The early bird gets the worm, right?

So if you suspect that the seller is going to reduce a property in price, doesn’t it make sense to act before they do so, as if they’d already done so?

I thought it makes sense.  But the greedy sellers out there don’t see it that way…

Wherever you are right now, do me a favour: look outside.

Do you see snow?

No.

Does it look like it’s 30-degrees and humid as hell?

Yes.

So can we then draw an inference that it is not February anymore?

It’s not February, but many sellers still think it is.  Or better said – they wish it was still February.

At least once a week, I find myself saying, “The first wave of sellers to miss the peak of the market in February or March are going to be the toughest to convert to this ‘new’ market.”

And every day, I see these sentiments played out in our market place.

A few weeks back, a client of mine made an offer on a property in the white-hot King West neighbourhood.  The property was a Freed building, and prices are higher than many people can justify to pay for a 1-bedroom condo.

There was a property listed at $469,900, and we knew it was too high as soon as it was listed.

My client figured it was “worth” around $430,000, and I tended to agree.

But regardless, we’d have to wait a while for this property to rot on the market before we could entertain the idea of a “low” offer, even if that offer was only “low” when compared to the asking price.

Yeah, really.  If your house is worth $1,000,000, and you list it for $1,900,000, an offer of $1,000,000 isn’t really “low,” is it?

After three weeks on the market (an eternity for King West), we made an offer of $435,000.

I explained to the agent that he’s another week away from a price reduction, as the magic “month-mark” is when you usually see a price drop, but we were willing to get the ball rolling a little earlier to save his client the trouble.

Our reasoning was simple: if this condo was going to be reduced from $469,900 to $449,900 in a week or two, why not just offer $435,000 now?

The $435,000 offer is only “low” when you hold it up against their $469,900 asking price, but they may as well be asking $499,000 at this point; it’s just not worth it.

The listing agent seemed somewhat interested in our logic, but after a day, we received a sign-back of $465,000.

And we immediately walked.

I’m not a confrontational agent.  Believe it or not, I keep my ego in check.

But this agent wanted to argue with me on the phone for an hour (I could tell he was at a bar, and I could tell he was at least one drink in), and eventually he hung up on me like a five year old child.

I explained my logic as I had done before: If this condo is going to be reduced to $449,000 in order to stimulate some action, after 4-5 weeks of inactivity, then why in God’s name would the seller sign back above the price that he’d likely reduce to?  It’s pure ego.

He then told me, “David, I shouldn’t be doing this, but I’m going to let you in on a little secret,” and when an agent tells you that, you know whatever follows is BS.  He continued, “My client has his price, and he isn’t going to sell for less than that; one week from now, one month from now, or one year from now.”

I’d heard that line so many times before from greedy sellers that never end up selling.

I laughed and said, “What’s next – you’re going to tell me, ‘If he can’t sell it, he’ll rent it’?”  That’s another line that stubborn sellers are using.

It’s been seven weeks, and the property is still on the market, unsold.

Just yesterday, I had the exact same situation with another client.

A Queen Street condo, listed at $579,000 and on the market for three months (off and on as high as $599,000 since last October!) is likely only “worth” about $520,000.

If it was worth what they’re asking, or even close, it would have sold ten times over by now.

My client and I figured that this condo “should” be priced at $539,000, since they haven’t had an offer at $579,000 in essentially half a year.

We offered $500,000, clean, with a 10% deposit cheque and a blank closing date (ie. seller picks the date), and we received a sign back of $560,000.

I know what you’re all thinking: “David, this is negotiating.  What are you complaining about?”

But you know what?  It’s not negotiating.

It’s ego.

It’s hurt feelings.

It’s sellers that are living in February and refuse to wake up.

If this condo “should” be listed at $539,000, why sign back at $560,000?

The seller is only “negotiating” based on his own inflated price that is, in my mind, meaningless.  He may as well be listed at $639,000 and sign back at $560,000, citing a “huge” $80,000 price drop.

As a buyer’s agent, I’m trying to beat these sellers to the punch.

If they have been lingering on the market for six weeks, two months, or more, we all know a price reduction is coming.

So we’re making offers based on the “new” price before it even comes out.

The sellers take it personally, and then let their egos work them out of a potential sale.

Chuck Charlton, a Realtor in Milton and an avid reader of my blog, has a saying:

“As a seller, as soon as you sign-back that offer, you’ve essentially bought your property back at that price.”

It’s so true.

Whether you want to or not, you always have to put the shoe on the other foot.  If you’re a seller and you sign an offer back for $560,000, if the buyer walks away, you have basically bought your property back for $560,000.

I wish I could convey that to both the sellers in this story.

Our market has cooled off since February and March, and I’ll be the first to say, “Thank God!”

But unless sellers recognize that they missed the peak of the market and adjust accordingly, there are going to be a lot of properties sitting on the market through July and August…