Yesteday I received an emailed flyer with this subject line:
“PRICE REDUCED 450K MUST SELL”
While that was a 26% price reduction, looks like someone had bought it for the higher price but that sale was cancelled and the property is back on market at 26% less. What can you say besides thank God that sale didn’t go through?
The day before yesterday, on Saturday, I was showing 6 properties. Virtually all of the properties I chose to show were overpriced by $100,000 to $150,000. 4 of 6 were also $100,000 or more higher than my buyer client’s price range. But I showed them because I am pretty sure most if not all of them will sell for less than my buyer client’s cap price.
Just 7 or so houses from the first property we looked at there is a house priced at twice as much that has been reduced by $350,000 since the first of the year, and another nearby just reduced by $150,000.
Technically speaking there are 75 properties on market in my client’s price range in the area where he wants to live. Only 6 properties were worth showing, and 4 of those were priced over the price range, but believed by me to be in his price range as to what it will sell for and what it is consequently “worth” vs. what the sellers are asking. Two were for sure…too were iffy.
Client’s often ask if what a Buyer’s Agent does is “negotiate”. NO! It does you no good to get $100,000 off of a property that is going to sell at $400,000 less. In that same price range from my Saturday and Sunday experiences, all homes sold in the last six months sold at 98.9% of ASKING price. Relying on a buyer’s agent is NOT about getting a house at 98.9% of asking price, or even at 90% of asking price. It’s about knowing that 73 of the 75 properties on market are overpriced and by how much.
Do NOT pay anyone 3% of the sales price to open the door. If all you need is someone to open the door, hire an agent with a license and a keybox and duct tape on their mouth and pay them by the hour, and do not listen to their advices as to “how to negotiate a great deal”.
If an agent can’t tell you what the house is worth, but instead promises to be “a great negotiator”…run away as fast as you can.
I sooo agree with Ardell. It’s even worse when you’re showing houses that are at least $75,000 overpriced and you’re only showing houses listed between $425,000 – $525,000.
Although an overpriced property could be a sign of a dropping market, overpriced does not always mean the market has or is falling. It often means, that for whatever reason, the listing agent has decided it is acceptable to spend time working on a project that shows no evidence of being worthy to spend time on … unless said agent has knowlege that seller does need to sell, and might need ‘time on the market’ to see real proof that their property isn’t going to cut the mustard at the sellers choice of price, and eventually will listen to listing agents advice.
Lots of agents don’t realize when they run the solds data, that the percentage of sales price from list price is only the percentage of sales price from the last list price, not the original list price. Look at that, plus Days on Market to get a true feel of where comps show the market has been.
Sunday I showed 11 properties. 4 of them were fairly priced, within striking distance. One of the 4 will probably be sold by the end of this week, it’s a great place, just doesn’t fit my clients enough. The other 7? Overpriced. A lot.
ok, the key between my e and t keypads won’t click all of a sudden, what do I do, except pound it? took it off, cleaned it, nothing. aaaccck.
Ardell, good point. I touched on a bit of this today on my blog, then just a few minutes ago, noticed this post. I am going to go back and add a link to this post. Thanks.
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Oooo… a deceptive title and first 80% of text. Let’s just hope people read all the way to the bottom. How ironic that I just had that conversation with my clients. We are in a negotiation with a demonstrably fair offer and will walk away to the next one if the Sellers don’t take it. If that isn’t true representation I don’t know what is.
Will,
I always say it’s not about the seller and a buyer. It’s about a buyer and another buyer. So I wouldn’t just “walk away to the next one” as it is still open and for sale until another buyer is willing to pay more. An offer that doesn’t look so good today may look a lot better later after no one else offers more.
Nothing worse than buying a different one instead only to find that the one they really wanted ended up selling at their offer price. Best to wait it out unless there is some sense of urgency to act fast.
Most of my buyer clients can wait quite a while if the right thing is not available at the right price right now.
Isn’t part of negotiating knowing the market well enough to negotiate correctly? The buyer agent is still helping with negotiating, not just to show any reduction, but to negotiate according to the marker reality.
