I can’t be anymore discreet than that, without holding back and taking away from the story.
You think that all Realtors are created equal? You think a house sells itself?
Listen to what came out of this agent’s mouth over the weekend, that will cost his sellers $100,000 or more…
I am confident, not only in my own ability to sell real estate for the highest dollar possible, but also in the ability of my industry colleagues who are at the top of their game.
I say this, not to start this blog off on the wrong foot and seem cocky, but rather to address the sentiments among some of the real estate bears that “a good house sells itself,” or “there’s really no difference between a full-service ‘top’ agent, and the one down the road.”
Selling real estate for top dollar is a skill, not unlike throwing a football, designing a bridge, or solving a math equation. All these things take knowledge as well as an ability that some people are born with, and some can never be taught.
On Sunday, I met the latter: an individual who can never be taught how to sell in this business.
The housing market remains hot in many neighbourhoods, and even red-hot in others. Then, there are some lukewarm pockets that used to be hot, and some pockets where even the best houses aren’t assured multiple offers.
Think about that, for a moment: assured multiple offers.
What a world we live in! What a market we transact in! Imagine the entitlement to be “assured multiple offers.” Isn’t that grand?
Now, I suppose anybody could be “assured multiple offers” if they priced their house low enough. A million-dollar home, priced at $799,000, is likely going to get multiple offers. But can you fool the market? Who among the buyer pool thinks they have a chance at $799,000? Believe it or not – many do. These inexperienced, wishful, gleamy-eyed pavement-pounders don’t know the product, don’t do their research, and often set the table for the big money – paid by somebody else.
And that is what I want to talk about today: how to get the big money by setting the table properly.
This, of course, is what the agent I met on Sunday did not do, and why I feel he should have just kept his mouth shut. But let me give you the background first…
Let’s say you have a property that is “worth” $900,000. That’s the fair market value, that’s the most likely price to be paid, and that’s a good, conservative, realistic, ballpark estimate of value.
We all know that in a great family neighbourhood, that is benefitting from a hot market, a house like this will be priced at $799,000 so that the sale price will exceed $900K. This isn’t news, is it?
At $799,000, you get three sub-sets of buyers:
1) Those buyers who are well-versed in the market, that know it’s a $900K house.
2) Those buyers who use their own numbers to try to justify their wishes, ie. “Houses are selling for an average of 5-7% over asking, so this house is worth $850,000.”
3) Those buyers who live on another planet, and have no problem making an offer of $780,000, conditional on the sale of their Ajax home, and their dog learning Spanish.
It is this last subset of buyers (to a lesser extent – the second group as well), that help listing agents and sellers move the eventual sale price of the home well beyond fair market value, in many cases.
So to alienate those buyers is NOT in the interest of the listing agent. In fact, to placate and coddle those buyers is a skill that is developed over time, as a listing agent gains experience.
This is not what I ran into on Sunday, in the west end of the city.
My clients and I attended the open house, and the young, new-to-the-business listing agent, who looked like he had just combined coffee, Red Bull, and ecstasy, was quick to get right up close to us and rattle off features of the home, neighbourhood sales, and anything else that could help “sell” us on the house.
I decided to ask a question, to which, in my mind, there is only ONE answer an experienced, knowledgeable, real estate professional would give:
“What are your clients expectations regarding price?”
The answer, of course, is a polite smile, perhaps a giggle, and something to the extent of “Bla, Bla, Bla.”
NOTHING. That’s the answer. Absolutely, nothing.
“My clients just want to get their house sold,” one agent might say.
“My sellers are just looking forward to moving on to the next step in their lives, and they’re excited,” another might say.
You never, ever, EVER tip your hand about expectations, and if you do anything – you set the bar low, to allow buyers who have no business being there, to come into the game.
I asked the agent, “Are your clients expecting multiple offers on the property, and would they be disappointed if they didn’t get them?”
He walked right into it.
A long pause, a deep inhale, a hamster running on a wheel in his brain, and he said:
“To be honest, yes, they would be disappointed. I mean, this house is priced for multiple offers, so if they didn’t get them, they’d be upset. I mean, this house is better than the one up the street, which sold for this-and-that, and this has a private driveway, and the finishes are this-and-that.”
I don’t need to get into specifics here; you get the point.
So I further inquired, “So help me out here – you clearly know the area better than I do, and I don’t have a calculator, so what’s the value here?”
If this agent had any clue what he was doing, with this $979,900 listing, that clearly had to be a family friend, he never would have entered into this conversation. Instead, he blurted out: “One point one million.”
He just sunk himself.
With 3-4 other people buzzing around the open house, clearly overhearing, this agent just said, “My clients have under-priced, and they’re looking to rake you all over the coals! Their expectations are through the roof!”
Sure, many of us do aim to rake buyers over the coals, all in the interests of our seller-clients, but we sure as hell don’t announce it out loud!
My buyers were savvy enough to know that this was a mistake on his part. One of my clients said, “I asked the agent at Belsize last month what her clients would do if they only got one offer at asking, and she side-stepped the question three different ways. She basically said that they’d be happy with anything in the end.”
This wasn’t the case, of course, since those sellers took the property off the market, but that is how you respond to a question regarding price and seller expectations.
We went back upstairs, and my client, who just had to know what else would come out of the listing agent’s mouth, asked, “What would happen if you got one offer on offer-night? Would your clients take the property off the market and re-list higher?”
Another pause, another deep breath, and another torpedo hitting the hull of a submarine:
“To be honest, yeah, I think they’d re-list the property higher to be more in line with fair market value. You see….”
He tried to continue, but my client cut him off. “Thanks – and good luck,” she said.
Good luck indeed, because he was going to need it!
The correct response to that question, true or not, would be, “Well, I think everybody would love to get a windfall of offers, but if we get just one, we’ll be happy to work with it!”
You catch more flies with honey.
That listing agent fails to understand that nobody is going to pay $1,100,000, for a house listed at $979,900, unless there are 5-6 offers.
So by turning buyers away by saying, “My sellers are expecting multiple offers” or “My sellers would re-list the property higher if they don’t get their price,” the listing agent is turning away 3-4 of the 5-6 offers needed to obtain $1.1M.
If the property garnered five offers of fifty-cents, that 6th offer might pay $1,100,000 based on the competition.
THAT is what the listing agent doesn’t understand.
And THAT is why he should have kept his mouth shut.
Maybe it’s common knowledge to you, reading this, after I’ve spelled it all out for you.
But you’d be amazed how quickly you can put your foot in your mouth in this business, and how quickly you can cost your clients a deal – or worse – several hundred thousand dollars…
ADDENDUM 10.31.2013: They received zero offers on ‘offer night’ and re-listed at $1,049,000. What a joke…