2011 Apr 19th

Someone Will Always Tell You What You Want to Hear

Sellers Don’t Always Like The Truth

It shouldn’t after all these years but it always surprises me how some sellers behave.  Their condo has been sitting on the market for many months, unsold.  They haven’t reduced the price.  They haven’t done any work to make it show better.  Instead, they believe that finding a different agent will get their condo sold. expired listing

Now, there is no question that a good agent is going to do a better job at marketing the property.   (Think of all the MLS listings that have terrible photos or no photos as one small example or all the flyers around town filled with typos and terrible copywriting).  A good agent will also know how to stage a property to make it as attractive to buyers as possible.  Many times the problem is not the agent – the problem is the price. Good agents understand pricing and how crucial it is to a successful condo sale.

Here is a too-familiar scenario – a listing is about to or has just expired and we get the call from the seller who is “thinking about re-listing with someone else”. We look at the property, analyze the comps, and see what the prior agent did or failed to do to sell it.  We meet with the seller, explain our marketing plan, give them staging advice, and then the conversation turns to price.  It is often quite clear to us that the reason the property  hasn’t sold is because it is overpriced.  Yet, when we show the seller the market statistics and how their unit compares to the competition they turn a blind eye.

“I’m not going to give it away” is the usual refrain.  I understand that many of these sellers bought at the height of the market and are losing money.  The truth is – nobody cares what you paid.  Buyers base their decision to buy on what is available in the market today and how your property compares to their other options. To sell a condo in Hoboken in today’s market your property must be compellingly priced. If a seller doesn’t understand that or won’t do that we don’t want that listing.  We have a limited amount of time and would rather spend it productively.   There are many agents out there today with no business. I assure you, one or more of them will say anything to a seller merely to get a listing. I have heard agents say “I’ll take the overpriced listing because eventually they will reduce the price.”  Maybe that agent will get luck and eventually the seller will succumb to their pleas to reduce the price.  Many times the listing simply expires yet again.

So what should the seller do to know if an agent is merely telling them what they want to hear? Ask the agent to show you hard numbers.

If there are no comparable sales to support your price, the agent is perpetuating your fantasy.  Today’s buyers are smart and armed with the facts.  They get those facts from market analysis done on this very blog.  If average price per square foot for March was $431, how do you justify asking $555 a square foot?  There better be an awfully good reason.  If you paid $700k in 2006 and have done no renovations to your condo, and the market is down at least 15%, why do you think you can list at $700k today? fairy

Here is a dirty little secret – the real estate fairy is not going to come along and pay you what you want merely because you want it. If and when you do receive an offer from a buyer, you need to be able to support your asking price in order to negotiate successfully. If this is a bitter pill for you to swallow, don’t worry.  There will always be a desperate agent out there who will tell you whatever you want to hear.

  1. BP

    So true, so true, so true…

    And to highlight a point you touched on briefly… Even if an uninformed foolish buyer comes along and offers to pay that above market price, the deal will die or be heavily re-negotiated when the bank’s appraisal comes in well below the contract price and the buyer can’t get the needed mortgage to close.

  2. homeboken

    As a lender, I would look at a borrower that commits to a purchase price that is significantly higher than where final appraised value comes out very carefully.

    As a lender, I would think, this fellow as very little understanding about the true value of things, or is being capricious with his money. Therefore, I am less likely to want to lend this type of borrower, as his risk profile is greater than an informed borrower.

  3. jC

    If appraisals dont come in high enough no deal is done, no fees are paid, no commissions are earned etc. . Do we really think the industry has changed and the lenders dont have the appraisers in their pockets anymore? An appraisal company that consistently comes in low will no longer get business from the lenders. Sorry, but conflicts of interest will always remain in any industry where money is earned for each deal that closes. A stock got upgraded today by 5 banks…..guess who underwrote the IPO…..all 5 banks! Oh, but that division is on another floor and they never speak to each other….sure.

  4. Lori Turoff

    Actually, JC, I do think the industry has changed. I have experienced appraisal issues recently and the seller had to renegotiate the price due to a low appraisal. The banks no longer get to choose the appraiser. It’s not like it was in the old days where the appraiser would say what ever the bank wanted. Sorry, but that is my experience.

  5. JC

    thanks for sharing your experience Lori. I’d be curious if it stays this way in the future.

  6. Lori Turoff

    You’re welcome. It is an issue that comes up all the time now. Sellers overprice their property, someone comes along and makes an offer, and the property doesn’t appraise. The buyer either has to put more money down or the seller lowers the sales price. The other problem I’m seeing is appraisers who are not at all familiar with Hoboken doing appraisals here. I had one in my last deal who was using a 1BR (800+ sq ft) that had sold in the same building to comp a 2BR with a deeded yard (1200+ sq ft). Now, using price per square foot might be understandable with a bump up for the value of the yard. But no – this guy was using the absolute sale price of the smaller unit. That’s like saying a 2 carat diamond is worth the same as what the prior 1 carat diamond just sold for. We could not get him to see reason on this and the appraisal came in too low. Other appraisers use comps on Monroe or Jackson for sale on Bloomfield or Hudson. They don’t understand the value of location. To me, that is a real issue.

