“You’re going to blog about me aren’t you.” stated my client, Jill.
“Yep! I’ve got a years worth of blogs in just working with you two. I’m down to about $1.50 per hour, so I have to get something out of the deal,” I replied.
“Are we your worst buyers ever?” she asked.
Let me back up…Two years ago I met Jack and Jill. The CA market was hot, they just had a child, and wanted to move to an area that would give them a better lifestyle. They came up to visit and we looked at several homes that would be in their price range based on the equity that they would have had at the time. Expectations were set. (You all know where this is heading, don’t you…)
Certain types of jobs face a lot of competition here in Salem OR. Jack was in one of those fields here in Salem. As a result it took him a year to get hired on here. He got a job offer and they were ecstatic. They came up in November of 2006 to get started on their home search. We looked at several great prospects, talked pros and cons of areas, and then they went back to list and sell their home in CA. Jack moved up here alone and started his new job.
I imagine you have an idea of how the story goes from here…
3 agents and 12 months later their home sold in CA. This is the tale of their home sale.
Jack and Jill were no exception to the norm when they wanted to hire their friend to do the sale of their home. The friend had a full-time job and did real estate “on the side.” The market, while slowing, was still strong in their area of CA, and they figured it would be an easy sale. Their friend suggested an asking price $20,000 less than they wanted, but being an “on the side agent” he agreed to price it $20,000 higher. A disagreement occurred between Jack and his friend about the marketing of the property and the price. Jack felt that his friend wasn’t marketing enough and his friend felt it was pointless to market an overpriced home.
They agreed that they would rather stay friends so Jack started to interview other agents. 90 days had passed with a lot (60 people through the home) of buyer activity and no offer.
In the meantime, we wrote up an offer on a house up here, contingent on the sale of their CA home. We agreed to a 90 bump clause thinking it would be a non-issue.
Jack and Jill had now been separated for 3 months. Jack living here in Salem and his wife and child back in California. We were now at the end of March of 2008. Realizing his mistake in hiring a friend, Jack and Jill went for a very experienced husband and wife team with a large national franchise.
Jack referred to him as a shark. I commented that a shark might not be so bad right now as the market forecasts were showing a significant slowdown coming. I encouraged him to be really aggressive.
They were wary after their last experience and signed a 60 day listing contract. The shark told them, “I can sell your home for asking in 30 days!” The team made the same pricing recommendation that their friend made 3 months prior. Jack and Jill priced the home $10,000 more than the suggested list price by the agents. With renewed energy, they began marketing their home.
Confident that their home was cute (it was, I saw pictures) and that it would sell with this new team, they forged ahead. The home was staged, and open houses were planned. Jill was raving about how cute the home looked. Two weeks into the listing, the agents called Jack and said he had to come down in price by $20,000. They asked him to drop his price by $10,000 more than their original suggested listing price just two weeks prior. The shark told Jack, the market was correcting in a way they hadn’t seen before.
Jack called me and asked if we were slowing down. I said yes, but the slowdown had been happening all year, not just in the last two weeks. Since the listing was for only 60 days, the agents cut their losses and stopped advertising. Dick felt that it was a real estate agent tactic to not do any work. I talked with Jack about risk and reward, and that the agents were risking a lot in marketing costs with little chance of the reward in sight. Jack felt really let down by these agents as they weren’t “marketing the home enough.” He reiterated their promise, and I gently reminded him that he did not price the home at the agents suggested listing price. Like many sellers, he wanted to give themselves “negotiating room.” He also stated that if they dropped their price too much more, they would not be able to afford the home that we had an offer on, here in Salem. He asked me if I thought they were overpriced. I reminded him that I was here in Salem, OR and not in CA. I had no market knowledge, but based on the large amount of showings between the two agents, and no offers…it was clear they were overpriced.
Stuck on the promise to sell at list price, they refused to drop the price. Needless to say the listing expired after 60 days. No offers, and barely a trickle of showings.
In the meantime, the contract on their purchase up here expired and the builder refused to extend.
