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

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/

Michelle Gibson REALTOR®
HANSEN REAL ESTATE GROUP INC.
561.333.0446


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Comment balloon 53 commentsMichelle Gibson • June 25 2016 06:18PM

Comments

Michelle Gibson, You are so right on the spot with that one.  Everyone seems to think their house is worth more. Pricing to high will end up costing everyone involved.  Thank you

Posted by Esther Preston (Heartland Realty) almost 2 years ago

Hello Michelle Gibson, I think we have all been there and the longer it is on the market the less people will get.  They need  to listen to us.

Posted by Will Hamm, "Where There's a Will, There's a Way!" (Hamm Homes) almost 2 years ago

Michelle, those who want to test the market must understand how much money that "testing" equates to. In your case, glad to hear they were open to price reductions. 

Posted by Beth Atalay, Cam Realty of Clermont FL (Cam Realty and Property Management) almost 2 years ago

I have many horror stories to tell where I couldn't convince the seller to listen to my advice.  In two instances, they both lost more than $250,000 by not accepting offers that we had received that presented the true value.

I use these stories now when dealing with sellers that want to overprice - and sometimes they still want to "test" the market.  

Posted by Margaret Goss, Chicago's North Shore & Winnetka Real Estate (Baird & Warner Real Estate) almost 2 years ago

But Zillow said!!!

Posted by Greg Nino, Houston, Texas (RE/MAX Compass, formerly RE/MAX WHP) almost 2 years ago

Michelle Gibson You are so right!  I have seen this happen time and again. 

Posted by Elyse Berman, PA, Boca Raton FL - (561) 716-7824 - CRS, ABR, GRI (Best Connections Realty, Inc.) almost 2 years ago

Michelle, excellent post and you are spot on. Congrats on the feature!

Posted by Sharon Paxson, Newport Beach Real Estate - Arbor Real Estate (Arbor Real Estate) almost 2 years ago

It's a strategy that seldom works. Glad you finally found a buyer!

Posted by Chrissi Chapman Topoleski, HOME~There is no place like it! (Re/Max Real Estate Connections) almost 2 years ago

I've seen them stay on the market so long they actually end up selling for less than I first suggested it might.  Even turn down reasonable offers and then sell for less after months or a year on the market. 

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) almost 2 years ago

Hi Michelle: Yes, many of us have heard that before. What is surprising is that the home was vacant. When I see this, they usually still occupy the home and their motivation is not high. One day...hopefully sellers will rely on our expertise. It did sell, so that is a good thing!

Posted by Janice Hope Zaltman Realtor,LEED AP (United Realty Group) almost 2 years ago

Most  of the time....testing the market is not a good idea.  I can see how a seller can really get burned..

Posted by Ginger Harper, Your Southport~Oak Island Agent~Brunswick County! (Coldwell Banker Sea Coast Advantage) almost 2 years ago

I realize how frustrating this can be.  They call us for our knowledge, experience and expertise . . . then don't listen to it!  And it's not true about the buyer can negotiate it.  

In my years of being a buyer's broker, buyers will have their price range.  When a home is priced $50K above it, they won't even bother.  Maybe $10K, but in this market -- a strong sellers -- it possible that the property will sell very close to list.  If the property is priced ABOVE the buyers price point -- they're not going to consider it.  So sellers who want to "test" the market, will only test their own patience . . . they limit the number of buyers going above price points.  Great post and nice to see you again!

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 2 years ago

We had an agent who wanted to test the market had her home listed 6 times.

I was her experiment #2.  I brought her 1 offer. She called next year wanted me to represent her and I asked her to sign all disclosures. She hesitated and I said it is needed for any home seller. She left the brokerage and the next 4 agents all got the property into pending and cancellation. Make long story short she called and I listened. I am sure the next 4 agents were not happy. Finally, she sold it herself w/o MLS. I have not spoken to her for several years. I figured I was her guinea pig.  

Posted by Sam Shueh, mba, cdpe, reopro, pe ( (408) 425-1601) almost 2 years ago

Heyheyhey .. what about the one that sat on the market for several years and finally sold ???

