Saturday I conducted a listing presentation for a Stead couple who has been trying to sell their house for the past year. During the last twelve months they have had a total of two interested parties stop by to view their house. Yes, two! The couple blamed their listing agent for the lack of interest generated.
The listing is about to expire, so the couple is now interviewing for a new listing agent. I caught wind of their situation and called to set up an appointment. After securing my place in line (I believe I was second of three interviewees scheduled), I began my analysis of the Stead market and the comparable Solds.
I discovered 203 Active listings in little old Stead. Yes, 203! These Actives have a median asking price of $269,000. Next, I looked at Pendings. I found 37 Pendings in Stead; these had a median price of $244,999. This relatively high number of Pendings was encouraging. [Note: The median Pending price is 91% of the median list price.] Next, I examined recent Solds. In the past 30 days there have been 22 Solds; these have a median sales price of $227,500. The high number of Solds was even more encouraging than the number of Pendings. Despite the nine-plus months of inventory, homes are selling in Stead. [Note: The median Sold price is 85% of the median list price].
Why, over the course of twelve months, had this couple’s home not been one of the Solds? I suspected pricing. And as I took a closer look at the homes comparable to theirs, my hunch was confirmed I found 23 Active listings comparable to this couple’s property. Consistent with the overall Stead market, comparable Solds were coming in at 87% of the median list price for comparable Actives. Where do you think this couple’s house was priced? You guessed it; at 99% of the Actives’ median list price. Incidentally, their current asking price has been reduced three times over the last 12 months. Their initial asking price was 102% of the current median Actives’ price.
In an extreme Buyer’s market, if a Seller truly wants his home to sell, it is imperative he price it at or near the sales price that the market currently supports. I usually recommend within ±1% of the sales price of the most similar recently sold comparable(s). And if the Sellers desire to sell very quickly, I usually recommend 1% below the sales price of the most similar recently sold comparables.
In the case of this Stead couple my pricing strategy would dictate reducing their price by about 12%. I’ll spare you the details of how the pricing discussion went, but this couple made it clear that reducing their price by such a large margin was NOT going to happen. During our negotiations small concessions were made by both sides, but ultimately the gap was too wide to bridge. I concluded my listing presentation by saying there was simply no way I could accept such an overpriced listing. I was then informed that the agent before me had also declined to take the listing at their price. We thanked each other for the other’s time and I left.
As I drove home I wondered what will become of this couple’s home. Will they find an agent who accepts the listing at their price? Yes, probably. Will the couple’s home sell at that price? No, not likely. Is the agent who accepts the listing at an unrealistic price providing a service of any value to this couple? What do you think.
One unfortunate aspect of this situation is that this couple sincerely wishes to sell their home and relocate out-of-state in order to be closer to their grandchildren. They wanted to sell their home twelve months ago. Now, they really want their home to sell. But until they price realistically their property will continue to sit unseen and un-shown.
Mike Van H
Another case of ignorant sellers. When will they learn and accept the ‘old days’ are gone? Even when explaining all of this to them it didn’t click. At least there are still some honest agents out there who understand and attempt to explain to these sellers what it takes to sell a home in this market. The faster sellers realize this, the more quickly the market will stabilize.
Todd Tarson
Well done by sticking to your information that you researched. I’ve had similar appointments and have walked out without the listing… and I know I have done the right thing.
If sellers cannot understand the market (the actual current price level for successful sales) when they have been shown the facts, then they aren’t sellers.
BanteringBear
Thanks for the great laugh, Guy! Sorry you even had to waste your time with such losers. These are the same kind of people who try to sell their used cars at dealer prices. I’m not sure why any agent would even want to take the listing. They are the prototypical greedy sellers who will ride their house all the way to the bottom, wherever that may be. How about you post the address so I can submit a lowball offer? Not that I’d be interested whatsoever in their desert wasteland crapbox, but I figure an offer of $129k with seller covering closing costs might wake them up a bit.
GreenNV
It is hard to get offers when you can’t even get showings. What did the “sellers” think the problem was, bad juju?
By coinsidence, I was doing some data mining up the the 89506 over the weekend and genreally found that the sellers there are getting it. Of the 10 new listings I studied, 6 were priced below their last selling price, 1 was in foreclosure after multiple refies, 1 was trying to break even with the magic 7% over previous sales price, and 2 were dreamers at 15%+ over previous sales. On average, the new listings were 1.5% over prior sales price.
