Numbers Don't Lie

by Patrick Hancock

Whether you are a hardcore investor or a first time home buyer, numbers don’t lie.  I can’t tell you how many times “owner pride” (owner pride is what is referred to as the homeowner’s thoughts and feelings towards his or her home) has interfered with the selling of a home and caused the home owner to lose thousands of dollars. I’ll begin with an example from 2007 when I was asked to sell a home of a friend that I used to work with. After performing a CMA (comparative market analysis) I suggested a sales price of $235,000 to which the seller vehemently objected. She wanted to list it at $250,000 and that was that. Since she was a friend I agreed and we listed the home. Weeks passed and we received an offer of $232,000. I vividly remember the day because I was on vacation. The combination of being on vacation and receiving a strong offer made the weekend even sweeter. I figured by now, with little activity and my recommendations of lowering the price going nowhere, that the seller would at least instruct me to submit a counter-offer. Well, that good old “owner pride” took over and the seller wouldn’t budge. The response was “my house is worth $250,000 and that’s final. Needless to say the buyer’s agent and buyers were flabbergasted that we didn’t even submit a counter-offer. A few weeks had passed and we received another offer of $227,000.  I did, however, manage to get the seller to reduce the price to $245,000 but the median prices for homes kept dropping each month so her home was now worth even less. But once again that owner pride came into play and she wouldn’t budge after yet another speech from me about chasing the market (chasing the market refers to the pricing of your house just above the actual market value of your home or even after a price reduction the home price is still above market value). This went on for weeks and weeks and after six months my listing contract had expired. She informed me that since she couldn’t sell the house that she was going to keep it off the market for a while and see what happens. About a week later I drove by the property and saw another real estate company’s sign in the front yard. I continued to check on the house and saw that it finally did sell for $217,000. 

The moral of the story is do not let owner pride get in the way of what the numbers are indicating with regards to the market value of your home. This is the reason why real estate agents spend hours on the comparative market analysis. The CMA is not fun, it’s time consuming.  And, all the distressed properties on the market makes things even more complex.  But, the CMA is necessary and if done correctly, it is usually accurate. As much as it is unpleasant to consider, what a seller thinks of his or her house is irrelevant. It is the home buyer’s opinion of the house that matters and price is always factored into this opinion. Remember, in this market, there will always be another house just like yours with the only difference being the price. As a seller, it is important to understand the purpose of the CMA and the data being presented by your real estate agent. In the story presented above, the seller did not trust the numbers and therefore chased the market down. If the seller did trust her real estate agent and the data that was presented, she would have more than likely sold her house for approximately $20,000 more than she did. It is important to note, however, that effective marketing needs to accompany proper pricing of the home.  Meaning, a home might be priced right but if the real estate agent doesn’t market the home effectively, the home will usually remain on the market longer than necessary.  So, when interviewing real estate agents, make sure to ask about their marketing plans.

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