And had they waited another year it could have been MUCH more?

 

Leave it on the market forever if you can.

 

Make it a Great Day.

Posted by Scott Thompson, Commerical Finance - Blue Springs, MO (Columbia Mortgage Plus) almost 2 years ago

Yes, many don't think about the carrying costs.  Here, the taxes are so high that you really need to look at this...and most forget this. 

Posted by Debbie Gartner, The Flooring Girl & Blog Stylist -Dynamo Marketers (The Flooring Girl) almost 2 years ago

Great post about how too high of a price really effects your bottom line. It's always a story that 'happens to somebody else'.

Posted by Lyn Sims, Schaumburg IL Area Real Estate (RE/MAX Suburban) almost 2 years ago

Michelle -- Great post. 'Testing' the market almost always results in a 'failure'.

Posted by Barbara Altieri, REALTOR-Fairfield County CT Homes/Condos For Sale (RealtyQuest/Kinard Realty Group, Fairfield and New Haven County CT Real Estate) almost 2 years ago

Michelle Gibson this is one of the many things I talk about in real estate pricing myths. So many sellers make the mistake of thinking they will be the one sale that will be different than all the rest - WRONG!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) almost 2 years ago

Hi Michelle,

Good post. To bad sellers won't listen to the professionals. I've had a few of those clients too. Never seems to end well for them.

Posted by Steve Higgins (RE/MAX Kelowna) almost 2 years ago

I just went through this on the buyer's end. Seller "tested the market" according to listing agent. 3rd price reduction just happened to occur hours before I showed the home to my buyers. Buyers loved it, wrote an offer, offer was accepted, we're happy on all sides. Then the appraisal.... For $20,000 less than the agreed price. Big deal for a rural area. Luckily, seller agreed to reduce (after much discussion) in order to move on. Testing the market just doesn't work in the age of public information.

Posted by Melissa Spittel, "Achieving Results Together " (Coldwell Banker Residential Brokerage) almost 2 years ago

All sellers need to read your words of wisdom and pay attention to local markets, comps and their listing agent!

Posted by Sharon Parisi, Dallas Homes (United Real Estate Dallas ) almost 2 years ago

Michelle, finding the perfect listing price ins't rocket science or brain surgery, but it's complicated and nuanced.  Some sellers need to learn the hard way.

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) almost 2 years ago

In total agreement on this. I have  a couple I am very good friends with who wanted me to have their multi-million dollar listing but I needed to follow their plan. After a few talks and the unveiling of their plan I declined for the sake of our friendship. We're still friends and they never sold their home.

Posted by Lon Levin, I am a real estate investment specialist (Sotheby's International Realty) almost 2 years ago

Happens every day in America.  Why listen to experts, after all they only spend time every day, researching and staying abreast of the market.

Posted by David Alan Baker Laveen & South Phoenix Realtor, Your local Expert (HomeSmart) almost 2 years ago

Michelle Gibson - somehow some sellers go by what they think is right - and that's when things go south!

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) almost 2 years ago

Michelle

We see this sort of scenario play out over and over, and sometimes sellers are even less fortunate, and have to learn a tough, and expensive lesson.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude - Carlsbad (Solutions Real Estate ) almost 2 years ago

Great perspective:

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.

Posted by Sham Reddy, CRS (H E R Realty, Dayton, OH) almost 2 years ago

Good morning Michelle Gibson,

Excellent presentation of how overpricing can work against a seller. It can often be a very expensive lesson.

Posted by Dorie Dillard, Serving Buyers & Sellers in NW Austin Real Estate (Coldwell Banker United Realtors® ~ 512.346.1799) almost 2 years ago

Which is exactly why I don't take over priced listings. It not only costs the sellers, it costs me advertising and time, and puts a ding in my reputation!

Thanks for sharing your nightmare Michelle Gibson 

Posted by Jennifer Mackay, Your Bay County Florida Realtor 850.774.6582 (Counts Real Estate Group, Inc.) almost 2 years ago

Michelle, this happens all the time. No matter how much you explain to a seller that this is a bad strategy that will net them less money...they often assume we want a lower price because we are hoping to earn a quick commission.