So, part of the buyer agent’s job IS to neogtiate.
This is somewhat of a strawman argument.
Ardell,
“An offer that doesn’t look so good today may look a lot better later after no one else offers more.” (your response to Will’s comment)
Time and time again I’ve had this discussion with my Sellers over the years (mostly Developers building on spec); and these days more than ever, it seems.
A big part of the job is understanding the seller, and you can’t determine that just walking through the property. It requires some investigation.
Stated differently, it doesn’t matter what the property is worth, what matters is what you can get it for. So if you have two properties that seem fairly priced (or are overpriced by the same amount), you can do better by understanding the sellers’ situations. How much do they owe? How long have they lived there? How much did they pay? Are they in default? How long have they been on the market?
Oh, and I’ve said this before: Prior to mutual acceptance, time limits are not important unless you’re going to accept the (counter)-offer, or you know there’s a competing buyer out there. Silence can be golden.
The simple key is finding a motivated seller. With equity of course!
I want to add to that. There are homes that are priced properly, and will sell at or above list price. That’s just part of the market. If it makes you feel better to bag a bargain, you’re not going to buy one of those homes.
Kary said: “Stated differently, it doesn’t matter what the property is worth, what matters is what you can get it for.”
Of course Mike is correct that part of what we do is negotiate. It is just not the be all end all nor even necessarily at the top of the list of what we do.
There’s always another “it” Kary. What the buyer can get “it” for can be way too much and time to go home and wait for the right “it” at the right price.
As to “silence is golden”, I learned it as “He who talks first loses.”
Good Morning Geno!
How much someone likes a given house plays a huge role in strategy. We may be heading toward the days when a buyer can actually find three houses that they like equally. We in the Seattle Area are not there yet for the most part. Down South and in Issaquah yes, but most of Seattle and close to Microsoft, not so much.
There’s a lot more of what no one wants than there are three of what everyone wants.
The top of the list of what we do is advise. That’s why it’s critical for consumers to choose their agents well.
Leanne,
I don’t think the top of the list is “to advise” as much as it is helping them think things through to their own best conclusion. It’s more “what would I do if I were you” than “what would I do”.
I agree with you. I see homes all the time that are significantly priced out of the range of what pervious comps have sold for recently. I can never figure out how a listing can be marketed “motivated sellers” but the listing is 80K over priced.
However where I do have a beef with you is that a buyer should walk away from an agent who says they are a good negotiator. I am a good negotiator & I often tell my clients that. But I am also very good at knowing the correct value of a listing. And I wish that were stated more clearly in your blog since buyers read so much on the web & always consider what they read to be the absolute truth.
great advice you posted, i never knew about the 98.9 percentage thing..
While I think it’s essential to have a good idea of what a property is actually worth, almost always – it’s worth more to the eventual buyer than to anyone else.
New York mayor Michael Bloomberg, who is Rich, paid $41M for a townhouse that “observers” thought was worth, oh, $35M or so. Except that Hizzoner owns the townhouse right next door.
It’s always the client’s goals that matter, and we have to help them when we get to the fork in the road (The seller won’t come down any farther): do you want to buy the house or keep your money?
Jenn,
My point regarding “negotiating” is that hiring someone to negotiate who has not seen the house, or who does not know much about valuing a property, is not a good substitute. In my experience those that pride themselves on their negotiating skills and who talk about negotiating A LOT, are weak on valuation and property selection skills. There are always many more houses on market that are overpriced than that are priced well. So negotiating off asking price is not a top consideration.
I didn’t say “walk away from a good negotiator”. I said, “If an agent can’t tell you what the house is worth, but instead promises to be “a great negotiator
Ardell, are you talking about something like the Redfin model where an agent negotiates without seeing the property. Do they really do that? They negotiate without looking at the property? I’ve heard they are at arms length, sort of, but are there agents who negotiate without looking at the house or comparables?
Heck yes, run away, indeed!
Ismail,
Many overpriced sellers will say “well let them make an offer”. But the truth is that most homes sell when the asking price gets into the right ballpark at least.
