What A Seller Paid For A Home Is Not A Negotiation Tool

By
Real Estate Broker/Owner with Amanda Davidson Real Estate Group 0225221517

What A Seller Paid For A Home Is Not A Negotiation Tool

NegotiationDuring recent negotiations I was really taken back that an agent was using what her sellers paid for the home as a negotiation strategy. It’s not uncommon for a seller to want to base their sale price around what they paid for the home or for a buyer to want to make a low offer because they see that the sellers bought years and years ago and likely have substantial equity but, as a real estate professional we know (or should know) neither scenario is a tool for negotiation.

 

Real Estate is always changing and a home’s value is going to change with it. It really doesn’t matter what a seller paid for the home and in turn it’s never a negotiation strategy I’d consider using. The agent I was working on negotiations kept coming back with what her sellers paid and while I felt for them because they had bought at the absolute height of the market the reality is that’s not what the home is currently worth. The house had been on the market for almost 2 months and in our current market that’s an eternity. It showed beautifully and was in a great location but, the comps didn’t support the list price. We weren't able to come to terms during negotiations and the house is still on the market 2 weeks later.

 

When negotiating on a home there are many reasons that are relevant for a buyer not wanting to pay full list price or for a seller justifying why full list price is reasonable but, what the seller paid for the home is not one of them in either scenario. Hiring an agent that knows your local market whose expertise you trust is imperative for a successful sale. 

 

 

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Amanda Davidson

Amanda Davidson Real Estate Group

Broker - Owner
Licensed in VA and DC

6485 Old Beulah Street
Alexandria, VA 22315

Cell: 703.431.3755
Fax: 703.562.7057




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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 06/06/2016 03:55 PM
  2. Winston Heverly 08/20/2016 02:57 PM
Topic:
Home Selling
Location:
Virginia Fairfax County Alexandria
Tags:
selling your home
negotiation
home sellers

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Ambassador
674,670
Mimi Foster
FALCON PROPERTY SOLUTIONS - Colorado Springs, CO
Voted Colorado Springs Best Realtor

What a perfect observation, Amanda. I usually get this one on the buyer side - they only paid $100,000 in 1972, why should we pay them $350,000 now? LOL

May 26, 2016 03:43 PM #22
Rainmaker
936,849
Kat Palmiotti
Grand Lux Realty, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

It's all about what the market will bear for a particular house at the time the house is being sold/purchased. While knowing what a seller bought their house for might help get some insight into how much flexibility there might be, the bottom line is market pricing.

May 26, 2016 08:39 PM #23
Rainmaker
1,769,216
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Great post! Market determines price.....what the seller paid doesn't matter. The original buyer of my home paid cosiderably more than we did.

May 26, 2016 08:54 PM #24
Rainmaker
3,578,225
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

So true, Amanda.  Past sales from years back have no relationship or relevance for the current market.  

May 26, 2016 08:54 PM #25
Rainer
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LeAnn Sink - Realtor Lexington, KY
United Real Estate - Lexington, KY
#ThinkSink when you need an agent.

Very true and this needs to be preached a little harder in our industry. A home is only worth what a buyer is willing to pay. Period. Nobody but the seller cares what they paid for their house. That was either their mistake or gain. 

May 26, 2016 10:17 PM #26
Rainmaker
2,100,254
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Relevant subject matter and good post. Add to this the famous: Why are you moving thinking the reason will get a buyer a better deal.

May 26, 2016 11:36 PM #27
Rainmaker
618,405
Cynthia Larsen
Safe Haven Realty - Cotati, CA
Independent Broker Serving Sonoma County, CA

What a seller paid for their house is not relevant, I can't believe the listing agent is taking that into account. What they owe on the house is another matter. Are they trying to avoid a short sale?

May 26, 2016 11:56 PM #28
Rainmaker
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Nina Hollander
RE/MAX Executive | Charlotte, NC - Charlotte, NC
Your Charlotte/Waxhaw/Fort Mill Area Realtor

Makes me crazy when people ask me this question.

I always tell buyers that we have no "profit police" in Charlotte. Then I ask them how they'd like to have someone questioning their profit on the sale of their home. That usually shuts them up. 

As for sellers, I have a one page flyer that talks about all the things that don't impact the current value of their home and I review it with them. Sellers who can't or won't understand what does impact their homes' values to me are not fully motivated sellers.

