Joe and Jane have found and purchased a home closer to their preferred elementary school, Alki Elementary in West Seattle.  Their old house in the Alaska Junction is currently vacant.  Between the utility bills and their mortgage, it is costing them about $2,500 a month to keep that house warm and showable.  Currently the housing market in West Seattle is averaging about 100+ days to sell a home.  That is just over 3 months of mortgage and utilities.

Their house in the Alaska Junction is comparable to other homes that have sold for 500k.  They set their listing price at 500k. They have a little savings and could, worse case scenario, keep both houses for six months tops. They could sell their home for as low as 470k to cover mortgages and selling costs. What is their BATNA?  Well they have to sell within 6 months or risk losing out entirely.   Every month they wait, they spend another $2,500.  When there first offer comes in at 30 days their BATNA is: 5 months * $2,500 + 470k = 482.5k

In other words, if someone offered 480k they would be better off waiting for another offer rather than settling for this one.  Of course this is not taking in to consideration a changing market, that is another topic all together. But as time passes their BATNA changes.  Their reserves dwindle, and their motivation to sell increases.  At 90 days their BATNA is: 3 months * $2,500 + 470k = 477.5k.

Wait a minute if they would have accepted the original offer at 480k they would have been better off right?  Yes, they would have.  But they would have lost the opportunity to receive an offer of 490k or even a full price 500k offer.  Not everyone has the stomach for negotiating when this much is at stake.  That is why it is so very important that you choose a Real Estate Agent whom you are comfortable with and has the negotiating experience to guide you through this process.

The home is a beautiful 3 bedroom rambler just south of Seattle.  It had an updated kitchen and the owners took fabulous care of the home and the yard, it showed like a champ.  With all of the updates to the home it comped out at 289k.  During the listing presentation I allowed the seller to talk me up to 299k for the home.  I said ok based on a pre-signed price change form for 30 days out.  I gave a day or two for him to discuss it with his wife.  She talked him up to 309k and had another agent friend that would list it at that price.  With the added pressure he said that we had to try it at 309k for a month and then lower it to 299k.  I explained to him that most of the buyers in the area are looking for a home that is below 300k.  Pricing the home above this would exclude the home from most searches.  He insisted.

Here is the error.  I like the sellers, they’re great people, they have a great home.  I took the listing.  Now I did my part as a consultant, giving the right direction and advice.  But when the home didn’t sell at 309k or at 299k the sellers lost motivation.  3 months went by with very few showings.  They must have thought that no one wanted their home.  But that wasn’t it, no one could find their home because it was overpriced. By the time we had the price lowered below 300k the seasons had changed, the market had drifted.  We took the home off the market earlier this week. 

When I gave the keys back to the seller he said, “Hopefully if things improve we will put it back on the market in the spring.”  But, while I don’t have a crystal ball, at best the market is going to be flat not better.  If the market doesn’t improve and they are going to stick with the above 300k price we are just going to repeat the past.  The definition of insanity is repeating the same action over and over while expecting different results.  I am not insane:)

Ok so what did I learn.  I took the listing at a price that was too high, because if I didn’t someone else would have.  While I gave the clients the right advice, I wasn’t forceful enough about it.  By not turning them down I did them a disservice.  They were just trying to get as much as they could for their home.  Who could blame them?  But in the end it backfired.  There is actually no way of knowing if the home would have actually sold if it was priced how I recommended.  I do know that it would have had a better chance. Other homes in the area that were crap compared to this one sold at around 289k and 295k.

Even if I have to turn down business, I will not take an overpriced listing.  Not even for people that need to get the most from their home.  If they can’t sell then they can’t sell.  I don’t set the price, buyers do.

Again so it is burned into reality: “I will not take an overpriced listing!”