There are a few agents, just a handful, who always overprice their listings for two reasons:
1) So that the buyer buys from them direct, as they are the only one who knows what the seller will sell for, which is much less than the asking price. They keep the asking price artificially high to increase the chances that they will get all of at least some of the buyer agent fee in addition to the listing fee. Agents who do this as the norm often list at very low commission on the listing side and play the odds of getting both sides of the comission as other agents walk away from the over priced listing. You see this less and less, but for many years it was the normal strategy for some very key players.
2) To maintain their ad space and get more exposure and lead calls. Agents who keep very large ad space in expensive monthly or bi-weekly publications do better when they have lots of inventory and lots of pretty home pictures to advertise. They may not sell that particular house, but they may sell 6 other houses from the ad calls. If all of their listings sold quickly, they would have nothing to advertise themselves with.
The hard part about stale inventory is trying to figure out if the house is on market a long time due to price considerations…or something else. I love when you ask a listing agent why a property has been on the market for a long time. Someone should print a joke book on all the answers you get. I love it even more when a new agent tells me why a house has been on market for a long time, and when you ask them how they know that, they say “the listing agent told me”. Always good for a chuckle.
Mack said” “it’s worth more to the eventual buyer than to anyone else.”
Actually my experience says it is worth the most to the neighbors. Ever have an Open House where everyone LOVES the house and hopes you get that price for it? It’s always the neighbors who love it most and hope it sells high.
Mike,
No, I’m talking to Craig 🙂 He challenged me to a “death match”. We’re doing point/counter-point.
Mike,
Redfin is an ONLINE buying service. It’s where you go when you want to pick your house by yourself. It’s a great tool for many buyers who do not want someone telling them what to buy and what not to buy or how much they should pay for a house. It’s a powerful tool for those who can value property on their own. There is an option to see property at a modest cost over and above the commission structure.
If you don’t need the answer to “but SHOULD I buy it at all, and if so on what basis?”, it’s a fabulous consumer option.
Yes, I know, but they must know something about the market and the house before they negotiate, right?
No? Then I’m disappointed even more in their service model.
So the buyer has to come up with the value of a property, then Redfin negotiates? Or does redfin not negotiate at all?
I obviously have a misconception of what they do. I thought they determined value and then helped with negotiation. I knew they were an online brokerage, but i thought their services extended to determining value and negotiating.
Excuse me for saying so Mike, but I think you want to be disappointed in their service model. But then I think most agents want to be disappointed in their service model.
When you buy a book online, do you expect that service to say “I read these five and this one is the best and here’s why”? Do you get that when you go to a bookstore? Will you pay more for a book at a bookstore that does have someone to tell you that?
It’s an online service, like buying a plane ticket without a travel agent. You tell them what you want. They get it for you at the best price they can. Most buyers are capable of saying no to a counter offer and many agents won’t tell a buyer what they should offer or if they should buy it.
As more than one of my clients has said, if you can’t find an agent whose opinion you trust or one who will give you an opinion of value, you might as well… Many, many agents will not do more than hand a buyer “the comps”. Redfin can give you comps and 2/3rds of the commission.
I have no reason to “want” to be disappointed. I like new ideas and innovation, so your assumption is offbase and a little offensive.
What I was disappointed about is if in fact they negotiate without knowing anything the house the market value.
My other disappointment is that they haven’t created a service model that is profitable. I’d like to see them succeed and take full advantage of their technology experise.
Try not to categorize me with “other agents” – I’d really appreciate that.
Ardell’s point about many agents not actually giving you advice, but simply handing (or emailing) you the comparables with no discussion from the agent as to the agents opinions … that’s not what you should be getting. An agent has a bigger duty than that, unless you have some written agreement with them otherwise!
There are some buyers who really prefer not to have an agent offer advice and opions, they seem to just want an agent to handle the paperwork. As long as the agent and that buyer have a clear undestanding of what the agent duties are, and the cost for same, that’s not a problem. Could be tho, that not all buyers are sophisticated in their market knowlege to risk going this route.