May 27, 2016 12:12 AM #29
Rainmaker
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Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
Los Angeles Pasadena Area Real Estate 818.516.4393

Hi Amanda --- I always love when a buyer asks "what did the seller pay?".   It's public record in most cases but it certainly has no relevance to current market value.   Odd, that a real estate professional should bring up the issue - she should know better.  

May 27, 2016 12:32 AM #30
Rainmaker
276,737
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Great post Amanda.     The only reason I can think of where the sellers' purchase price matters is if the sellers' loan is such that a market rate sales price would create a short sale.     

May 27, 2016 04:43 AM #31
Rainmaker
2,026,149
Anita Clark
ColdwellBanker SSK Realtors ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Amanda: It sounds like the other agent took the listing hoping the sellers would drop the price at a later date. No relevancy in what the seller originally paid for the home when it comes to selling it down the road.

May 27, 2016 06:07 AM #32
Rainmaker
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Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Condo & Home Sale Specialists

Amanda, Home purchases are made based on FAIR MARKET VALUE. What a property is worth today would be the important question to ask now!

May 27, 2016 07:28 AM #33
Rainmaker
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Carla Muss-Jacobs, Principal Broker (503) 810-7192
BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

Yes, it has to do with negotiation . . . especially in short sales.  While you don't have to, it certainly is part of what I see.  Using previous stats from sold property, i.e., what sellers have paid for their property in the immediate area is how I comp a particular property of interest.  I've used the price the seller paid many times as a negotiation strategy.  How do you find out what fair market value is if you don't take into the equation what seller paid?  I just closed on a transaction where what seller paid was, indeed, used in negotiation.  They saved $12K as a result.

May 28, 2016 05:23 AM #34
Ambassador
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Robert Vegas Bob Swetz
Realty ONE Group - Las Vegas, NV
Las Vegas Henderson Homes for Sale

Congrats on the feature Amanda and Happy Memorial Day 

Photography by Robert Swetz

May 29, 2016 03:42 AM #35
Rainmaker
214,022
Victoria Henderson Marshall Henderson
Buyer's Edge Company Inc - Bethesda, MD
Real Estate for Home Buyers with Buyer's Edge

Such an excellent point Amanda! So often people have the wrong idea of how to value a property. Some use the Zestimate or tax assessment or just want to come in 30 thousand dollars under list because they have to get a slammin' deal. Time is an excellent teacher in these situations. 

May 29, 2016 11:24 PM #36
Rainmaker
270,159
Teri Pacitto
RE/MAX Olson & Associates, Inc. - Westlake Village, CA
Real Estate, Your Style...Your Home...My Specialty

And I thought I was the only one who ever got asked that question!  What difference does it make is my response?  It never ceases to amaze me that so many without a real estate license are experts in this business.

May 30, 2016 12:35 AM #37
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Debbie Reynolds
Berkshire Hathaway HomeServices PenFed Realty, Your Clarksville Real Estate Professional - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

If I had a nickel for every time a buyer asked me that question I could retire (almost). I explain it doesn't matter and they have no way of knowing what the market was doing at that time. Base the value on the present. Great post Amanda.

May 30, 2016 12:37 AM #38
Rainmaker
772,229
Jan Green
HomeSmart Elite Group,Scottsdale, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Excellent post and congrats on the feature.  I hear this all too often, sellers think they can also add those extra upgrades on a new-build, too.  Very frustrating!

Jun 02, 2016 03:29 PM #39
Ambassador
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Bob Crane
Woodland Management Service - Stevens Point, WI
Forestland Experts! 715-204-9671

I invested in many foreclosures at the bottom of the market, spent a lot to fix them up, spent a lot to keep them, and now I will get both buyers and their agents who expect that I should pass on this purchase price to them.

My response to this tactic is never a pleasant one.

Jun 06, 2016 04:13 PM #40
Rainmaker
1,238,364
Sandy Padula and Norm Padula, JD, GRI NMLS#1483386
Realty One - Carlsbad, CA
Presence, Persistence & Perseverance

Amanda S. Davidson You are so right in most cases with this post. However, when dealing with an investor flip, I must argue that it does have some bearing, as so many flips are resting places for distasters in renovations that merely cover the defects and all the bases for arriving at the sale price should be considered by the buyer.

Aug 20, 2016 10:47 PM #41
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