Welcome to this week’s ponderings….
Following up on last week, I promised to chat about the Seller/Buyer (SB for confidentiality) and the Owner Agent (OA for confidentiality) and the implications of Do It Yourself selling that unfolded over the past month or so for a client of ours.
SB called us in to appraise their property since they had made an offer to OA verbally, and wanted to move rapidly. Over a number of hours, we discussed all the pros and cons of buying before selling and vice versa amongst lots of other things to do with the whole real estate process.
In the meantime, OA decided not to accept SB’s offer and all plans were put on hold with a “back to the drawing board” result for SB.
SB began to target other owner agents because they felt they could do a better deal by reducing any asking price by what they thought the commission might otherwise have been.
(Probably why the offer to OA was refused previously)
The complication with that thinking is that many self-sellers will already have reduced what they think is a reasonable asking price by any “savings” they think they will generate by doing it themselves. This often results in a double whammy of discount which in turn becomes extremely difficult to negotiate around. After all, SB is not going to tell OA what they are thinking just as the reverse will not apply – human nature.
However, more time ensued, and surprise, surprise (not), OA called up to advise them they had reconsidered and were prepared to accept the offer.
Not surprisingly, human nature kicked in again and SB saw an opportunity and reduced their offer further.
Of course, OA knocked it back and went away for a second but shorter period of time only to return to accept the reduced offer – it was obvious by now that things were a bit stressed in OA’s camp and SB appeared to have the upper hand. With a level of fairness and commiserations, SB agreed to proceed.
Secretly, SB was ecstatic because the original asking price on the property was around $1,200,000 and was willing to pay and made the first offer at just under $1,100,000 but ended up at $960,000 with some conditions. (All verbally and nothing on paper at this point in time by the way)
Now bear with me on this let’s just take stock of what happened:
The final reduction appears to have been $240,000. However, if we apply the considered norm that most owners dream price is 10% above where the market actually is, and buyers are up to 15% below where the market actually is; then the numbers should have been something like: Owner likely acceptance of $1,080,000 and buyer attempt at $1,020,000.
Back track for a sec, SB was originally willing to pay to $1.1M yet OA finally accepted $960,000.
Forget about the desires of possibilities and focus on most likely outcomes if OA had used an agent who could properly market and negotiate a deal in the first instance. OA would have invested in the vicinity of $30,050 to $32,250 to achieve a sale of $1,020,000 to $1,100,000. (SB was willing for $1.1M)
Unfolding that further, OA would have netted before other costs like legalese and removals, an amount somewhere between $989,995 to $1,067,750 and would have saved upwards of $29,995 to $107,750.
Even at the lower end there would have been obvious $ benefit let alone the reduced stress involved in the process or the missed opportunity at the higher end – a number SB was prepared to go to but didn’t have to as there was no one there to facilitate the process properly.
To lose those amounts just doesn’t make sense.
In the final wash and thankfully for OA, recent regulatory matters and funding rules have precluded SB from progressing forward and OA may just have saved themselves a bucket or two. To earn an additional $29,995 buys a few buckets – imagine how many buckets $107,750 can buy.
SB has decided, as a result of the experience, that when the planets align again they will put their home on the market but definitely with an AA (Authentic Agent). We will be more than happy to be of service.
Until next time, Happy Listing Selling, Renting and Remember, We Are Always at Your Service.