I’ve had two experiences with clients this year that highlight the vast difference in either how well people utilize their best real estate resource, their relationship with their Realtor, or how clumsily they don’t avail themselves of the benefit of that relationship which then impacts them negatively.
The first situation involves my clients, we’ll call Gail and Sergio for this example. They were referred to me from previous clients and we’ve had a great relationship from the start as they purchased their first home with me in San Francisco. They ultimately did remodeling and had two children in that home and we stayed in touch throughout the years. Whenever they had a real estate related question – they called me and they got an honest opinion on the market or what might be the best choice in a remodeling plan. Then when they decided they needed to move to the East Bay to be closer to family, friends and chosen schools they called me to discuss selling their home. By this time however, the market had changed and not to their favor. We discussed the marketing aspects as well as pricing. And, my pricing opinion, $899,000, was not what they wanted to hear but they trusted my judgment so we launched the marketing this past summer and because the house was priced at a price for value sensitive buyers - it sold well over asking at $950,000 (5.56% above) the first week on the market. They received more money than they expected but besides that they saved time (which is money) and the house didn’t have to suffer price reductions and a longer time on the market in a downward trending market with other variables we couldn’t control such as an unexpected increase in inventory. A true success story for wisely utilizing a Realtor relationship.
The second experience was with two gentlemen who were formally my tenants in a rental property I owned. A number of years ago as their lease was expiring they went out and purchased a house without a Realtor. The market was hot and they felt using the listing agent would get them the best deal. They paid a higher than asking price for the property which was common in the market of that time. They never called me for advice and moved on to their new property.
Fast forward to this summer when I received a call from them asking me to come by and give them my valuation opinion because they needed to sell the property. I arrived with my business partner to initially tour the house prior to forming a valuation opinion to see what remodeling work had been done. It was a lovely two-story Victorian and they had done a beautiful job updating the kitchen and large family room. I, however, was shocked when touring the second floor to discover that during their ownership they had gone thru an extensive remodeling of the property by separating off the master bedroom from the main house and giving it a separate entrance from the rear of the house so it could be a second unit. Now this lovely Victorian had an abbreviated second floor with a cramped master bedroom and bath overlooking the front street, a second bedroom and a new bathroom at the end of the hall which created the separation between the main house and the second unit (which was formerly the spacious master bedroom and bath – now with a small kitchen added). To add to the negative impact the “new” second unit had on the main house, the tenant would have to access the small second unit by walking along the side of the house by the windows of the family room and through the outdoor patio off of the family room to get to their front door. Needless to say, they didn’t have a professional to talk to about the ramifications of this kind of remodeling on their overall investment in the property.
The comparables for this neighborhood had dropped quite a lot in the current environment. The value I gave them based on one lovely property that had sold within the last four weeks was a low price, $1,400,000. Since the current market is so value conscious, I suggested I call some colleagues at several other companies to come view the property to get some other opinions on pricing. I called six agents both within my brokerage company and at two others that I’ve had long professional relationships with to come by and let me know what they thought the value was. Across the board, the agents felt due to the awkward remodeling configuration that the house should be priced no higher than $1,500,000. Now, granted, that was higher than my value but in this tricky pricing environment I told the sellers it was a number I could get behind and with the right presentation get their property sold.
The sellers didn’t like the advice so they went price shopping. They found an agent (no big surprise) that would list the property for $1,695,000. The house sat. And, sat. They reduced it to $1,595,000. They did receive an offer and it sold for $1,550,000. (The number sounds familiar, doesn’t it..3.3% above my recommended and 9.35% below their original asking price.) They priced it higher than the current market value and in ultimately reducing the price created downward pressure on the final price they would achieve rather than pricing it lower and creating upward momentum.
These sellers never got beyond thinking of a relationship with a chosen Realtor as a sales situation rather than a relationship of trust for, most likely, their most valuable asset similar to the kind of relationship they would have with their attorney, accountant or physician. In the book, Rich Dad, Poor Dad, the author says the two professionals he never hesitates to pay are his attorney and his Realtor because they both make him money. The key is to have a “real” resource relationship with a trusted Realtor. One you can call on for advice at any time and know that the value will come to you when you need it most.
‘Til Next Time…All the Best, Lance