You make a 1% mistake on a $350,000 condo … that’s a lot of moola. Make a 10% mistake, wow, that’s some big big moola.
And, my version of mistake is more often that someone buys the wrong property – gets a good deal maybe, but still, chooses wrong.
Let’s say you’ve got 2 condos to choose from in the same building. One you can get for 20% below asking price, but it is a dark, ground floor unit, and looks out at some landscaping rocks that are all wet and mossy. The other is the top floor unit in the back, and is sunny and bright. Both are the same floorplan, both are the same price. You can afford either. I’d still say you buy the top floor bright one, not the cheaper dark and gloomy one. Buyers, do you agree?
Leanne –
Of course you think that way, its not your money you are spending! The question is, does the buyer think that “brightness” is worth $70k * interest? When you put it in those terms it makes it much easier to quantify for the buyer just how much such features are necessary.
Mike,
I don’t take too kindly to anyone speaking poorly about Redfin. Never have. Just how it is.
Oh, excuse me. I didn’t think I was speaking poorly of them.
(hmmm, I think I’ll sneak on out)
Bili, it’s a point geared for reselling that unit. If the buyer buys the wrong one, even by saving $70,000, it will be sheer hell to sell in the future. I always tell my buyer clients to assume you are selling in a slow market, and think about the flaws of a place. In a slow market, there likely will be more units in that same complex that are better than the worst dark one.
Something that seems like a savings can come back to bite you later.
Dark is a major, major flaw in our PacNW.
In my experience, ground floor condos are the most difficult to sell because they often are dark, and cold feeling. You also have an upstairs neighbor. A top floor unit often has a vaulted ceiling, and no neighbors upstairs, so it is brighter, quieter, and w/vaulted ceilings, feels larger.
That ground floor unit better always be a lot cheaper than the top floor unit. Used to be each level up, the price went up $10,000 for the same unit. I’d have to look at some complexes again and figure out if that rule of thumb has changed much :-).
Leanne,
Ground floor and top floors are usually preferable to the 2nd floor, as long as the ground floor unit is all above ground and not partially underground.
Ground floor often has an expansive ground area for extra patio usage preferred by people with a dog. Ground floor is also good for people who have trouble climbing stairs.
Top floor is best for people who don’t care about climbing stairs and generally the most preferred of the the three levels. In some complexes the ground and 2nd floor has flat ceilings and the top floor has high vaulted ceilings and palladium windows. Then top floor is hugely most popular. Views even better, even if they are territorial.
2nd floor is the least desirable. Someone on top of you and someone below you and no exit out to the grounds for poochie, no vaulted ceilings…The 2nd floor sandwiched units are often the last to sell in “garden apartment” style three story complexes.
Any UNDERground unit is the least desirable, even if only partially underground.
Leanne,
Good advice, to think about selling later when you are buying now. Buyers today are sellers tomorrow. Now is the time to buy the best property that fits your needs as a homeowner, at the same time as ensuring it will be a good sale later. If you save money now, make sure you don’t put yourself in a position of losing later. Buyers can be really choosy, take their time, and expect more right now. So make good choices. Pick a home that works for you, but is also a good investment.
Cheaper is not always better. There’s usually a reason for it. Sometimes it will because the seller is highly motivated to sell (relocation, divorce, but you may not know this information) and you, the buyer, will luck out. Other times a lower price is the result of an issue with the home. Find out what you can about the value of your home. Solicit the advice of your agent who should know the area. At the end of the day, make sure you are comfortable with your choice.
The job of a good agent is to point out the pros and cons of a home, so a buyer will make a good decision. I can’t tell you how many times over the years I’ve gone on a listing appointment and noticed a real issue with a house that will impact its asking price and the sellers never had a clue. The sellers never had a discussion about this issue when they bought the house. ( road noise, steep driveway, dark home, etc)
Maybe the best home you see when home shopping backs to a highway. If its the best home, then you should love the house, in spite of the road noise. The home should be priced accordingly, so it’s the best value out there. Just remember, when you sell this home in the future, the road noise will be a consideration. If you paid less because there were mitigating factors that affected the value of the home, like noise, then you will need to ask less when you go to sell.
