The Seller who wanted to "Test" the Real Estate Market and Got Burned!

By
Real Estate Agent with Hansen Real Estate Group Inc.

The Seller who wanted to Test the Real Estate Market and got burned

I think every REALTOR has worked with at least one seller in their career that wanted to "test" the market and overprice their home. Some sellers feel their home is superior and justifies a higher asking price while others simply think they'll be able to defy the odds.

As a REALTOR I educate my clients about the current market conditions and suggest a list price. Some of the information I provide is based on fact and some if it is based on my market knowledge and 15+ years of experience. While a majority of the sellers I work with listen to my suggestions and price accordingly occasionally a seller will come along that wants to "try" a higher list price even though the market clearly doesn't support it.

In my experience not only do overpriced homes take longer to sell they net less money, so it's imperative for sellers to select the right list price from the start, not "try" a higher price and reduce down the road.

A quick note before I share how a seller wanted to test the market and got burned. Every real estate transaction is different, so my pricing and marketing strategy will vary from listing to listing. Sometimes I will suggest a list price well above the highest sale while other times it may be right in line with the comparables. There are many factors that come into play when pricing a home. My goal with every transaction is to put my market knowledge, experience and marketing to work for the sellers and obtain top dollar for their home in the shortest amount of time.

The Seller who wanted to "Test" the Real Estate Market and Got Burned

Below is a real scenario that took place, the numbers are slightly changed to protect the guilty, but the percentages remain the same.

Highest Neighborhood Sale: $320,000

Recommended List Price: $330,000

Anticipated Sales Price: $325,000 to $335,000

Based on the market conditions at the time I was confident we could push the envelope and ask for more than the highest neighborhood sale, whether or not it would appraise was a bridge we'd have to cross when we got to it because there wasn't one supporting comparable.

I recommended a list price $10,000 above the highest comparable, now keep in mind the remaining comparables were significantly less than the highest sale. The seller wanted to "test" the real estate market and wanted to list at $350,000, they felt asking $20,000 more than my recommended list price and $30,000 more than the highest sale wasn't a big deal because "a buyer would want to negotiate anyways."

First impressions are everything and that includes the asking price! I expressed the importance of not overpricing their home and explained there is a fine line between pushing the envelope and setting it on fire. At the time homes were going under contract within 7-10 days of hitting the market and selling for full price or very close to it. After reviewing all of the comparables, market conditions, and my pricing strategy with the sellers again they were still insistent and confident asking $350,000 was the right decision.

So we hit the market at $350,000 and had a flood of showings the first week, which is normal because buyer's don't want to miss out, they want to be the first to see a new listing so they can either submit an offer or rule it out. The first week quickly passed, we didn't receive a single offer and by the second week showings came to a halt. After a month I urged the sellers to reduce the price because the market clearly rejected it, but they remained confident the "right buyer" was out there.

Fast forward six months later and several price reductions we finally found a buyer! As I anticipated the home sold for more than the highest neighborhood sale at $328,000 to a cash buyer. However the home sat vacant the entire time we were on the market, so instead of paying overhead for a month or two the sellers ended up paying overhead for 6 months, which substantially cut into their profits.

Had the sellers listed at $330,000 and accepted an offer for $328,000 after paying for two months of overhead they would have netted $323,200, but instead they decided to "test" the market and netted $313,600.

My number one goal is to obtain top dollar for all of my listings, which requires the right pricing strategy because the wrong one will result in an overpriced home that sits on the market costing the seller time and in some cases money every single day.

 

If you're looking for a REALTOR who is honest, trustworthy, one who is able to educate you about the market conditions, put together a comprehensive pricing analysis and strategy for your home accompanied with a great marketing plan call me today for a no obligation in home consultation.

 

Originally posted at http://wellingtonhometeam.com/the-seller-who-wanted-to-test-the-real-estate-market-and-got-burned/

Posted by
About the Author:
Michelle Gibson is a full-time Realtor with the Hansen Real Estate Group Inc. She has been specializing in residential real estate throughout Palm Beach County Florida since 2001. Specific areas of expertise include; Wellington, Lake Worth, Royal Palm Beach, West Palm Beach, Boynton Beach, Loxahatchee, Greenacres, Lake Clarke Shores, Palm Beach Gardens, Jupiter, Delray Beach and Jupiter.
 
Whether you're looking to buy, sell or rent Michelle will be able to walk you through your entire real estate transaction from start to finish.
 
Connect with Michelle:

Comments (54)

L. Scott Ferguson
Ask4Ferguson - Your House-SOLD Name in Real Estate - West Palm Beach, FL
Sunny Florida Real Estate Professional

Yep, just happened to me too. Listing got stale and then when we did close (actually scheduled for today) net I feel $14,000 less than it should.  They live and learn

Jun 27, 2016 10:41 PM
Michelle Gibson

Congrats on the sale

Jun 28, 2016 12:05 AM
Harry F. D'Elia III
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

They always think they know better than us. Hello--we are real estate professionals.

Jun 27, 2016 10:45 PM
Michelle Gibson

Yes they do, usually because they've bought or sold real esate before.

Jun 28, 2016 12:06 AM
Chris Lima
Atlantic Shores Realty Expertise - Port St Lucie, FL
Local or Global-Allow me to open doors for you.

If I had a dime for every time that I have witnessed this.  Apparently, anguish, stress and carrying costs are not first considerations of this type of seller.  Also, they don't readily listen to reason.  Great job putting this scenario into blog format. 

