I had an newer agent call me the other day, a bit consternated about how to evaluate a property for which his client had requested a CMA. Sometimes — often — it is hard to evaluate certain properties in this changed/changing market; it can help to get other opinions.
The conversation went something like this:
Agent: “I have a client who is selling the townhouse I sold him last year.”
Me: “Okay. Did you find any any good comparable sales?”
Agent: “Oh yes, there’s an identical unit that just sold in the same complex for the same price my client paid and another one that is on the market for a few thousand dollars more.”
Me: “Well that helps. What does that tell you about what your subject property is worth?”
Agent: “It seems like it’s worth what he paid for the place, maybe a little less. So should I just add the other closing costs to what he paid and list it for that price? I’d hate for him to take a loss!”
I know, this seems silly when you read it from the sidelines. Of course, we have to be honest and direct with our sellers, especially in this market. Sometimes it’s brutal honesty that clients appreciate the most, and it hurts a lot less than trying do something that can’t be done — like sell this townhome for 10% more what it sold for last year. So the answer is, price the unit at what the market will bear — which is what the direct comp unit just sold for, or more advisedly, for maybe a few points less.
For years we’ve been the bearers of great news: “Guess what? I sold you this little Wallingford bungalow in ’93 for $161,000, and now it’s worth $650,000!” Sure it was worth maybe $735,000 last May, but still, it sounds pretty good telling your client they have this nearly $500k windfall. And since ’91, our conversations with sellers have been something similar to that. But now, times have changed. This isn’t news to any of RCG’s readers, but it’s really important for agents, for professionals, to deliver the goods: Clear, honest, and yes, sometimes brutal, information to our clients.
Gordon, I get to do the same from the mortgage side of things. People wanting to refi when they did stated income or NIV and they’re stuck with their current mortgage (which some have not been bad to be stuck w/ however…some borrowers get refi-fever in markets like this).
I’ve also come across home owners who feel their home is worth way more than what their neighbors has sold for…yes, but we need those solds for comps.
Any “professional” who tries to “sell the goods” by not being straight forward and honest is going to get caught with their pants down in this market.
Excellent analysis tonight from CR on where we are now (AIG deal) and how much further we have to go, including home price declines:
http://calculatedrisk.blogspot.com/2008/09/comment-on-crisis-necessary-steps.html
This certainly speaks to the value of mentoring.
“But then you wouldn’t get the listing!”
This is the perfect example of what drives some agent’s in this market. “The invisible hand” seems to move people toward over-pricing certain listings in order to get the business. This practice can’t be employed anymore because you may never sell anything that’s priced above the market like before.
Nothing worse than a listing that just has no shot at selling, with a seller who has been given false hope and an unrealistic expectation regarding price.
I bet home sellers that turned down what seemed like low ball offers several months ago are now kicking themselves for not taking that offer back then.
I find myself being the bearer of bad news for several clients who have switched agents after being over priced. The tough part is that they’re still “tainted” from being on market for so long.
Even at times when we’ve told a client what it would take to sell a property they’ll still hold on to the info the last agent gave them as though somehow it is gospel. Well, seriously, then why didn’t you just stay with that agent? OH, because the house wasn’t selling and no one would come look at it because it was presented so poorly? Now you have activity and somehow that should translate back up into a higher selling price? Ummmmm…. no.
C’est la vie….
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