building, they wouldn't need anything more. Some have also changed the kitchen cabinets and replaced the kitchen countertops with granite. Some have added hardwood flooring. All really cosmetic stuff. It could fetch a premium of what, $5,000?
I provided this fellow with all the comparable listings on the telephone. I suggested that I come over and see his house to help him figure out a price. I offered to tour him through all the currently active listings for sale so we could price his with "pin-point-pricing™." I called him a week later. Nothing. I sent him another update with all the comparables by mail. I included in our package details about our standard "premium" marketing program. Still nothing. I guess he just didn't want the listen to what I had to say.
Or, he didn't want to list his home for sale anymore. Okay, that happens all the time.
So the most recent expired listing at the time of our discussion was listed for sale at $325,000 and had been on the market 260 days. Another home had been on the market at that same price of  $325,000 but had only been on the market for 167 days. So clearly, $325,000 was too much to ask at about this time last year.
So then to the Active listings: Currently they are priced from $349,900 to as low as $315,000 (80 days on the market), with most being priced in the mid-$330,000s (80 - 90 days on the market) and they are with double garages (which always commands a premium in condos).
Then, another one of the listings (priced at $349,900) expires on April 16th after having been on the market for 75 days. Clearly, $340,000 to $350,000 is still too high.
So based on all the numbers available, what would you suggest for an initial asking price?
Take a stab at it... Seriously.
Based on all the market data and experience, I'd suggest that if he wanted to SELL his home, he should price it at precisely $335,000 ($325,000 plus a little due to the finished basement and park exposure) to get the most exposure, the most activity, and the most likelihood of a sale. (It's also based on his claims his home is much better than the others, but I had yet to see it.) He may even get it sold in less than a few weeks at - or really close to - that asking price.
To be transparent, his listing is the one that was 14-days old when I printed off this report, yesterday. I thought, I really should do a blog post on this... He had listed it for sale with another agent at $349,900. Wow! I'm okay with him listing his home for sale with another agent. But, I thought that was way too high to sell, but I was willing to be wrong.
Two weeks have passed since he listed his home for sale. The real estate market stays unusually busy for May (a really late, spring market - based on experience.) The disastrously slow condo market has picked up just a little steam, but it's FAR from hot. And, 2-bedroom townhouses are a really tough sell especially with lots of sets of stairs and only one garage (and no driveway to park a second vehicle on).
Then, just today another almost identical home comes on the market -- priced at $349,900 (double garage). I say to myself, "What are these folks smoking? Why aren't they listening to their agents?" I can show buyers far superior homes in their same community for prices comparable to what they are asking.
But then again, maybe they are listening to their agents, and have been given bad advice. (That's called "buying the listing." i.e. suggesting a high list price just so the agent gets the listing. Then the agent beats them down in price as weeks go on. Yep, I think it's unethical.)
Does pricing it this high hurt? It does if he wants to sell it.
Experience tells me that buyers won't offer $30,000 to $40,000 below asking price for houses in this price range in hopes of negotiating down to market value. Sure, they're interested, but they just don't make the offer. I can usually get my buyers to make an offer, but other may not be able to. I always say to my buyers that if they are interested in a home, "Nothing ventured, nothing gained." It really doesn't matter what the seller is asking for a house, a home should only every sell for market value (or an uneducated buyer comes along and is duped into making an overly generous offer). For my buyers, either they can get the home for market value, or they can walk away from an unwise counter offer. That's my role as a buyer's agent: Help them buy a home, but don't let them be stupid on price.
Now they could be gambling on the market becoming really hot and people paying stupid prices for homes again, but there aren't any economists suggesting that that I know of. (Sure there are some seller's agents... but they're only selling themselves, and not likely their clients' best interests.)
I guess we'll see in a few weeks (or months) if I was wrong. Remember, TIME IS MONEY and if it hasn't sold in 3-weeks in an active market, it is seriously overpriced (or it's really poorly represented in the MLS® System that people just flip right by it.)
Any thoughts?

Update August 4: On July 10th, the listing for the home in question was terminated early after 71 days on the market (without a price adjustment of any sort). The sales in the complex since this blog post were $305,000 in mid-June, $340,000 in mid-July (vacant and immediate occupancy) and $341,000 for a home with a double garage. Currently three comparable homes are on the market priced at $349,900 (for a home with about 100 sq. ft. more space), $334,900 (for a double garage home) and one that just got listed this morning at $339,000 in a somewhat more active market for condo townhomes. Based on all this, may have been my suggested price was still too high but today (60 days later) he could be right in the money (had he left it on the market).
Data is supplied by Pillar 9™ MLS® System. Pillar 9™ is the owner of the copyright in its MLS®System. Data is deemed reliable but is not guaranteed accurate by Pillar 9™.
The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.