  7. jeralyn

    What is wrong with Monroe street? I currently rent on Monroe and there is ample parking (better than Bloomfield or Hudson), its quiet and it’s close to the light rail and bus, and a 15 min walk to the path. Everyone finds value in different places, I just wouldn’t assume that cream of the crop is on Bloomfield or Hudson.

  8. Lori Turoff

    Since the inception of Hoboken, the closer to the river, the more desirable the location. That’s just the way it’s always been.

  9. JC

    How do these appraisers account for condition/furnishings etc.? Do they at all? Price PSF isnt the end all with an adjustment for parking or outdoor space. Are you saying my countertops that are encrusted with jewels wont help my appraisal 🙂 Seriously though….furnishing could be top of the line and that does add value to the buyer, but will it be taken into account from appraiser?

  10. homeboken

    JC – I think you are talking about finishes not furnishings.

    I don’t believe that an appraiser will give much credence to absolute top end finishes. Those are depreciating and just because they are top end now, doesn’t mean they will always be top end.

    However, in the scenario you are talking about, if a buyer is in love with the jewel encrusted counter-tops, then they will likely come up with the extra cash to make up the difference between appraised and asking price.

    At the end of the day, we are talking about 1000-1300 square foot condos, how much of a spread is there between rental standard and high-end., $50,000? People upgrading their place more than that are not likely to get their investment back on re-sale.

  11. Lori Turoff

    Have you ever attended an appraisal? It takes 5 minutes. They come in, snap a few photos, measure the square footage and ask for a copy of the contract. I don’t think they even look at the finishes. No, it makes no difference. The are concerned with # of bedrooms, size, location and possibly view/parking/outdoor space (if you have a decent appraiser). In my opionion, it’s a joke.

  12. JC

    finishes yeah…I see your points, all valid. thanks

  13. Tiger

    I had my condo reappraised when I refinanced and actually was quite impressed with the process. First of all, my mortgage broker (Hoboken local) got an appraiser that has experience in Hoboken. It took 5 minutes yes, but they took photos, spent some time in the kitchen and bathroom.

    I looked at the appraiser report, it had some good comps (from my building and nearby), and actually it was very convincing. He even noted that my apartment does not have parking, but this is very common in a walkable city like Hoboken. I imagine someone who is not familiar with the area would count it as a negative.

    Ok I admit I did spend sometime making sure the place looks spacious and got the sprays that make stainless steel / wood shine :-). I was told this doesn’t matter but hey, first impressions last. They are only humans.

  14. Craig

    jeralyn – There’s nothing “wrong” with Monroe street per se. But its location is considered less than desirable. It’s far from the PATH and all the action on Washington St. (15 minute walk? – I don’t think so). It’s also quite close to the projects. Both are no-nos to the masses in Hoboken.

  15. teaorcoffee

    So, a realtor suggested to a friend that they list their condo at MORE than they purchased for in 2007. No upgrades were made in that time. Without knowing any other specifics, isn’t it unreasonable to ask more than you purchased for during the height of the market?

  16. Lori Turoff

    Duh – YES!

  17. homeboken

    tea – anytime I see a unit listed for more than the 2006-2009 purchase price, I automatically assume that home isn’t really for sale. It is only for sale in fantasy land.

  18. jerry

    Lori – This is very good post. When I was trying to rent out my apartment in Hoboken this past March, I spoke to a few realtors. Some of them would just tell me what they thought I wanted hear, which was “sure, I can get someone to rent the apartment for $xxxx in a week. The $xxxx they mentioned is about 20% higher than the similar apt in the building was actually rented for. The agent thought he would impress me this realistic number and I would list the apt wiht him. Of course, I didn’t. But I can totally imagin there are home owner out there who would fall for this kind of sales pitches.

  19. Tiger

    Pricing is true for 99.9999% of the time, but let’s not get carried way; sometimes tax records do not tell the whole story. Former Mayor Roberts sold him home in I think 2006 or 2007 to his wife for $1. And remember a few weeks ago when we saw a too-good-to-be-true Hudson tea sale, turns out it was a long term couple in which the guy sold his share of the place to his ex-GF?

    Let’s not forget also things like inheritence, flipper deals, preconstruction, etc…

    I think this is where a professional realtor would really tell the story, not based solely on th tax records, but on comparisons in the market TODAY.

  20. Lori

    Yes, Tiger, you are correct. But assuming an arm’s-length transaction, the tax records are telling.

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