Vancouver Real Estate: Why an Offer Won’t Pay off Your Mortgage

While I “get” the concept of “limited representation” (you know, those flat fee listing options) to help sellers get some MLS exposure and find a buyer, it’s what you do AFTER you find the buyer that really matters.

I tell my selling clients all the time – finding the buyer is actually the easy part (although it has gotten to be a tad more challenging in the past year).  The hard part is keeping the deal on track and getting it to the closing table so a seller can actually maximize that equity.

Just try cashing an “offer” at the bank.

It’s that expertise in managing a deal that truly defines the value in the listing expense.  Sure, marketing costs money, nowadays lots of it.  But marketing (or MLS exposure) alone is not going to get it done.

Why this discourse?

I subscribe to a local real estate “forum” where folks post ideas, comments, deals, etc… I find it amazing that people will turn to anonymous posters – with varied agendas, experiences and perspectives – for advice on how to handle contract negotiations. Earlier this week, an email to the anonymous group was peppered with…

“Is it feasible…”
“Do any of you folks have suggestions for me…”
“I have a plan on counteroffering. Open to your ideas and experiences!”
“Any suggestions would be greatly appreciated!”

Seriously.  These are actual statements.  From a seller who had the house “listed”, but had no/limited “representation”.  And this level of uncertainty is at the offer stage… what happens going through contract negotiation of terms and conditions, disclosure, inspection, underwriting, appraisal, title, escrow, etc…

Look, don’t get me wrong, I don’t fault someone for trying to save money, especially in this economy. But the premise of penny-wise and pound… well, you know the one I’m talking about.

The offer was $70,000 below the asking price.  I’ve talked again and again about whether this List Price was even correct to start with. But regardless, with that type of discrepancy and that level of uncertainty, the money spent of securing solid, experienced representation of a seller’s best interest in a transaction of this magnitude can not be undervalued.

But hey, I’m smart enough to admit I may be a tad bit biased in my viewpoint.

CSI: Clark County Real Estate… It’s a Crime this House Didn’t Sell!

I’ve been doing this a while, not “Index cards and MLS Book” while, but long enough to know that things are different now.

Out of the hundreds of transaction sides I’ve been part of in the last ten years or so, I have seen my share of those houses where I scratched my head, thinking “THAT sold?” Well, in many cases it was a function of the market.  Economics 101.  Supply and Demand.  Exotic, WTH Mortgages.  That kind of thing.

So, as we pop a couple of Tylenol and suffer through the housing hangover, today’s sellers are paying for the “party”.  I remember pulling some stats from year-end 2005 that showed almost 84% of my listings had sold over the prior two years.  Simply stated, failure was not an option.

That brings me to this Absolutely Fantabulous home over on the eastside.  We recently took it off the market, with the sellers wanting to enjoy Halloween, Thanksgiving and Christmas, without the burden of trying to live in a “can I show your house in a half-hour?” mode.  We’ll try again after that major February holiday… Super Bowl Sunday.

Anyway, I promised them I would take a “Post Mortem” look at what happened.  Being a stats junkie, and a little OCD on the side, I really wanted to see what happened.  Below is a copy of the note I sent to them. I have pulled personal details out of it, but felt the analysis would be of benefit to all my clients, as well as others currently working through the “morning after” effect.

Hey y’all,

As promised, some “post-mortem” stats and thoughts.

First, I wanted to see how we did vs. the competition. I took a look at all the listings that came on the market the same time we did to see how they had fared.  Of the comparable homes, (325-400K, 4BR, east side) only 28.6% had sold as of when we withdrew our listing. Of the balance, 50% of those were still active (or Bumpable, etc…) and 50% had just given up (withdrawn/cancelled).

Of the ones that did sell, they sold on average in 101.5 days, at a price that was 98.8% of “last” asking price, but more importantly, that sales price was only 93.3% of the “initial” asking price. (Or an approximately $24,000 reduction on a $360,000 house).

Additionally, I wanted to summarize some of the notes I have regarding feedback. In general, almost everyone loved the house. And they were especially complimentary of the condition. The only “negative” I heard was that one buyer hated the configuration of the corner lot. Go figure. As far as constructive feedback, the most common theme was a lack of upgrades… specifically flooring (e.g. hardwoods), countertops (e.g. granite) and fixtures (e.g. jetted tub). Buyers who wanted these generally also had the ability to go higher in price and did so, with a couple writing offers on Maple Crest homes.

We seemed to have been in a “no mans land” between price and features, which created a tough selling proposition. The house, its current amenities, condition and location warranted a price higher than comparables in the low 300’s, but the lack of upgrades precluded us from competing with those in the high 300’s. And unfortunately, we felt the burden of the contraction of the overall market when we did have that signed around offer in the first three weeks, but those folks couldn’t find a buyer for their place. The domino effect then comes into effect.

At this point, I would say we regroup for the winter, maybe do those couple of things we talked about to the house if you are so inclined, and look to early February to try again.

In closing, I want to say thank you again for the opportunity to assist you in your goal of selling the house. I tried extremely hard to make that happen, so I am truly disappointed that it didn’t come to fruition. Please let me know how I may of any further assistance. And as always, never hesitate to give me a call or shoot me an email.

Have great day and God Bless,

Mitch

Bottom line, this was a fantastic house, in a great location and priced appropriately (evidenced by the fact that we did receive two offers that failed to close)… and it still failed to sell.  The data were staggering.  We’ve gone from about 6 out of 8 houses selling (overall market stats from the same period I referenced earlier) to almost 6 out of 8 houses failing to sell now (based on this comparable).  Amazing.

As I have said before, houses will continue to sell, but it will only be those that are priced right, marketed aggressively and diligently managed throughout the process.  If you are on the market now, or looking to be on the market soon, remember this: numbers don’t lie.  Make sure your agent is doing everything possible to position your house for a successful sale… anything short of that would be, well, a crime.