How Dare You Low-Ball My Overpriced House?

Have you heard this tender real estate axiom before? “If buyer and seller both feel like they’re getting screwed, then it must be a fair deal.” This horribly depressing statement works on the principle that if I’m not getting mine, at least you’re not getting yours. Take it from me: I’ve been miserable before and hanging out with other miserable people doesn’t make me feel any better.

What could possibly set a homebuyer or homeseller off like that? Well, in this market, it apparently doesnt’t take much. A buyer’s incredulity when a seller refuses to fix nickel-and-dime inspection items; delays in response time (albeit within the parameters of the contract); a seller’s reluctance to allow a showing at a certain time or a buyer who won’t back off their 2-hr window. And on and on and on…

… however, during a testy market, such as the one we’re all basking in right now, the big “diss” usually comes down to price. For buyers, it’s seeing a house with a price tag that’s out of whack with the neighborhood (sellers aren’t serious, hence they won’t negotiate); for sellers, it’s getting a low-ball offer (“Are they high?” is a common refrain from some of my clients). My colleague Betty Jung in Portland, OR has some sage words on this topic, which you’ll find in Betty’s blog, but the answer, once again, lies in what how well your Realtor can read between the lines of a listing. And trust me, it’s not that hard in this market.

SELLER’S LAMENT

As I alluded to in my “This Lovely Market” post, if you’re selling in this market, it’s likely you HAVE to sell, which means that the SALE of the house is the top priority vs. the PROCEEDS from that sale. (Getting in touch with how your house ranks on the market could mean touring the other active listings with your Realtor.) If the comps reveal a $300,000-$310,000 list price, why would you list your house at $325,000? To end up at $310,000? That’s not a great strategy, unless you’ve been keeping up with your updating and you’re presenting a turn-key house to the buying public. Otherwise, when you go market with a stale, overpriced product, buyers can see you from down the block. There’s also no law against holding firm to your price if you feel it’s competitive; just don’t ignore buyer feedback.

BUYER FEAST or FAMINE?

Having been to Las Vegas a few times in my life (when I say few, I mean quite a few), I can attest to the dull ache of “winner’s remorse.” The pain of losing is swift and painful, don’t get me wrong, but I think the syndrome of wishing you had bet more on a winning hand, game or roll is the true business model that supports Vegas. Ever been the guy/girl at the craps table who had the puniest bet during a hot roller’s streak? Everybody around you is raking it in and you’re getting stack envy. So what happens? You get out fo your comfort zone, stop listening to reason and overcompensate to the point where you actually think you understand horse racing. Today’s buyer is not unlike the modest Vegas winner; the market has provided him with a healthy buy opportunity but he’s pretty sure he can squeeze these “desperate sellers” even more.

The problem is that while sellers shouldn’t be angry at low offers on their overpriced house, buyers can’t expect sellers to roll out the red carpet for any offer, especially when they’re priced fairly.

Good Realtors understand how the market has moved and where it’s headed; at least, they’re in a position to react quickly to it. And since the goal of real estate is to sell and buy homes, not win, reacting to the market is a very good skill to have.

-Karl Lueders


What Sellers Are Saying About Our Lovely Market

My esteemed managing broker, Gretchen Faber (who was interviewed by Charles Gibson on World News Tonight last night), found this interesting article in the New York Times written by a disgruntled seller/journalist claiming to have lost thousands of dollars based on the price he’d have to sell his house to actually get it sold. It’s pretty entertaining because there is a letter to the author written by a Denver Realtor (he’s pretty blunt, which I like) in response to the article. Check it out here.

The timing of this article complements my post from a few days ago about how to sell your home from a position of power.

Failure to Communicate!

I think what we have here is a failure to communicate realistic expectations. When a Realtor says “You can list your house for $425,000 even though homes are selling for $400,000 because you want that negotiating room to get to $400,000 eventually…”, correct me if I’m wrong, but as a seller, what you hear is, “You can list your house for $425,000 blah blah blah blah blah blah…”

The problem with this scenario is that with buyers becoming emboldened with free information, they aren’t going to pay a dime more than a house is worth. Which means that a Realtor instructing you to list your home for $425,000 means that you’re simply going to allow buyers to come and go without making an offer because there are more viable candidates in other parts of town that aren’t 5-6% overpriced.