Ardell,
You are right about condos. Particularly with people as they are aging and cannot do stairs. You are right that some buyers want the bigger patio or a place for a dog. We all have had clients like that.
If the bottom floor is the preferred floor, then the unit should still be light and bright, both for liveability and resale value.
Debra said: “Maybe the best home you see when home shopping backs to a highway. If its the best home, then you should love the house, in spite of the road noise.”
I don’t know about that one, Debra. If the inventory keeps growing with fewer and fewer buyers, homes with considerable negatives will get harder and harder to sell. Especially traffic issues, road noise, too close to freeway.
If only half of the homes listed sell, better to go for the better location. I always feel so sorry for people who are trying to sell a house with considerable negative influences. It’s often a heartbreaking experience. People make appointments and then don’t come in. A very frustrating experience for homeowners, most times.
One good reason to buy one might be it is the cheapest home in a certain school district and you want your children to go to the best schools. There are reasons to buy that house, but “loving it” is not usually one of them. Love something else.
Falling in love with a house and making a good investment choice are rarely terms that go in the same sentence. Best decisions are usually made without so much emotional interference.
Ardell,
I agree with you. That was my point. Here is what I said in the first paragraph of my last comment:
Buyers today are the sellers of tomorrow. Now is the time to buy the best property that fits your needs as a homeowner, at the same time as ensuring it will be a good sale later. If you save money now, make sure you don’t put yourself in a position of losing later. Buyers can be really choosy, take their time, and expect more right now. So make good choices. Pick a home that works for you, but is also a good investment.
I think buyers better know what they are getting into when making a purchase so they don’t get stuck with a tough sell later. Buyers should pick the house that works for them, but is also a good sale later. However, if the buyer has to buy that house on a road, if we, as their agents, explain the pros and cons of the purchase now and later as a sale, and they still want to buy that house, then they should. Our job is to make sure the buyer knows all the issues and can make an educated decision.
Years ago I had good friend wanting a home is West Seattle that was a great house, but right across the road from a major slide area. The area had slid during the previous year. We did all the research about the slide area. I told them not to buy the house because they could be living at the bottom of the hill someday soon. Regardless, just the fact that the slide area was so close would be a huge issue for the next buyer: translation-good luck trying to sell it later! At any rate, they still wanted to buy after I told them not to do so. I even talked with an attorney friend about my concerns. His comment was, if I had exercised due diligence, told them what I thought, directed them to the appropriate people to get all the best information about the area, and they still wanted to buy, then get out of their way. So that I did, we wrote up the offer, and they ultimately walked away on the building inspection. I was thrilled. I sold them a much better house a couple of weeks later. A house with none of these negative issues.
This is the time to buy the best house out there with the least possible issues, but if a buyer wants a home and knows what the negatives are and still wants to buy, then we’ve done our job and need to do what they want us to do and get out of their way.
Debra, your comment about meeting with prospective sellers who were unaware of a “real issue with a house that will impact its asking price and the sellers never had a clue. The sellers never had a discussion about this issue when they bought the house. ( road noise, steep driveway, dark home, etc)” is so true!
It’s really no fun to go meet with a seller for the first time, get to the property and immediately “see the problem”, and know that it’s a biggie. An unaware seller can be very problematic, so you have to be a good diplomat, and address the issue during your price evaluation.
No seeing “the problem” is one of the risks a buyer faces when choosing a home alone.
And yes, Ardell, dark in a hole is one of the worst places to live, and a horror to sell … :-). Years ago I had an ‘underground’ 1-bedroom condo over by Lake Samm, and literally, it was December in there 365 dark days a year … it took months to sell, and I swear the only reason the guy bought it was to get rights to the condos’ boat moorage on the lake. What a relief to get that one done!
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LOL Leanne, yes, I know the place. The front view units can be awesome.