On the dark side, about 80% of the existing mortgages on these properties are what I would consider highly toxic. (In contrast, my study of 89523 had about 30% toxicity) Interesting that the only good loans went to the 2 people who put up some equity – 20%+. 70% had a down payment of 5% or less. My guess that the heavy impact of these bad loans is creating a drive to sensible pricing – you can get a haircut or a shave.
I wish some of this sanity would rub off on the South Meadows Amnesiacs – new listings there are showing an average 19% asking price over prior sales.
Reno Ignoramus
Thanks Guy for another great post. I find it VERY interesting that the median sold price in Stead is 85% of the median list price. This is almost 10% lower than the market at large??
As far as these particular people go, this is a fairly common story. I disagree they REALLY want to sell their house. You told them what they need to do to sell their house. They declined. There are thousands of similar sellers in this market.It is behavior like this that contributes to the “stickiness” of prices on the way down in a housing market downturn. People behave as if they are in the market they wish they were in as opposed to the market they are in fact in. This “riding the market down” will cost them a lot of money with every passing month. It already has.
As you so ably describe, if a seller REALLY wants to sell, he has to be BELOW recent sales.
Drip by drip the market declines. We are years away from the bottom.
Diane Cohn
Pssst, Guy, this is why you want to be agent number three: The first one breaks them in. The second one breaks them down. The third one gets it sold. Just wait this one out… 😉
Kris Berg
Guy, Aargh! If I had a nickel… In fact, I am going to a “listing” appointment tomorrow where I am certain I will have to Just Say No. Their home is currently listed, but the agent just isn’t marketing it agressively enough. Of course, I could be surprised and find that the lack of sale is entirely due to mismanagement, but I doubt it. There is a range of value out there, and I am certain I can help my seller clients achieve the highest price within that range, but overpriced is overpriced, and no amount of marketing can overcome this.
And then, there is the home I currently have listed. The seller insisted on listing it $25k higher than I emphatically recommended and, after three offers at “my” initial “probable sale price” (which were, apparently, offensively low to the sellers), they have now instructed me to RAISE the price. I may be one listing lighter by the end of the week.
Hey, Redfin! This real estate stuff is easy! (Sorry, it’s late, and I’m testy).
Lindie
GreenNV there are two explanations for why South Meadows asking prices are still so high.
One is that the people who live there still think it is 2004, and that they are entitled to their REIC guaranteed 20% annual appreciation. They still have the fliers from 2004 telling them they better buy now or get priced out forever because prices there will climb into the indefinate future.
The other is that 1) everybody wants to live there, 2) South Meadows is special, 3) they aern’t making any more land in South Meadows, 4) prices have already hit bottom in South Meadows,5) South Meadows is special, 6) you can’t lose money buying a house in South Meadows, 7)South Meadows is special.
Austin Realtor's Wife
Guy, great article! You know, it sure is hard for sellers to separate their personal feelings of what their sentimental worth is vs. a Realtor’s CMA. It takes some people getting into a desperation in order to figure out that they are selling A house, not THEIR house- they have to remove their feelings from this business transaction.
Guy Johnson
I noticed that the Sellers found an agent who would list their home at a price acceptable to them. The new listing can be seen at MLS #70011668. The new agent listed the house for $328,888. This new price represents a $10,612 reduction from the Sellers’ prior asking price (see MLS #’s 70004783 and 60017094). Will this reduction be enough? I suppose we’ll see. But if it’s any indication, the house two doors down (MLS #70006279), currently listed for $269,898, has been listed for over a year now (see also MLS #60011260). Sure, it is a smaller house; and on a $/sq.ft-basis both homes are priced at $149/sq.ft. (I suspect this is the figure the new agent used in pricing the Sellers’ house.); but, as I stated in my original post, to sell a home in this market you need to price with the recent Solds, not the Actives.
Sean
I see why they are trying to keep the price high. In july of 2004 they bought the house for 306k. Even if they sell for 320k(right now they’ll be lucky to get 300k, probably closer to 280k) after the real estate comissions they are losing money or barely breaking even from the 2004 purchase. Now if they would have just lowered it a little bit a year ago when they first put it on the market they would have been much better off, now they are stuck! Good luck to them. Now the one two doors down for 269k sold for 292,500 in September of 2004 so they are upside down on that house. Guy, keep us informed on the status of those 2 houses. It will be interesting to see the sold price of these homes if they ever do sell.
Barb
No problem.
Just offer the agent the listing at a ridiculously low price,
lock the exclusive in for 90 days……….
and then counter HIGH and refuse to budge.
Haha!