Good Result/Bad Result

Example: Two listings of mine: one sold in 5 days; one had to be cut loose. The first one was listed in line with sold comps in its neighborhood (Stapleton) and we got 99% of list price. The second was listed with general neighborhood appreciation in mind (house was owned for 5 years… Park Hill between 16th and 17th). We got a lot of showings, but when no offers came in, I discovered that after we listed the home, competing listings in the neighborhood were being put on the market and scooped up in droves at a price point about $30-40k LESS for essentially the same dimensions. Unfortunately, that put my seller right at where they paid for the house. Did they overpay for the house 5 yrs ago? Maybe. But the point of Gretchen’s post (and Bill Dolan’s comments) is that what happened 5 yrs ago doesn’t matter. It’s playing the cards in front of you today. The financial decision is hard for people whose assets (or liabilities) are tied to a house, but their ultimate decision was to save money by selling it themselves as opposed to cutting losses and learning from a tough experience.

Does that sound callous? Granted, if I sold them the house 5 yrs ago, I’d certainly be trying to justify their purchase price at the time, but even then, they went through the same due process everyone else goes through. I can’t expect everyone to take responsibility for their own actions, but at the very least I can paint a realistic picture of what you can expect.

Find out more about how I’m pricing my listings.

How to sell your house from the driver’s seat

I happen to live in Denver’s Driving Park Historic District, which encompasses all houses north of 4th, south of 6th between Downing and High. We moved into a 1400 sf Victorian in 1999 for way more than we wanted to spend, and struggled for at least 2 years wondering how we would spend the remaining $14.32 that we didn’t plop down on our mortgage payment every month. Eventually, our income caught up to our house, and now we can go to the movies together, as opposed to taking turns.

One of the nice things about living in Driving Park and near Denver’s Country Club neighborhood is that we’ve remained relatively bubble-proof, although for reasons different than most neighborhoods.

At first glance, it appears that our section of central Denver is not unlike the rest of the metro area. Currently, there are 47 homes on the market; 31 of these are currently listed for more than $700k. And, when you consider that only 6 houses are under contract and 14 homes have sold in the past 6 months, that amount of inventory seems even more daunting.

Yes, there are homes that have been on the market for more than a year and there’s a large handful of homes that have near or below the seller’s original purchase price (yes, even in Country Club do sellers take it in the gut). But, as I said before, these statistics are not only misleading, but they can provide everyone with valuable lessons about homeownership and how to prepare for selling.

For example, only 3 of the homes sold or are about to close this year are under $700k and several homes above $2million (!) have sold well below the average days on market (DOM). (To get an idea of how the Denver market is performing in general, read my respected colleague Gayle Glucksman’s entry in the Realty Times about market saturation.)

But how does this help you? Read on. Once you know the rules of selling a house in Country Club and apply those rules to sellling your own home, you will realize that or your neighborhood, the numbers begin to make perfect sense.

THE RULES OF SELLING IN THE CCHD 

IMHO, many Country Club Historic District homeowners – broadly, everyone north of 1st Ave, south of 4th between Downing and University (it’s slightly more detailed than that on the east side of the neighborhood, but anyway) – do not see their homes as their primary investment. In order to buy a home, you have to be able afford it, but, more importantly, you have to be able to update and maintain it. This rule increases 4-5x with $1M+ homes.

Like you and I, CCHD homeowners develop a strong emotional attachment to their home, but unlike you and I, they aren’t “house poor” like many people were or are. The result is that there is less emotion and more strategy when it comes to pricing their house. Specifically, two distinct strategies:

  • PLAN A: when you live in a great neighborhood and there is no pressure to leave, you can move on your terms. What ends up happening is that many sellers will price their house according to optimal market conditions (FYI: currently we’re not living in “optimal market conditions.”) and let the market come to them. But not all of it! Most Country Club homeowners don’t – and shouldn’t – allow unqualified buyers to tour their homes, thus filtering the number of “tourists” from coming through their houses. Depending on motivation, there are times when houses north of $3 million will stay on the market for more than 2 years!
  • PLAN B: There are times, however, when job, family or some other circumstance will change the motivation of a homeowner. When you lose control of your situation, Country Club homeowners are just like any other homeowner. More often than not, buyers can take advantage of sellers that relist their house within a couple of years of moving in – especially in this market – or sellers who failed to upgrade a house hoping that the great bones and great block would keep it up with the competition. Regardless of where you live, if your house doesn’t show well because you failed to update or (gasp) your taste isn’t as mainstream as the next house, you can almost see the calculator in a buyer’s head deducting huge chunks off your list price. Don’t get me wrong, there isn’t one homeowner on the planet who is going to be happy about taking a loss on their home, but it’s not a coincidence that successful people often possess a healthy mix of reality, proactivity and a desire to move forward with their lives. And it’s no coincidence that many people that live in Country Club and Driving Park have already found success or are well on their way.

