About 7 months ago I got a call from a potential client who asked me to list his home for sale in St. Louis. While it isn’t odd to get a call to list a home in my line of work, it was odd that he asked me to list it when I hadn’t even seen the property. After all, how would I know what the value of the home might be without even seeing it?
The Listing Consultation
Rather than shuffle paperwork around, I asked the potential client if he’d be open to meeting at the home. He agreed and we went over the home’s strong points and things he probably should do before he put the home on the market. “How much do you think it will sell for?” he asked. I said it would be tough without seeing the work on the home when finished, but that he could expect around $85,000, and it might take 30 or more days to sell it. Even in a high demand market like we are in, this home wasn’t in the best part of town.
I stayed in touch with the seller from time to time. Weeks and then months passed. It seemed that he had a tenant that was taking time to leave the property and that was causing work to be delayed. I didn’t think anything of it as it isn’t uncommon for work to be done to list a property.
Surprise, you aren’t the listing agent!
Imagine opening your email one morning and seeing a house you were going to list up for sale with someone else! That’s what happened to me. The house was listed for over $100,000! The strange thing was that the house really didn’t have the repairs I’d mentioned. How in the world, or who in the world would list this property for this ridiculous price? More importantly to the seller, who would actually buy this house at this price?
2 Months Pass
I have been humbled enough in real estate to know that I can be wrong from time to time. I kept an eye on that listing that I didn’t get. While they stuck to their pricing, they did end up lowering the price 2 months later. It was still $10,000 too expensive. In St. Louis, when a house is priced in in the $100,000 or less range, even 500.00 matters on a listing. So, while it seems coming to market 15,000 too high isn’t all that issue and wouldn’t be on a $700,000 house, it’s a major error to try that on a lower priced home.
Another Month Passes
When the average days on market is 15 days, and your property has been on the market for more than 4 months, that’s an issue. I guess they figured that out and lowered the price again, this time to $91,500. What are the chances that the seller sees $91,500 at closing? None. Can you see where the listing strategy is failing? It’s the asking price of the home. It’s not any real estate agent that sets the price; the market shows you the price through its actions.
What is the market saying?
I’m pretty sure the listing agent could tell the buyer that there just aren’t buyers interested in this particular part of town. “Don’t worry that no one has requested a showing in a month, I’m sure we’ll get one next week.” And, that sounds good. Except, let’s look at what’s happened in this particular neighborhood since our seller put his home on the market. There have been 9 sales since he listed his home! That means there were at least 9 potential buyers who knew not to put an offer in to purchase his home.
What’s The Best Case Scenario Now?
Mr. seller can call the market dumb. He can scream at his listing agent that they aren’t doing a good job selling his house. But neither of those two things are going to get his house sold. Especially, since he’s to blame for hiring the wrong real estate agent in the first place.
He should lower the price to about $80,000 if he really wants to get the house sold. Why $80,000 and not $85,000, which is where I said he should come to market? Well, the repairs he did aren’t great for one, and second, that house is sitting there unsold and every potential buyer who would have bought it has already said no. He has to wait for new buyers to enter the market. There’s no urgency to purchase his property over someone else’s at this point.
How Could This Breakdown Have Been Avoided?
I don’t think Mr. Seller is interested in looking at previous sales in his neighborhood to arrive at a reasonable price. If he had been, he would have instantly seen that he was way off on his pricing. But, selling a home isn’t always a logical thing, or, I guess it depends on whose logic. In seller’s case, he feels the house is worth a number that no one else does. Who is to say he’s wrong? Well, the current market is.
Does The Listing Agent Get Credit For The Failed Listing Strategy
I would say it depends. Did the listing agent know that the asking price was stupid when she took the listing? That’s between her and the seller. I would say that any strategy that involves buyers bidding lower on a home versus up is not a great strategy.
What did the seller want? What were his goals? Was it to sell the home fast and get out from under the home, or does he want to drag out a sale for as long as possible and get less than he would have with a correct pricing strategy? It’s hard to tell. Sellers tell themselves a lot of things. Some of the things I’ve heard are
- You can always negotiate down, but never up. That sounds good, but I’ve seen plenty of houses for sale get into bidding war situations. Not too many excited sellers taking less for their home than asking price though.
- You just need one buyer. That sounds good too. What if that one buyer can’t afford your house? Was there really a buyer at all? I’m certain that there are awful buyer’s agents out there. I’m not certain that they will luckily find your house as the one to completely over pay for a home.
If you are looking for luck to sell your home, I’d say you’d have a better chance in Vegas than you would with your own personal residence. You need a listing strategy that makes sense, and evolve over current market realities to sell your home.