A Sad Tale Of False Hope

Nothing beats experience in rapidly changing real estate markets. Last summer I was challenged by a potential seller who had a specific need. “I need to sell my home and close the transaction in 30 days” The seller had purchased another home and wanted to replace the funds used in that transaction with the closing proceeds from the home for which I was being asked to give a pricing opinion.

Last summer the market was in a rapid state of change. Home values had increased dramatically during the spring and into early summer. Prices that were inconceivable only a year ago were a reasonable expectation in a booming sellers’ market. How do you price a home in a rapidly changing market?

• I looked at the Market Comps – homes that had sold in the neighborhood in the past three months. I could not look back any further because the market had been changing so quickly.
• Secondly, I determined the finished square footage in the home for which I was giving a price opinion.
• Third, the condition of the home was considered. What was the age of the roof? Do HVAC systems need to be replaced? Are there water leaks in the basement or foundation issues? What additional repairs are needed?
• Then I sat down and formulated a pricing opinion based on the facts. No emotions were involved, just a careful analysis of the facts. In the trade we call this a market analysis

I gave the seller my price opinion and it was not well received. The seller had a much higher price in mind and the facts were just not part of the seller’s consideration for forming a list price for their home.

The seller contacted another real estate agent who was more than happy to list the home at the seller’s desired list price. Promises were made that the home would be under contract quickly and close in the desired 30-day window. The home was listed $100,000 higher than the list price I had recommended.

This week the sale info finally hit the fmls. You guessed it. SIX MONTHS LATER the home finally sold at the list price I had recommended.

You might think that is ok since the seller got the list price I recommended. But consider the cost of carrying the home for 5 additional months. Real estate taxes, fire insurance, electricity, natural gas and water bills for 5 additional months piled up while waiting for a buyer. Also, the lost opportunity to invest the sales price in a conservative equities market choice would have yielded a 3 or 4 % return on the proceeds of the sale. That added up to quite a costly expense for the seller. A sad tale indeed.