Don't Insult the Seller

By
Real Estate Agent with Healdsburg Sotheby's International Realty

I don't want to insult the seller.

How often have we heard that comment from fence-sitting buyers? Even if it's not stated explicitly, it's clear that many buyers today are looking for significant bargains. I'm not talking about the conscienceless low ballers who want thirty or forty percent slashed from the listing price, but regular people with hearts trying to buy at the best possible price. My favorite way to deal with this situation is to stick with the basics of comparable sales.

The fundamental fact of real estate today is that the market has declined from previous years. Even the most reluctant sellers are finally understanding that their nest egg from four years ago is now a much smaller egg than before. Comps are the universally understood guideline that helps determine just how much the value has fallen and allows sellers to set a rational market price. When I work with buyers, we always study the comps in the neighborhoods we are interested in so we can see the trends of the last few years and identify realistic standards for square foot pricing. For example, in one Sonoma County neighborhood, the average square foot price has declined from $280 to approximately $220. If my clients are looking at a 2,000 square foot house, they know that the house value is probably around $440,000 compared to $560,000 previously. 

This is where the question starting this post comes into play. If I have done my homework with the buyers and done a good job of explaining comps, they will come to any house tour with an initial idea about what the current market value of the house is, regardless of listing price. Particularly in relatively homogeneous markets where homes were built at the same time with identical or similar floor plans, every recent sale informs us of current pricing. To keep things interesting, each home will have been maintained differently and some owners may have made significant and thoughtful improvements before becoming sellers. All those factors are part of coming up with a buying strategy, but the underlying value of the house should be known by studying the comps and verifying the condition of the house during a careful tour. 

Most buyers that I have worked with take the comps and the tour information and come up with roughly the same valuation that I do. This isn't rocket science. If the identical house next door sold for $400,000 last week, it's unlikely this house will sell for either $300,000 or $500,000. 

So, we now have a fence sitting buyer who knows the realistic market value of a property. What should they offer? If they have been careful listeners to your market reality discussions, they will understand that well priced homes sell quickly and overpriced homes languish. If the property they are interested in is new to the market but appears to be on target with pricing, I don't think offers more than 10% below listing price make sense. In some of our neighborhoods that are trending towards seller's markets, a full price offer might even be in order. What your buyers have to understand is that the seller and listing agent looked at the same comps you looked at and thought for a long time about setting a price. Your offer will only be insulting if you assume the people on the other side of the table didn't do their homework. 

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Rainer
41,522
Sara Garden
Rocky Mountain Home Staging - Boulder, CO
MBA, HSE, HSR, APSD, Home Stager

or if you make a ridiculous offer as a buyer insisting on the infallacy of the mighty zillow... that happened to me as a seller once... of course once I sold my house at market value zillow raised the estimated value of my house by $65k...

Oct 18, 2011 12:17 PM #1
Rainmaker
346,955
Dan Brudnok
Keller Williams RE- Exton - PA License Number #RS225179L - Downingtown, PA
REALTOR,e-PRO,ABR,GREEN,SRES,CSP

Dave,

You stated this very well.....BUYERS/SELLERS please listen!

Oct 18, 2011 12:23 PM #2
Rainmaker
373,058
Pat Champion
Coldwell Banker Camelot Realty - Mount Dora, FL

So true buyer's and seller's need to understand the market and comps of what is selling whenever making an offer.

Oct 18, 2011 12:27 PM #3
Rainmaker
267,549
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

Sara - I have a theoretical appreciation for Zillow's chutzpah in trying to determine value for every home in America, but they are doing a huge disservice to buyers and sellers who don't understand how inaccurate most Zestimates really are. I'm sorry you were the victim of a browbeating from a true believer. 

Zillow has a presence here on AR and they can defend themselves. Let me just say that I think they have a great team of people from the top down. I wish they would do a better job of educating the public about the inherently flawed process (Zestimate) of using a computer model that works fine in a cohesive subdivision in a stable market but terribly everywhere else.

Oct 18, 2011 12:28 PM #4
Rainmaker
267,549
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

Dan and Pat - Thanks. I think the more we can convince our buyers and sellers to understand the market, the easier it is to get pricing right.

Oct 18, 2011 12:37 PM #5
Rainer
234,123
Daniel H. Fisher
www.FisherHermanRealty.com (704) 617-3544 - Charlotte, NC
MCRP - Charlotte Real Estate, NC or SC

Having solid information about the comparable sales prices, days on the market, list price to tax value, list price to sale price and other market data is essential to making an informed decsion about price. 

Oct 18, 2011 12:54 PM #6
Rainmaker
817,992
Richard Weeks
Waller Group - Dallas, TX
Realtor, Associate Broker - Manager Business Development

I say no offer is a bigger insult.  No offer indicates I am not even willing to take the time to make an offer.

Oct 18, 2011 01:06 PM #7
Rainmaker
1,375,455
Ron & Alexandra Seigel
ra@napaconsultants.com - Carpinteria, CA
Luxury Real Estate Marketing

Dave,

I think your apprach is excellent and logical.  The important part is that agents who are listing homes also educate the sellers.  Many agents are afraid to challenge the seller and take an overpriced listing and sit with it.  They will even admit it is overpriced and will tell you that they showed the comps to the seller, and the seller just does not want to budge. One of our clients walks away from these listings, and quite often, the seller calls him back and lists it at his suggested price.  LOL it is all part of the game we call real estate. A

 

Oct 18, 2011 02:11 PM #8
Ambassador
634,681
Doug Rogers
Bayou Properties Realty - Pineville, LA
Your Pineville Louisiana Agent

The only thing that should insult a seller is the absence of an offer.

Oct 18, 2011 02:43 PM #9
Rainmaker
267,549
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

Daniel - The more information, the better foundation for defending the offer.

Richard and Doug - I appreciate your sentiment about any offer being better than no offer. I've had listings with zero activity in spite of multiple showings and it's an empty feeling, for sure. 

Alexandra - I'm starting to draw a much harder line with potential listers who won't set a reasonable starting price. I will bust my tail promoting their listing, but it's not effective if the price isn't right. Buyers are too smart to jump at something over market price. At least my buyers are...

Oct 18, 2011 06:50 PM #10
Ambassador
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ASHEVILLE 1031 PROPERTIES RESOURCES & REFERRALS
Asheville 1031 REFERRING BROKERAGE - Asheville, NC
Tell Us What Is Most Important to YOU

Dave~

On first glance, I thought  yourphoto showed "prockly  pears" ...especially onsidering the content of this post..."Prickly" as it may seem to Sellers, as you say, "...The fundamental fact of real estate today is that the market has declined from previous years. Even the most reluctant sellers are finally understanding that their nest egg from four years ago is now a much smaller egg than before...."

Oct 21, 2011 08:43 PM #11
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Dave Roberts

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