HEY, I DON’T LIVE IN COUNTRY CLUB

Regardless of your neighborhood, you as a homeowner have several options on how to market your property when you need to sell. If you’re electing to move, you can certainly choose Plan A, but eventually you’re going to have be honest with yourself about whether you’re seeing what your house is really worth in this market or if you really want a change of scenery. This market is very quick to respond to your opinion of your house’s worth, so if there’s part of you that thinks you’re not going to get what you want, you may reconsider listing your house (that’s another post altogether). Plan B is never the optimal alternative, but it reflects reality, and as many people are wont to admit, life ain’t fair. The best way to ease the pain of B, especially in this market, is to make a run at a price you’d like to get but be ready to accept what a buyer will bring you.

THEN THERE’S PLAN C

There is Plan C, which I find to be the optimal route for selling a house, but it also forces you to resist the urge to procrastinate and – yuk – do some work around the house.

  • PLAN C: I have clients that will contact me in March/April, letting me know that they’d like to be in a new house by September. While that conversation is nothing new, these clients are prepared to make it happen. They’ll expect me to come by the house and consult with them on what needs to be done to the house in order to have it sold in 4 months.

Sound impossible? Not at all. (Maybe, if they need to gut their kitchen. But if these people are calling 6 months ahead of time, they’ve already made significant updates to their house.) They also recognize that the ultimate goal is to be in a new house, not trying to squeeze every nickel they can out of their current home. These people have either made a profit on their house and won’t led greed disrupt their lives, or their life change is more important than an extra 1-2% of sales price (now that’s another post for another day!) in a bad market. In either case, they’re moving forward with their lives.

What’s my role in moving them forward? To bring as many buyers as possible to the house, present as much feedback as possible, and give the seller the opportunity to react to the market’s criticisms.

Remember, most of us don’t live in the Country Club, but with a little planning, we can be just as savvy when it comes to selling our houses. And when you’re ready, be sure to visit me to get a little more insight as to why I can get you in the driver’s seat.

 

 

 

Housing inventory down; price points up… story at 11?

If you’re expecting any of the data here to make the front page anytime soon, don’t hold your breath. These numbers aren’t bleeding, so they’re not leading.

But there are embedded glimmers of hope for people clamoring for positive real estate indicators.

Housing inventory is up over last month, but compared to this time last year when our market was saturated, the trend is absolutely positive. The combination of sales, unreasonable sellers and more motivated bank activity has certainly contributed to this overall decrease. Housing prices have decreased in the past 12 months, down close to 10k since 2006. But month-to-month numbers have shot upward, as have the under contracts on the single-family side. The condo market still isn’t the greatest, but the month-to-month upticks are still pretty encouraging.

So when can you expect a local talking head to report on the eventual uptick in the Denver housing market? When their house sells for more than what they paid for, I’m guessing. If you’re curious what houses are selling for in your neighborhood, go to this search tool to find out. To find what they sold for, go here

Karl Lueders on Line 1…

Thanks for taking my call… Even though this is going to be a dedicated real estate Web site, this post is dedicated to the late, great, Goethe P. Lueders. She was my black lab for 4.9 years, only to succumb to lymphoma 4 weeks before her 5th birthday. She was my inspiration, energizer bunny and alarm clock all wrapped into one. Here’s a pic

She was loved by many people, hated by most cats and birds and tolerated by her sister Sadie. Sadie is still with us, and because of that, dog parks are a part of our lives. If they’re a part of yours, check out these locations in Denver.

Denver metro area dog parks

Anyway, if you care to learn more about my relationship with the top real estate brokerage in town, click there. If you want to search for homes or learn about my upcoming charitable giving programs, click here!

Otherwise, bookmark this page for important information about Denver’s vitriolic real estate market, what the future holds for your home or your neighborhood, or random commentary that may captivate you for a couple of sentences, bookmark this page or simply check back when you can. I’ll keep the swear words to a minimum. Talk to you soon.