Who wants to talk about price?
Price Waterhouse Coopers
Professional hockey player, supermodel, accountant.
Yeah, I wish I was an accountant too…
Let’s pick up right where we left off yesterday…
“We need to get at least $600,000.”
Note the word “need.”
“Need” is the worst word in all of real estate. It never ends well for people who “need” something.
Personally, I need a date with Katie Price and I need to be as good at Carey Price at hockey. But what you need and what you might end up getting are two completely different things.
I need to sell my 1-bedroom condo for a jillion-dollars.
I need to triple my income next year.
Who cares what a person “needs” unless it is food, clothing, shelter, or water.
When a seller claims that they “need” to get a certain price for their home, it starts the process off on a bad note right off the bat. There is no easier way to set yourself up for disappointment than to set a threshold – one which is usually unattainable.
Realtors usually provide a range for values; not because they aren’t good at their job, but rather because it’s almost impossible to accurately peg the price of real estate to an exact dollar figure. You might tell the seller, “We’re looking at about $540,000 to $560,000 based on the highest sale on the street from earlier this year, but also considering the slight dip in prices.”
It’s when buyers fire back, “Well, we need to get at least $600,000″ that I simply have no answers.
They’re confusing a “want” with a “need.” They don’t actually NEED $600,000, they’re just being greedy and/or unreasonable. If they happen to have massive debts that they’d like to pay off, then they’re just trying to find the solution all in one place.
You can’t squeeze blood from a stone, not matter how hard you try.
It all goes back to the fact that buyers won’t pay 115% of fair market value, no matter how hard you “need” them to.
“Don’t worry – buyers will see past the (insert awful feature here).”
Again – this is where sellers refuse to separate their emotions from the process.
If you happen to live at the end of a dead-end street (excuse the pun) and the street is next to a cemetery, surely you don’t expect that buyers won’t notice the headstones out their kitchen window.
Sure, you may have become accustomed to seeing the graveyard each and every day, and over the last decade, you’ve noticed it less and less.
But a buyer will notice, and the buyer will make a corresponding adjustment to value.
Sellers often get frustrated when I tell them that it doesn’t matter how they feel – that’s just the way buyers will see things. They’ll fire back, “Well they’re all just a bunch of morons! It’s just a few headstones! It’s pretty, it’s green; what more do they want?” But this is emotions interfering with value, plain and simple.
Take the case of a house on the corner of a busy intersection. Sellers will look at the value of the house down the street and say, “They have the exact same 3-bedroom, 2-bathroom house as us; also on a 30 x 120 foot lot. Why are you valuing our house at $50,000 less?”
Um, how about because your house sides onto Eglinton Avenue?
It doesn’t matter that you’ve “got used to it.” Buyers aren’t foolish, and they won’t overlook huge red flags.
Would you spend the same amount of money in a piece of china if it had a huge chip on the side?
Okay, perhaps that was a curious example. Who the hell buys china? I’m not sure how many old ladies read my blog…
“We’ll include all the furniture to help get ‘our’ price.”
I’ve written entire blog posts on this subject.
I have to spell this out as bluntly as possible: “Nobody wants your used hand-me-downs!”
The funny part is – the people who suggest that they include the furniture with the sale are usually the people who have the oldest, grossest, worst furniture!
Stop me if you’ve heard this story, but I had a seller in the St. Lawrence Market area two years ago tell me she “needed” to get $315,000 for her condo. I valued it at around $269,000 – $279,000. She argued with me over the value for a half-hour and then finally said, “Alright, fine! I’ll throw in all the furniture!”
I paused, looked around the room, and unlike the winning contestants on the original Wheel of Fortune who got to pick items from a staged living/dining/kitchen, I was unable to identify a single item worth choosing.
I told her that her television set was worth $5.00. It was an old JVC from the early 1990’s that was about 18-inches in depth. She said, “I paid about $700 for this!” I reminded her that she likely did so over 15 years ago. She was not pleased.
She said, “That’s a $2,000 cabinet over there!” The cabinet, which ironically contained china now that I think about it, was ugly and far too large for a 600 square foot condo.
I could go on (as I did for another half-hour with the seller in the story), but you get the idea.
One of the greatest thrills for the buyer of a new house or condo is furnishing the condo! They can’t wait to get the new plasma TV that they’ve never had, or pick out a dining room set from a handful of stores that their friends and family have recommended!
Nobody wants to buy ugly, old, used furniture.
And they certainly don’t want to pay 99% of the original purchase price, fifteen years later…
“They can always just make an offer regardless!”
This goes back to the over-pricing that I spoke to at length yesterday.
Many sellers feel that buyers in an active market will make an offer on a property that interests them, no matter how the property is priced.
But these sellers have a very short memory…
Let’s say the house is worth $540,000 – $550,000 and the sellers defy all logic and price it at $599,000.
A buyer makes an offer at $530,000, and the sellers lose their minds.
They find the offer to be “an insulting lowball,” but they only feel this way because:
a) they had illusions of $599,000
b) the offer price is low relative to the asking price
They fail to realize that if the property is “worth” $540,000, then this would be 98% of the asking price, had they priced it appropriately.
Sellers have very short memories, and they quickly forget everything that was discussed in advance of the listing about “over-pricing.”
Buyers will make an offer, but as I said for the umpteenth time – they won’t pay 115% of fair market value.
“We would have got $700,000 if we sold at this time last year.”
I don’t really have a response for this one because the answer seems obvious.
Call me cynical, but if somebody said this to me, I might just stand there and eventually say, “I’m sorry, is there a question in there?”
You would have got $700,000 for your house if you sold at this time last year. True.
BUT……you know that biotech stock you own that lost 78% of its value today after failed clinical trials? Well, you would have got about 78% more for the shares if you sold last week.
Hindsight is a bitch.
Just as I said yesterday about sellers who comment, “We’ll wait as long as it takes to get our price,” you can’t look forward or back when selling your home. You have to look at the current market. You can’t forecast the price of your home in three years and expect to somehow get that today, and likewise, you can’t turn back the clock and complain about prices last year as if it somehow applies to the sale process today.
I just re-read this post in its entirely, and maybe it’s blunt.
But there’s nothing I regret more than not explaining things to a seller in advance and then having to deal with crushed expectations. Sometimes being blunt is the best possible option.
I have a few more “objections” up my sleeve for tomorrow, but these have less to do with price and more to do with what we’ll just call “other” for now…