Jun 27, 2016 11:16 PM
Michelle Gibson

Thanks

Jun 28, 2016 12:06 AM
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Hi Michelle, all I could think as I read your excellent post is 'exactly'. This is where lecturing and educating a buyer would perhaps work. I even have a chart to show as people tend to understand diagrams better than words. But if they insist on testing the market, then I have to know in advance if and when the 'test' ends in short time so I don't waste my time and resources.

Jun 27, 2016 11:55 PM
Michelle Gibson

I do the same thing, showing numbers like I did and/or diagrams usually works, but not always.

Jun 28, 2016 12:08 AM
David Krichmar
www.DaveYourMortgageGuy.com - Legend Lending - Sugar Land, TX
DaveYourMortgageGuy.com

great real life example of what not to do and why!

Jun 28, 2016 12:07 AM
Michelle Gibson

Thank you

Jun 28, 2016 12:08 AM
Donna & Larry Johnson
Keller Williams Real Estate - West Chester, PA
Chester & Delaware County

Funny story: I met with my sellers along with my appraiser. I suggested a price and the wife bulked.The husband said to his wife,honey Larry has a real estate license, Marty has a appraisers license you have a drivers license please listen to them. One of the best I can remember!

Jun 28, 2016 12:13 AM
Michelle Gibson

That is AWESOME! I wish more husbands were like that.

Jun 28, 2016 06:50 AM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Great post!  If a Dr. told a seller they needed immediate surgery, they may get a second opinion but like would proceed with the surgery,  If their accountant said a deduction they wanted to use was risky and would like trigger an audit, they probably would listen to the accountant.  When a realtor show actual closed sales, pending sales and active properties and recommends a price, these are facts, not just "opinions".  Now the seller is so much wiser than the agent and thinks someone will overpay for their home.  Now the buyer's agent  is probably showing the buyer the same comps....why do seller's think their outcome will be any different than the advice of the Realtor?

Jun 28, 2016 12:19 AM
Macy Babb ... North Georgia Realtor
Re/Max Around Atlanta Realtor - 404-234-6166 - Cartersville, GA
Realtor, SFR, HUD/REO Certified

Yes... we have all had that client... facing one now, and to add to it, it is also Family

Jun 28, 2016 12:58 AM
Michelle Gibson

In my opinion family is tough to work with, pricing only adds to the diificultness.

Jun 28, 2016 06:51 AM
Noeleen Duffy
Claddagh Florida Properties - Palm Coast, FL

Great post Michelle.  There's no easy answer to the overpriced listing.  Unless the property is unique or the seller agrees to lower the price after a "short test" I think its a waste of time to take the listing because in my experience most of these seller's have unrealistic expectations.

Jun 28, 2016 01:15 AM
Michelle Gibson

Agreed, if this wasn't a vacant referral from a past client I would have turned it down.

Jun 28, 2016 06:52 AM
Linda Metallo DiBenardo
RE/MAX Impact, Lockport, Illinois - Lockport, IL

Sellers are best to price it to "sell" not "sit".

Jun 28, 2016 02:43 AM
Michelle Gibson

I agree

Jun 28, 2016 06:52 AM
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Michelle

The seller who wants to test the market . . . . may find the they will have a very long wait.

Good luck and success.

Lou Ludwig

Jun 28, 2016 03:20 AM
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Michelle

Congratulations on the feature for an outstanding post.

Good luck and success.

Lou Ludwig

Jun 28, 2016 03:22 AM
Michelle Gibson

Thank you Lou!


 

Jun 28, 2016 06:53 AM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

People sometimes forget about the carrying costs associated with holding out for more money!

Jun 28, 2016 04:04 AM
Michelle Gibson

Yes they do

Jun 28, 2016 06:53 AM
BARB KELLEY
NextHome Realty Center - Cypress, TX
The 'Golden' Experience Team!

Great feature and so true!!

Jun 28, 2016 11:35 AM
Anonymous
Connie Addison

I like your post, Michelle. I explain, among other things, that today's buyers are very sophisticated and knowledgeable, unlike many years ago when there was precious little data out there. They come armed with facts, prices, listing history, comparables, etc. As an agent who also works with buyers, I explain to the sellers that when I'm working with buyers I do NOT show them listings that I know are over priced. Since I do my homework I know which ones are over priced and don't have a problem telling buyers just that (should they insist on seeing it anyway).

Jun 28, 2016 11:49 PM
#49
Connie Addison
RE/MAX Sundance Realty II - Fort Myers, FL
Realtor

Oops...forgot to "log in".  I like your post, Michelle. I explain, among other things, that today's buyers are very sophisticated and knowledgeable, unlike many years ago when there was precious little data out there. They come armed with facts, prices, listing history, comparables, etc. As an agent who also works with buyers, I explain to the sellers that when I'm working with buyers I do NOT show them listings that I know are over priced. Since I do my homework I know which ones are over priced and don't have a problem telling buyers just that (should they insist on seeing it anyway).

Jun 28, 2016 11:52 PM
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Well said, Michelle Gibson ! This really points out how costly a "test" can be. Thanks for sharing and I'm glad you were ultimately successful with this listing even if the sellers found it a bit costly.
Bruce

 

Jun 29, 2016 02:01 AM
Annette Thor
Connecticut Homes and Commercial Fairfield Cty,CT reinct.com - Westport, CT
Residential & Commercial Real Estate Broker in CT

I've been there and done that Michelle...The best marketing strategy is pricing right. Nothing beats that.

Jun 29, 2016 04:29 AM
Tori Toth
Tori Toth, International - Howard Beach, NY
888.667.6643 NYC & Beyond, HSR, SAR, RESA, LIBOR

that's such a great story...I'm going to share this..

Jun 30, 2016 02:26 AM
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Michelle - You hit the nail on the head with this story.  So true.  I have one of those now :(  

Jul 01, 2016 05:42 AM