the RIGHT house and the GOLD coins.

By
Real Estate Agent with Coldwell Banker Residential

I recently had the good fortune to be asked to do listing presentations on two single-family homes.  The homes were side by side on the exact same street. They were the same house, the same view, same school district, same, same paint color, same .... well, you get the idea.

To help you differentiate them, let's call them the LEFT house and the RIGHT house.

The seller of the LEFT house, had purchased it in 1964, and paid about $134,000 for this fabulous 3br/1.1 bath home.  Since 1964 they'd updated the kitchen, updated both baths, and overall maintained the home in excellent condition, including the landscaping.  The seller of the RIGHT house has purchased it in 2005 for $480,000, and when they bought the 3br/1.1 bath home, the previous owner had already updated the kitchen, both baths and had maintained the home in excellent condition, including the landscaping, in fact they used the same landscaper to care for the expansive yards.

I did a CMA on the homes, and my CMA clearly showed that the current market value (in order to sell within 90 days) was approx $430,000, and if they really wanted to show as a "value" on the market, they probably ought to list at $425,000-ish.  The owner of the LEFT house read the CMA and agreed, based on the very convincing CMA, and listed their home with me for $430,000.  The owner of the RIGHT house, however, was very upset.  This represented a drop in value of about 10% since they purchased.  "My home" he said "Is worth more than the LEFT home, you're asking me to LOSE money, just so you can have a quick sale. If you were any kind of Realtor®, you'd run print ads, do internet marketing, and hold open houses to bring me a buyer at $500,000, which is where I think we should list.

At that point, I revert to my trusty Gold Coins, and I explain to my potential seller.  Your home is not a "product"... your home is a "commodity".  And as a commodity, the prices on these homes goes up and down.  Here in my hand I have two 1-ounce gold coins.  One of them, I purchased many years ago, at a cost of $300.00.  The other gold coin I purchased recently, when gold was a bit higher, at $800.00. They are identical coins, same country of origin, same condition, same luster, same gold content. 

Gold is currently trading on the market around $700.00 an ounce. Do you suppose, if I try to sell either of them, that by way of extra advertising, extra internet presence, or extra broker's opens, or public open houses, I can entice someone to pay $800.00 for either of them?  Do you suppose any amount of exposure could entice someone to pay $800 an ounce right now? Can you look at them and tell which one is worth $300.00 and which one is worth $800.00? If you can, then I'll list your home for $500,000.

Of course, he couldn't do that.  The market is, what the market is! (feel free to quote me on that), and people will only pay what the market says your home is worth.  Just as people will only pay what the gold coin is worth today.  While we don't have a "gold exchange" to tell us what each ounce of our home is worth, we DO have the ability, through comps, market times, and actives to tell what the approximate pricing on a home should be... and not amount of advertising, open housing, broker's tours, or fancy signage is going to get someone to pay extra, just because YOU did.

Did I get the listing, no, not yet.  The RIGHT house, decided to go with another Realtor who agreed to list their home at the WRONG price.  Maybe after my LEFT house sells, and the RIGHT house sits on the market for reduction after reduction, they'll remember my Gold Coin Analogy and call me the be the follow-up Realtor?  Am I upset that I didn't get the RIGHT house.... well, I'm a bit upset that I wasn't convincing enough, but I'm not upset that I don't have an overpriced listing to sell, and spend lots and lots of money on, with a high-maintenance seller, in today's market.

Did I do the RIGHT thing?  I think so.

btw... graphics are supplied via ClipArt.com and my $159/year subscription, and are copyright protected. I have a subscription which allows me to post them on my web.

Posted by

 ALAN MAY, Realtor®
Specializing in Evanston Real Estate and North Shore Real Estate

Coldwell Banker Residential Real Estate, 2929 Central Street, Evanston, IL 60201
847.425.3779      Cell: 847.924.3313      Email: Almay@aol.com

Evanston Real Estate & North Shore Real Estate
Licensed in Illinois

   

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Jason Sardi
Your Agent for Life
Auto & Home & Life Insurance throughout North Carolina

Alan - It certainly sounds like you did the right thing to me.  I'm not a Realtor but I do think your analogy to the gold coin is an accurate & creative one.  And hey, if by some fluke the house on the right sells at 500K-ish... perhaps you and your seller will make more 'Coin' on the house on the left as a bidding war ensues.

November 10, 2008 09:10 AM
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Alan May
Evanston & Northshore of Chicago real estate
Coldwell Banker Residential

Jason, if I really believed there was any chance in hell that either house would sell near the $500's, I'd be willing to list it at that price.  But I do a thorough CMA, and i'm confident in the numbers I extrapolate.

I'm the first to admit that it's not an exact science, there's a lot of subjectivity involved, experience and having actually experience (been inside) the comps that you're using, and your ability to properly interpret those comps.  the RIGHT house ain't gonna sell for anywhere near $500,000.

Of course, I may just have pissed-off the seller enough by being right, that even though the price get's down into my range, he won't use me.  But I'd still rather have that scenario, than spending money on an albatross that won't sell, with a high-maintenance seller, who'll call me every other hour wondering why we don't have any showings.

November 10, 2008 09:17 AM
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Charles Buell
Seattle Home Inspector
Charles Buell Inspections Inc.

It is a no win situation for you with the unrealistic seller in my opinion----in this market.  Tell him to wait 10 years:)

November 10, 2008 09:52 AM
Rainmaker
223,559
Laurie Mindnich

Love the gold comparison. Hopefully, sellers are coming to grips.

November 10, 2008 02:17 PM
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Alan May
Evanston & Northshore of Chicago real estate
Coldwell Banker Residential

I find that the comparison of 1oz of gold to 1oz of gold makes sense to sellers... (most of the time)... they understand that there's just nothing I can do to make a buyer want to pay more money for a 1oz. gold coin, than they can buy it for on the gold exchange.

November 10, 2008 02:24 PM
Rainmaker
713,144
Barbara S. Duncan
CRS, GRI, e-PRO, Searcy AR
RE/MAX Advantage

Great blog with great examples.  Do you actually pull out the gold coins?  I noticed today that a house I'd done a market analysis on has been reduced from a high $215,000 to a more realistic $190,000.  This was after they'd sworn they HAD to HAVE $210,000.  I lost out on getting the listing but probably also lost out on a lot of the seller's bitching about not getting their price.

November 10, 2008 05:35 PM
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Alan May
Evanston & Northshore of Chicago real estate
Coldwell Banker Residential

Yep, the gold coins are a critical "prop"... it's something they can truly understand... although I imagine that anything would work... Two Krugerands, two Silver Dollars... you get the idea.

November 10, 2008 08:39 PM
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Alan May

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