Somebody brought to my attention the other day that I often start sentances with, “The reality is….”
I’ve also been told I use the phrase, “At the end of the day” quite a bit, but that one wont make for it’s own blog post.
For many sellers, there seems to be a severe disconnect between reality in our real estate market and that of their hopes and dreams.
Here is a story that explains it all…
The other night I was having the most incredible dream…
I was sitting in a Muskoka chair in perfect sunshine on my private yacht, successfully day-trading shares of XYZ Company for massive profits, while Jessica Alba and Jessica Biel were literally fighting over me on the deck.
Suddenly, Scarlett Johansson appeared and threw both Jessicas overboard (into an awaiting life raft, of course…), and Scarlett and I lived happily ever after and never had to work another day in our lives.
And then, I WOKE UP…
The difference between my dream and my reality, is that never at any point did I fail to distinguish between the two…
This brings me to my latest experience in the real estate market.
I first spoke to Darlene about two weeks ago. She told me that she was interested in selling her condo, and she would like to know what her condo was worth and what the current market conditions were like.
She described her condo to me: 1-bedroom, den, 1-bathroom, no parking, locker, small balcony, north-facing, 10th floor.
I did my research and put together a comprehensive “Seller Information Guide” as I went to visit her.
I had recently sold a unit in her building for $319,900, and this unit was 700 square feet with a parking space and a gorgeous 220 square foot patio.
I asked Darlene, “Before we start, what do you think your condo is worth? Surely you have a number in your head. Could you let me know what that number is?”
Darlene raised her eyes up and to the right, which meant she was searching for non-existent info in her head.
She asked, “What did that other unit sell for?”
I told her, “$319,900.”
She continued, “And that unit had a parking space, and a patio?”
“It did, I replied.”
Then she got this devilish look in her eye, as if she had figured something out that nobody knew, and she said, “But it was on a lower floor, wasn’t it?”
I figured that she’s one of these people that assume “the higher the better,” even if all the views are blocked by other buildings.
That’s when she said, “In order to sell…..I mean…..I’d have to think…..yeah, I’d have to think……I’d need to get about $310.”
Thankfully I had passed on her offer of coffee, or I would have spat it all over the room.
My research concluded that her condo was worth $271,500, and my recommendation would have been to list it at $279,000, simply to appease her.
I couldn’t figure out which way the hamster on the wheel in her head was running! She started with the $319,900 unit, deducted parking, then patio, then figured her unit was higher, and for some reason thought that she could achieve a sale price of only $10,000 less?
I should also mention that a massive condominium project is being built right outside her sliding-glass door, which interestingly enough, she had open during our entire meeting. I could barely hear her as we sat three feet away from eachother, due to the jackhammering across the way.
I opened my notes and showed her the Excel spreadsheet I had been working on.
I had taken all of the similar 1+1’s in her building that sold since last August, and made several columns for adjustments.
I had a column for parking, which deducted $25,000 from each unit that had sold with a parking space.
I had a column for square footage, which at $450 per square foot, showed that the 700 square foot unit was worth $9,000 more than her 680 square foot unit; all things being considered equal.
I had a column for date of sale, which deducted anywhere from 0% – 5% depending on how long ago the sale was. I figured that the condo market, on the whole, had dropped about 5% from the peak last June (although perhaps not the better buildings).
I had a column for view, which I don’t normally have, but because this building backs onto a massive construction site, I figured that any of the north-facing units would surely present a much tougher sale.
And finally, I had a column for extras, which could be anything from the higher ceilings to the massive outdoor patios. This column was somewhat subjective, but surely a 220 square foot, west-facing patio overlooking St. James Cathedral had to add at least $20,000 of value compared to a cookie-cutter 10th floor unit overlooking a construction site.
When all was said and done (another of my catch-phrases, so I’ve been told…), my calculations and comparisons showed an adjusted price of $271,500 based on eight comparable sales and five different adjustments.
Darlene looked at the page in front of her for about twenty seconds, and then sat upright in her chair.
She crossed her arms.
And then she looked at me, shook her head, and said, “No.”
“No…..what?” I curiously asked.
“No, that’s not right. There’s no way that’s right. I paid $253,000 for this condo and I need to get $300,000 out of it.”
That’s when I realized I was fighting a losing battle. She used the word “need.”
She explained that she wanted to move out to Calgary, and she showed me what houses cost in the neighborhood that she had targeted. She figured that she “needed” to get $300,000+ for her condo in order to come up with a 50% downpayment on the Calgary house.
“I’ll wait as long as it takes,” she said, as if that were a useful strategy. “I’ll keep this on the market for six months, a year, I don’t care!”
I told her that if the market were to continue falling in the next 6-12 months, perhaps that wouldn’t be the best strategy to put into place.
“You’re not listening to me,” she said. “I will not sell this condo for less than $300,000, and that is what I know I can get for it.”
Only one question was left for me to ask: “Then what the heck do you need me for?”
But I didn’t ask the question, I simply thanked her for her time, left the package of notes on her dining room table, and went on my merry way.
A week later, I called her to follow up, and she told me that if she were to list the property with me, she would want to list it at $309,900. She explained that nobody pays asking price in this market, and in order to achieve a sale price of $300,000, she would have to list higher.
I told her that her condo was only worth $270,000 and change, as it was a very run-of-the-mill unit with no parking that happened to stare at a construction site.
I told her I would not list her condo for $40,000 more than it was worth, that it was a pleasure to meet her, and then I wished her all the best.
I truly feel for this woman, as she is completely out of touch with reality and although she has illusions of grandeur about moving out West and selling her condo at a nonsensical price in order to do so.
Look, we all wish that we had bought at the bottom, and sold at the top – in any market!
I remember looking at shares of Apple at $8.00 when I first heard of this thing called the “eye-pod,” and wondering if perhaps this hand-held music gadget would help turn the company around. I still fantasize about having bought just a thousand shares of the fledgling company, and watching the shares grow to $200.
But the reality is, I didn’t buy those shares, and all my fantasies can’t change that.
I’m a very good real estate agent, but I can’t deliver miracles.
I can’t get my clients $310,000 for their $270,000 condo in this market, no way, no how.
All I can do is help my clients see the reality…Back To Top Back To Comments
at 10:42 pm
It seems there are many people like Darlene out there right now and very few people like you David (who won’t list a property for significantly more than its worth.)
I follow the Beach very closely and see that there are many sellers that currently have their property listed at peak (2008) prices. Someone I guess forgot to tell them that instead of selling a property in a few days in a massive biddding war above the asking price, properties are now sitting on the market for months. They also forgot to tell them that the typical buyers of Beach homes (Bay Street bonus boys and gals) have seen their bonuses halved or worse (and they are the lucky ones that still have jobs.)
When the sellers acknowledge reality, I’ll be a buyer. In the meantime, I’ll stay in my little one bedroom condo for as long as it takes!
at 12:43 pm
Ditto PI, I’ve been following some townhomes on Carr street since late summer/fall and I see some of the same homes for sale at the same price. I guess they are all waiting for that one buyer still living in 2007