When I see a crazy price, crazy pricing strategy, or just a downright batty property listing, I always think the same thing: how did the conversation go?
I’d love to be a fly on the wall when a real estate agent and a seller discuss the price, and see what kind of logic is present.
The truth, which we all know, is that there is no logic.
There’s probably no conversation either, but just to really hit home how stupid some sellers can be when it comes to pricing, I’d like to illustrate three fictitious conversations, which all lack anything resembling logic…
I think this can work.
I think the only way to see just how utterly illogical some people’s thought-process can be, is to put it in conversational form.
Maybe a conversation never happened, but if it DID, it would go something like this….
1) The over-priced condo
We see this time and time again: a condo comes out onto the market at a price that is HIGHER than an identical property also for sale, which happens to be sitting on the market.
So picture a $449,900 condo that has been on the market for six weeks, and then the same unit comes out $20K higher.
It’s illogical, but when you spell it out in a full conversation, it becomes ridiculous…
Listing agent: “Have you given any though to the price point?”
Seller: “Well, you said there was a similar condo on the market, which we would be competing with?”
Listing agent: “Yes, that’s correct. You own Unit #501, and Unit #401 is also for sale.”
Seller: “Interesting. That is, indeed, the identical unit to mine.”
Listing agent: “Yes, that’s correct.”
Seller: “What are they priced at?”
Listing agent: “They’re priced at $449,000.”
Seller: “How long have they been on the market?”
Listing agent: “Over six weeks now.”
Seller: “So let me get see if I have this straight: the same unit as mine, has been on the market for six weeks, unsold, at $449,000.”
Listing agent: “Correct.”
Seller: “The unit hasn’t sold. It’s not moving. It’s sitting there, in a hot market, unsold, at $449,000.”
Listing agent: “Correct.”
Seller: “Okay. Perfect. So let’s list my unit $20,000 higher at $469,000.”
What the???
Really?
Could a conversation really go like that? Could a seller really sit down, hash it all out, and then make an illogical decision like that?
I’d like to think……not.
If the seller really thought it through, how could he or she come to that decision?
2) Raising the price after the “offer date”
I touched on this a bit last week, and it drives me nuts.
Specifically for condos, which I have said time and time again – should NOT have set offer dates, I’d like to know how a seller rationalizes a price increase after not getting any offers on offer night.
Seller: “Last night was disappointing. We didn’t get any offers?”
Listing agent: “That’s correct. We did not receive any offers.”
Seller: “No offers on my condo – priced at $418,000.”
Listing agent: “Correct.”
Seller: “So we had the condo on the market for 8 days, priced at $418,000, and nobody brought us an offer.”
Listing agent: “Correct.”
Seller: “So the buyer pool, made up of thousands and thousands of active condo buyers, has seen my listing, and said ‘no’ to it at $418,000.”
Listing agent: “Correct.”
Seller: “So nobody wants to buy my condo, listed at $418,000, or seemingly anywhere near that price, otherwise they’d have likely brought us something.”
Listing agent: “Correct.”
Seller: “Okay. Perfect. So let’s raise the price to $439,800 tomorrow.”
Yep.
It happens. It happens more than you’d like to think.
If you walk through this, logically, step-by-step, and sound it out like we did above, how in the world could a seller make a decision like that?
There’s no logic involved in the price increase.
Just willful ignorance.
3) The over-asking sign-back
Whereas the first two situations primarily happen with condos alone, this one can happen with houses and condos.
We know that quite often, a seller who is expecting multiple offers on “offer night,” who only gets one offer, might sign the offer back above asking – hoping that the buyer will play ball.
While I don’t necessarily agree with the logic, I do acknowledge that it can make sense from the seller’s perspective now and again, since they can always re-list higher the next day (ie. two wrongs DO make a right!)
But what about when there is no offer date?
What about when the seller signs back above asking, for seemingly no good reason? How does that conversation go?
Listing agent: “We have an offer! It’s for $675,000, which is pretty close to your $699,900 asking price.”
Seller: “Is this the only offer on the table?”
Listing agent: “Yes.”
Seller: “How long have we been on the market for?”
Listing agent: “Twelve days.”
Seller: “And this is the only offer we’ve received?”
Listing agent: “Correct.”
Seller: “And there’s nobody else here at the table right now – just us, and this one buyer, who brought us this offer?”