The last resort:
While they gathered their wits about what to do next, they stuck a FSBO sign in the front yard. Starting to see the changes occurring in the marketplace, they decided they needed to cut the commission and go limited representation. For those of you who don’t understand this terminology, a limited representation company is one that puts you on the MLS for a couple hundred dollars. They don’t provide any other service.
The listing started at the end of June 2007. Despite the changing market, and the negative press that was starting to appear in their local paper, they kept their price the same. They felt they really need to leave some “room for negotiation.” They quickly had a verbal offer of $275,000, $24,000 below their asking price. They refused to go for less than asking. They would not be able to get the home they wanted here locally with that offer. Not really appreciating what was occurring in the marketplace and without good representation, they continued on.
Since the builder had refused to extend their contract, we decided to wait until they had an offer before we found them another home. In September, still holding open houses every weekend they received an offer, $264,000. They accepted the offer this time, and we found them a new house up here, for a great price. Things were moving along until the first request for an extension from the buyer of their home. Like most FSBO’s, Jack had not contacted the mortgage broker to find out the status of the loan. He called me and told me that the lender was requesting a certain document. The request was highly unusual and I suggested he call the lender directly. My instincts were going crazy, but I was not representing them so there wasn’t a lot a could do. He called the buyer agent who assured him that “everything was good to go” and this was a formality. I called and spoke with her as well. I told her the request was highly unusual and I gave the deal a 25% chance of closing. She assured me that things were good to go as well.
They were packing up and getting ready to move to Salem and I expressed a lot of concern over moving before the deal was done. My instincts were going wild, but they were moving forward as the agent said things were good. They packed up and moved to Oregon. Their house didn’t close and not surprisingly after several extensions, the buyer gave up trying. The deal was officially dead. Now they were paying rent, mortgage, a kennel for their dogs, and storage for their furniture.
Their home purchase up here failed, and they were living in a tiny studio. One of my friends agreed to take the dogs while they regrouped.
At this point, very desperate, they started dropping their price by $5,000 every two weeks. About one month later they received an offer for $250,000. The deal closed in December 2007, one year after they originally listed it.
The sale of their home was frought with many issues, and there are many lessons to be learned from their experience for sellers as well as agents.
What I hope sellers will learn from the adventures of Jack and Jill are
- Set boundaries and expectations when mixing friends with business.
- Take pricing advice. Jack and Jill could have sold their home for more, but were constantly overpriced, and rode the market down. Don’t leave “room for negotiating.” Price right the first time.
- Beware of sharks. Guarantees and promises in real estate are clues to run away as fast as you can.
- Determine your emotional value. Jack and Jill were separated for a year during this time. Rather than take an offer for $275,000 over the summer (which was low) they held out for more. In the end they received $25,000 less as a result.
- You can’t price your home based on what you WANT to get from it to purchase your next home. You can only get what the market says it is willing to pay.
- Limited representation listings are not for everyone. You need to know what you are doing if you choose to put yourself in the position of an MLS only service. If you are not buying and selling on a regular basis, pay the extra for representation.
What I hope agents will learn from the adventures of Jack and Jill are
- Set boundaries and expectations when mixing friends with business. We need to learn this as well. Don’t be offended if your friend wants to work with an objective party. It might be in their best interest.
- Price right the first time. Jack and Jill could have sold their home for more, but were constantly overpriced, and rode the market down. They said they wanted more and agents placated their desires.
- Sharks ruin the business. Don’t promise what you can’t deliver. It makes the rest of us look bad when you fail.
- Clients count on us for our honesty and market knowledge. Don’t sugar coat things for them. They are making important decisions based on our information. How would you want to be treated?
Jack and Jill are signing on their new home on Monday. I plan to bring the pinot noir.
(c) Copyright, 2008. Melina Tomson, All Rights Reserved. DO NOT COPY this without express written permission from the author.
If you are thinking about relocating to Salem-Keizer Metro area and need more information about what our city is like, please call or email me for more information. If you are considering a purchase or sale of a home, I’d like to discuss your real estate needs with you.