If you aren’t getting many showings or offers - that’s a sign.
Most people think that if their home isn’t getting shown enough - it MUST be the agent’s fault.
And some sellers say they want feedback - but then won’t listen.
Selling real estate is a joint effort of seller and agent.
In The Five Factors That Affect The Sale of Real Estate I explain the relationship of these factors, and how the seller has a big responsibility in the process - particularly in setting the list price.
Today’s story is borne from a cursory review of the For Sale By Owner (FSBO) ads in Atlanta.
I noticed one that came up had an address that seemed very familiar, so I investigated.
The seller had a link to an online gallery of images where I realized why the address was so familiar.
I had shown this house.
Way back in the Spring of 2005.
Naturally, I wondered why the seller was selling so soon - but a quick peek in the MLS and tax records revealed the real story.
This home has been on the market for nearly two years.
Let’s start this story with my viewing of the property in the Spring of 2005. This home was one of the smallest in the neighborhood, but priced at $949K, it was within my client’s budget of up to $1M.
The home was vacant, but not on a lock box. Apparently the listing agent had strict instructions to be present during all showings. Why was this necessary - I do not know.
The listing agent was late for our appointment. Neither the lack of lock box nor the tardiness of the listing agent impressed us.
Unfortunately for the seller, neither did the home.
Since we had been viewing homes from $600K to $1M, we had a pretty good idea what the market value of this home might be - and $949K, it definitely was not.
My client asked me how long the seller had owned the home - and the price that he paid. I told him that the seller had owned it for two years, and purchased it as a foreclosure for $565K.
My client started laughing. Almost hysterically.
After all, it was obvious that the seller hadn’t made a bunch of improvements. Even the listing agent had to concede as much.
Needless to say, we didn’t place an offer on that house.
Before leaving, I had to ask the listing agent how they arrived at the list price. She claimed that it was the seller’s idea.
It figures. So many agents will list a home at whatever price the seller wants just to get a listing. I guess there’s always hope that the seller will reduce the price later.
To her credit, she did call me to ask for my feedback, which I was happy to offer:
"Lower the price. It will never sell at that price. Not even close."
Well that scenario has played out three more times.
The price was dropped to $899K - but months later, still no sale.
It MUST be the agent’s fault - so the agent gets fired.
Meanwhile, a comp in the neighborhood sells for $688K.
The next agent lists it for - drum roll please - $949K.
This time, it was staged nicely with lots of furnishings including plants and books - a big improvement over the empty space, for sure. But of course, it’s still terribly overpriced. Eventually the price is reduced to $899K. I’m so surprised.
After six months with this agent - BAM! he’s fired.
After all, the home hasn’t sold - so it MUST be the agent’s fault.
Meanwhile, a nicer and 50% larger home nearby sells for $850K.
The next agent puts the full court press on the seller, and gets him to lower the price waaaaaay down - to $895K.
Of course, since the seller reduced his price by a whopping $4000 - he had to reduce the level of staged furnishings; so little things like plants and knick knacks and books had to go.
Now he had a somewhat-staged home (better than bare) that was still overpriced in a market that was already becoming a buyer’s market way back when he first listed it. And by the summer of 2006, all the buyers knew it was a buyer’s market.
This agent was eventually successful at getting the seller to finally concede the current market conditions, and the price was reduced to $868K. An improvement - but too little, too late.
Unfortunately, this price is still way too high for this home.
But not in the eyes of our seller! BAM! Another agent is fired, and he decides he will sell this home, himself.
After all, it’s the agent’s fault that the home hasn’t sold.
So for the last three months, the seller has been trying to get $868K for a house that is obviously worth much less.
If I had to put an educated guess on it - I would say that this home would sell in today’s market for between $650K and $700K - and probably a lot closer to $650K.
To top it off - he’s trying to do it without the help of a real estate agent. Statistically, he’s fighting a losing battle.
Meanwhile, he has been paying a mortgage for the last couple of years - in addition to utilities - in addition to taxes - in addition to a staging company - not to mention the skyrocketed rates of hazard insurance when the home is unoccupied.
I ran some quick figures, and estimate that this seller is spending well over $6000 a month to hold on to this property. He made the big mistake of taking out a giant second mortgage ($250K) just before listing - which usually means that he used the money for a down payment on his next home.
So now he’s coughing up money so fast, he will eventually probably need to take out a second mortgage on his new house to pay the shortfall on this one if and when it finally does sell.
So far, he has spent at least $100K - and more likely over $120K trying to make a profit and cover that second mortgage that he should never have taken out.
He has already lost any possible equity in this home. He is losing money fast, yet fails to see the truth which at least three agents, I am sure, have tried to tell him.
This is a example of being blinded by greed.
Resale properties in this area and price range have been slipping, so while the seller has this crazy idea of the value of his home - it’s not realistic.
My guess is that when he took out his second mortgage, the appraisal came in at some outrageous amount (as they often do for refinances and second mortgages).
So he believes his home should be worth that much - if not more.
Recently, a man in Connecticut admitted that against his agent’s advice, he put his home on the market in 2005 for $2.1M.
At the time, it was really worth around $1.8M - but by his own admission - he was greedy.
Over the course of the months ahead, he reluctantly reduced the price over and over - but never in a big enough price reduction to attract a buyer.
He was chasing the market down.
He finally put the home under contract recently for $1.2M.
The lesson here, of course, is that if he had listened to his agent, he would have sold his home for around $1.7M and saved himself a half a million dollars worth of misery.
Now our seller here in Atlanta doesn’t have to fear the bottom falling out of the Atlanta real estate market. We are not a "bubble market" and therefore we are not subject to the same rules of correction. His home will not eventually sell for pennies on the dollar.
Our seller should fear that he’s going to lose a tremendous amount of money in holding costs if he doesn’t get this home sold soon. And the sooner he realizes what the problem is - the sooner he can patch the holes in his leaking boat.
It’s the list price, Mr. Seller. The market rejects your price.
No matter how much marketing he does, this home will not bring his asking price. He could buy advertising on billboards around town - it will not matter.
It won’t matter which agent or firm he selects - it won’t matter how much staging he does - it won’t matter if he gives away a trip to Disneyland or plasma TV’s in every room.
If he would have listened to my feedback so many months ago - he could’ve saved himself over a hundred thousand dollars.
But he knows better. After all, it must be the agent’s fault.
Care to guess how long before this FSBO fires his agent?
and who is the agent going to fire?
Excellent post!
Left by Karen Rhodes on January 27th, 2007