One of the most alluring aspects of owning real estate is the prospect that people have an opportunity to become richer just by living in their very own home.
It's understandable then that when realtors are faced with the task of defining the value of any given home, sellers hang on our every word, hoping that the number we offer up will satisfy their insatiable thirst for the highest value possible. This awareness brings forth a multifaceted dilemma that truly haunts both realtors and sellers alike.
"You can't handle the truth."
When it comes to speaking with our sellers about the value of their homes, oftentimes sellers crave hearing what they want hear, not what they need to hear. It makes sense. All sellers want to have a professional confirm their beliefs that their home is worth the amount they've already formulated in their minds, regardless of whether or not that price was based mainly on emotion or desire.
Unfortunately, fantasy is not reality.If a realtor provides a seller with a price for their home that very well may be the accurate number, but is one that the seller deems as too low, there's a good chance the realtor has just alienated him or herself right out of the opportunity to represent the seller. Considering that realtors don't get paid unless we are part of the transaction, we are faced with the choice to either:
- Tell the truth and perhaps take ourselves out of the equation, or
- Tell the seller what they want to hear to get the listing, at the risk of creating false expectations, ultimately putting them in a compromising position of negotiation down the line. (8 out of 10 times, overpricing a property ends up costing a seller more than if they had effectively priced their home at the outset - but that's for another, future blog post.)
So, What's the Right Number?
The housing market is constantly changing, which means the "right" price for a house will vary based on a few, specific factors: average prices of homes currently on the market in that same neighborhood, the number of homes currently in escrow, and the number of homes that have sold in the past three months.
By analyzing these statistics, a realtor can effectively price a home to sell.
For example, let's say that dozens of homes have sold in a particular area over the past 90 days. This indicates that there's a lot of activity: more homes on the move means higher demand, which leads to higher values and more room to push the envelope with the pricing. On the flip side of that, though, is when you look at recent sales and see single digits for the past few months. Homes aren't flying off the shelves, meaning that one will need to aggressively price the home to get it to sell in that market - perhaps even listing it for less than the rest of competition to attract potential buyers.
Ultimately, a realtor does both him or herself and the seller a disservice by making promises that may be nearly impossible to keep. Both end up unhappy in the end: one with a home languishing on the market with a price too high to sell, and the other with an unhappy client whose expectations haven't been met.
All of this can be avoided by looking at the market objectively and being honest about the value of the home. The numbers don't sugarcoat anything by telling you only what you want to hear: they just tell you simply what is. And while we don't always like what we hear, contrary to that famous quote, people can handle the truth - and it's the realtor's job to provide it.
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