Posted by Jeffrey DiMuria 321.223.6253 Waves Realty, Florida Space Coast Homes (Waves Realty) almost 2 years ago

Just went through this with a seller who was not going to take less than $x and no buts about it. Thankfully, we needed a few days to get it ready to take photos, and in the meantime, he thought about what I had told him, went with my comps and we listed it yesterday at a realistic price. Had 3 prospective buyers contact us within a few hours.

Posted by Hella M. Rothwell, Broker/Realtor®, Rothwell Realty Inc. CA#01968433 Carmel-by-the-Sea almost 2 years ago

I've found that most people do not understand the concept of time value of money. And depending just how much someone wants to "test" the market, to me that often reeks of an unmotivated seller. So it's always a delicate dance to find out if they are truly motivated or "playing around."

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (RE/MAX Executive | Charlotte, NC) almost 2 years ago

The ironic ending of many such scenarios is that the listing expires with the seller unhappy with the efforts of the agent.  They complain about the first agent to the second agent, who lists at a lower price, sells it quickly and pockets the commission that the first agent would have earned if the sellers had listened to their advice in the first place.

Posted by Brian Schulman, Lancaster County PA RealEstate Expert 717-951-5552 (Coldwell Banker Residential Brokerage, Lancaster PA) almost 2 years ago

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

Posted by L. Scott Ferguson, Sunny Florida Real Estate Professional (Ask4Ferguson - Your House-SOLD Name in Real Estate) almost 2 years ago

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

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (Real Estate and Beyond, LLC) almost 2 years ago

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. 

Posted by Chris Lima, Local or Global-Allow me to open doors for you. (Atlantic Shores Realty Expertise) almost 2 years ago

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.

Posted by Richard Bazinet /MBA, CRS, ABR, Phoenix Scottsdale. Sellers, Buyers & Relocations (AZuRE Team - Realty ONE Group) almost 2 years ago

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

Posted by David Krichmar, DaveYourMortgageGuy.com (www.DaveYourMortgageGuy.com - Legend Lending) almost 2 years ago

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!

Posted by Donna & Larry Johnson, Chester & Delaware County (Keller Williams Real Estate) almost 2 years ago

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?

Posted by Shirley Coomer, Realtor, Keller Williams Realty, Phoenix Az (Keller Williams Realty Sonoran Living) almost 2 years ago

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

Posted by Macy Babb, Realtor, SFR, HUD/REO Certified (Re/Max All Properties Realtor - 404-234-6166) almost 2 years ago

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.

Posted by Noeleen Duffy (Claddagh Florida Properties) almost 2 years ago

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

Posted by Linda Metallo DiBenardo (Re/max Impact, Lockport, Illinois) almost 2 years ago

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

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) almost 2 years ago

Michelle

Congratulations on the feature for an outstanding post.

Good luck and success.

Lou Ludwig

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) almost 2 years ago

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

Posted by Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC, ... a small office, delivering big service! (Waters Realty of Brevard, LLC) almost 2 years ago

Great feature and so true!!

Posted by BARB KELLEY, The 'Golden' Experience Team! (NextHome Realty Center) almost 2 years ago

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).

Posted by Connie Addison almost 2 years ago

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).

Posted by Connie Addison, Realtor (RE/MAX Sundance Realty II) almost 2 years ago

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

 

Posted by Bruce Kunz, REALTOR®, Brick & Howell NJ Homes for Sale (C21 Solid Gold Realty, Brick, NJ, 732-920-2100) almost 2 years ago

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

Posted by Annette Thor, Residential & Commercial Real Estate Broker in CT (Connecticut Homes and Commercial Fairfield Cty,CT reinct.com) almost 2 years ago

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

Posted by Tori Toth, 888.667.6643 NYC & Beyond, HSR, SAR, RESA, LIBOR (Tori Toth, International) almost 2 years ago

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

Posted by Jan Green, HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN (Value Added Service, 602-620-2699) almost 2 years ago

Participate