Real estate prices are working their way back up slowly in many areas of the country, including Sequim and Port Angeles, and more rapidly in other hot markets (like some southern California markets). In areas like Sequim where real estate prices have not leaped upward, sellers are still struggling with listing prices and selling prices. This article is not about the obvious. For example, sellers in a recession always want more than they can get and they lament how much they are losing on their home. We all get that, and that is the obvious. The less obvious is how sellers negotiate when they’ve reached their threshold of pain.
Negotiating Real Estate Prices
Let’s take a broad brush and paint a typical scenario for sellers who listed their home with a Realtor during this recession. The original listing price was almost always a little above what the market would bear. In other words, the listing price was somewhat above fair market value in the market at the time they listed. There are two major reasons the listing price is so often above the selling value. First, some sellers don’t ask their Realtor–they tell their Realtor how much the listing price will be. Second and more often, Realtors are under tremendous pressure to outbid other Realtors for the highest listing price just to get the listing.
You might suggest that sellers “should” be able to discern which Realtor is telling them the truth and which ones are giving them hype to get the listing, but “should” and “reality” or two different things. Every seller wants the highest price, and so they default to the Realtor who quotes the highest listing price. Of course, sellers do not get more than fair market value or what buyers are willing to pay. So sellers inevitably reduce the listing price several times and lose a lot of time until they finally arrive at a listing price that was quoted by the agent they did not hire. By the time sellers get to that price, they are mildly “pissed off” at their Realtor or the market or everyone. That’s understandable. They are greatly discouraged with real estate prices. They may be losing a lot of money if they bought at the peak of the market or when times were better.
Now I will explain how all this affects sellers and how they negotiate when they reach their threshold of pain.
Real Estate Prices and The Threshold
By the time a seller gets to a realistic selling price, many have had their homes on the market with two and sometimes three listing Realtors. Each time they re-list they reduce the price of the home. You’ve got to see the irony of a seller blaming a Realtor for not selling their home and then listing with another agent while immediately reducing the price. Of course a reduced price will help sell a home.
Each time a seller reduces the listing price, they get a little more discouraged and frustrated, and those two psychological states are on the path to anger. As if that wasn’t enough, it gets even more difficult for sellers on the subject of real estate prices. Finally a buyer makes an offer, but the offer is somewhat below their last listing price, the lowest listing price they have had in all this time (6 months or 1 year or 2 years). Every time they have reduced their listing price, they had a long therapy session with their listing agent, and essentially unleashed on their agent for an hour each time. So now when they get an offer that is even below their lowest listing price, which they already told their agent was their bottom line, they are unhappy campers.
This is not the picture they had painted in their own minds. They thought they would sell their home for so much more, and they had made plans to buy another house with those funds, and now to them it seems like everything is unraveling. It isn’t, but it seems like it is. They will never admit this, but if they had discerned the difference between listing Realtors in the very beginning, they most likely would have avoided all the stress and frustration and ended up at the same negotiating table. [See more articles on Negotiating Price]
By the way, not all sellers get “pissed off” or angry. Nearly all sellers do experience some level of discouragement or frustration, but how sellers internalize these challenges depends on their own emotional maturity and experiences in life, and that varies dramatically from seller to seller. A listing agent is truly blessed to have a mature and understanding client who hangs in there throughout the listing until the home is sold.
If sellers have been down a long stressful listing path, they may actually refuse to reduce their price enough for the buyers to commit. They may kill a sale over as little as $5,000 or $10,000. Now maybe they will get their price, but maybe not. At the very end of negotiations after counteroffers are fizzling out, either a buyer or seller can walk away from the table with no sale, and everyone starts all over again. The seller hopes a new buyer comes, and maybe they will and maybe they won’t for another six months to a year.
It’s important for buyers to understand the anguish that a seller goes through when negotiating. Real estate prices are not where sellers want them to be, at least not yet.
Possibly Related Posts:
- Sequim Homes Selling at Full Price
- How Much Should I Offer: What is Fair Market Value
- Winning with Competing Offers
- Negotiating Mistakes Kill Deals
- Bidding Wars for Homes?