Listing agent: “Correct.”
Seller: “Okay. Perfect. So, let’s sign it back at $750,000.”
Utterly insane.
You would like to think that this wouldn’t happen; that it can’t happen, but it does.
Like I said at the onset – when a seller has a set date for offers, and they think they have under-priced the house, and should get over-asking, I can understand why they might choose to sign it back over asking.
But when they do not have an offer date, and the house has simply been on the market for a few weeks, unsold, what logic is involved in signing back over asking?
Wait. I think we answered that rhetorical question about logic at the onset.
I recall making an offer on a bungalow on Royal York a few years back, where the seller signed back $30K over asking – even though we had offered the FULL asking price!
It was lunacy. It made zero sense.
The listing agent just kept saying, “It’s a good deal!”
Yeah, for you!
Seriously folks, sometimes to understand how stupid people can be, you have to envision them as 5-year-olds.
The three conversations above all have as much logic as a 5-year-old might have, since a 5-year-old doesn’t really understand the world, or how it works, or how other people fit into what seems like their universe.
We’re in a free market, where buyers and sellers are allowed to set prices, and make decisions, as they see fit.
But sometimes when you see what people do with that freedom, it’s absolutely, positively illogical…
Pete
at 8:15 am
In your example it was the seller who made the illogical choices and the listing agent was passive. Is that always the case? I’d imagine in many cases the sellers are taking their agent’s advice ?
Geoff
at 8:46 am
Or the opposite is true – where the sellers overrule their agent’s advice.
My own mother once told me she “needed” to sell her condo at X price in order to cover her investment into it. I said her needs were irrelevant to the market’s evaluation of it’s current value. She didn’t see my point at all, whatsoever.
Chroscklh
at 10:07 am
Smart owner with some knowledge of market can have opinion too – and motivated different. I sell condo in spring, agent say “things soften, I’d recommend $599k now” (we had been talking $625k week earlier). I say “not in rush, would like to try $625k still.” -condo sell in 5 days $618k. Probably sell in 2 days for $592k if list at $599k -that difference buy me house in lake back home (actually in the lake not on it)
lulu
at 11:25 am
Well, in a seller market, the seller can do whatever they want in price setting, especially in single family home, buyers just have to suck up to it, take it or leave it. however in the condo market, what the seller trying to act like in the single family home tactics, is a very risky move and often time can back fire. you want to leave after all, why not agree on a reasonable price and move on, there is no win it all or you will end up having a longer DOM, meaning problems to a lot of buyers.
Dan Dickinson
at 4:42 pm
While there will always be *some* irrational behaviour (’cause people are weird) that behaviour is amplified by irrational systems. When the process is complicated, and agents have more information than buyers/sellers (or even if it’s *perceived* that they do), then some of the actors will behave irrationally. I imagine that for some people who are stressed and are uncomfortable when they’re not in control, they do something like this to try to re-assert control, even if it’s batty. And I bet it’s worse if they’re also inherently distrustful people — if they feel like they’re being gamed by the system, they’ll try to game the system back.
Kyle
at 9:33 pm
We can’t all assume that sellers are all the same. I think there are two types (maybe more) 1. The seller that actually wants to sell now at what the market will pay and 2. The seller that wants to sell for $X, and doesn’t really care if it happens today, tomorrow or never, so long as they can find a listing agent dumb enough to waste their time listing it, it’s no sweat to them.
Alex
at 11:52 am
All your conversations assumed the seller was making the terrible decision. Couldn’t it be that the agent, desperate to get the listing, overpriced the property to begin with? So when the seller gets no offers, or offers lower than they were expecting, the agent convinces them that they can re-list higher and still sell the place, they’ll just “work harder”, etc. I’m sure there are cases where the seller is the one insisting their place is worth more (“The walls are painted so nice! The view is nicer than that same condo below me! I have shinier appliances!”) but there have to be cases where the seller is just getting terrible advice from a bad agent and is too lazy/optimistic/stupid to realize that their agent is wrong.
Jim
at 8:20 pm
I know someone who knew someone who sold his home using one of these methods. I also know for a fact that politicians wouldn’t lie to me.
All Urban Myths are based on plausible events and being repeated over and over. Or is so impossible that it must true.
Mix in sentimentality, greed, fear, and plain old hubris…..and what do you get–stupidity.