I’m sure there are at least a few readers who are not believing that people not only didn’t see things when they bought the house, but also didn’t see them while they lived there.
I don’t think it is that they didn’t see them. I think it is more like what I said in my April Fool’s post. They won’t ever say it out loud. they may not even say it to themselves. They have chosen for whatever reason to overlook those things and believe others will as well IF they put their head in the sand and act like they don’t exist.
That’s why I say if I can’t get a seller to list their 5 strong points AND their five weak points…we’re in it for the long haul.
It’s a bit ludicrous to suggest an owner never noticed that they live in a traffic noise zone. Of course they know it. They just can’t bring themselves to say it.
I’ve even heard many turn it into a positive and put it on the plus side of the list 🙂
Jim Reppond, up in trackback/comment #39 has taken issue with my downplaying the role of negotiating.
First of all, many buyers and sellers negotiate very well on their own. Agents that go to negotiating too quickly, and who laud their abilities in that regard, are often too much about “how do you get it?” and not enough about “should you want it and is it in negotiation range?”.
Many a buyer who had an agent who negotiated really, really well, bought the wrong house for too much money in the end.
🙂 good points Ardell about them not wanting to admit certain flaws – but honestly, some things we see as flaws, they don’t realize at all – like being right next door to 7-11, the woman who lived there had owned that house for 45 years, so naturally, she just didn’t see that or AURORA as a flaw :-)!
And agreed,many buyers still buy the wrong house even with an agent. It’s why you’ve got to be sure to pick a good agent.
There are many, many things that I see that my clients do not. But they are not usually as big as a 7-11 or a busy road 🙂
My initial reaction to Ardell’s point on agent negotiation was negative, but the more I think about it, the more I think I agree.
I really don’t think agents should negotiate. They should assist in the negotiations, but not control the negotiations.
The example I used to give in my attorney days, when discussing settlement with a client, was the horse track. Some people betting are more risk adverse than others, and thus bet on the favorite. Some bet on the long-shot. You don’t know which is right until the race is run.
The same is true in negotiations. Some will take a hard line. Some will cave in easily. You don’t know which will work out better until you try, but unlike the horse race, you don’t typically have multiple people taking multiple routes simultaneously. Taking the hard line stance may work, but it may blow up on you. Caving in will work (obviously), but you won’t know if that was the best result.
Ultimately it’s the client that makes the decision, because they’re the ones that have to live with it. The agent can assist them in making the offer, but if they want to offer more or less than the agent suggests, that’s their choice.
Telling someone the pros and cons of a property is more important than helping them negotiate that last $5,000. I’d rather give them that last $5,000 then see them lose the house they really want over it. I’ve seen someone lose a property over $2,000 only to buy a worse one much later for $30,000 more because the market went up.
Yes Kary, THEY live with the consequences. And given I often don’t charge as much as other agents, I think they can use that difference to get the house they want, instead of fighting over the last dime, since it’s often my dime and not theirs 🙂
Kary, we advise, the client decides. And, while I’d say we lead the way in recommending negotiation strategies and suggestions, the client always has to give acknowlegement and ag.eement by signing the documents.
And Ardell, we work hard, long hours, and our advice makes a huge difference in our clients lives. I believe that and know you do too. Giving up something to make a pefect place wo.k can be a pleasu.e. Damn . !!! off & on again!
By the way, my lady by the 7-11 bought 45 YEARS AGO!!! She wasn’t my client then & 7-11 wasn’t there either :-)! You made me laugh!
my . key (the one between the e and the t) sometimes won’t wo.k fo. those of you confused by my last post. So..y.
Translation “my r key” 🙂
So now I’m using my old sticky keyboard, since the new one lasted less than a month. arrrrrrrrrrgghhhh!
… My Lady By The 7-11 … sounds like the name of a church! 🙂
I am intrigued by all of the people in the comments arguing what an agents job is. I personally enjoyed the article. As an agent, I agree that if all I am is a negotiator then all I need is a key, and the ability to act tough.
People need us because we hopefully know the market better than they do. This is where the money saving is.
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