Would that Listing Agent Sell
their own home “fast”?

Probably not. Most listing agents would probably opt for a more patient approach, with strong marketing, in order to draw a top-dollar offer from the right buyer. For most folks, a top-dollar sale is usually preferable to a fast, average-priced sale. We customize our marketing strategies on a case-by-case basis, then execute a plan to achieve the highest possible sales price-per-square foot for our clients. This means more money in their pockets at the end. Often overlooked though, is the impact sellers have on their neighbors’ home equity when they sell. In some cases, when a listing agent has convinced a seller that selling quickly is the most important priority, a seller will authorize multiple, seemingly back-to-back price reductions, in order to affect a quick sale. And, often this does result in a fast sale, albeit, at the expense of unrealized equity by the seller. In addition to selling for less than they could have–if they’d only been patient–what’s often overlooked is the walloping their neighbors take as a result. In their wake, these sellers have negatively impacted historical home prices in their neighborhood, which impacts future appraisals. To see this, you need to understand how appraisals work. When a seller sells for a low price, their sale becomes a low-end ‘comparable’ sale, a.k.a. “comp” that could likely appear, sometime in the near future, on an appraisal of a nearby home. Appraisers use the historical sales of comparable homes to determine the current market value of a subject property (the home whose value is in question). Common practice is for appraisers to use three comparable, recently-sold homes as a reference point for determining the current market value of the subject home. The significance of an appraiser’s opinion of “current market value” lies in the direct affect that appraisals have upon real estate financing. You see,lenders require an appraisal for mortgage refinancing, home equity lines of credit (a.k.a. “cash-out refinancing”) and new home loan/mortgage origination. In most cases, lenders will not refinance or make a loan for more than the value of a home, as determined by a third-party appraisal.

Let’s think about Joe…
Let’s look at a hypothetical scenario with your average ole neighbor (let’s call him “Joe”). Joe has been faithfully making his mortgage payments for 10 years. Joe’s done his homework, and he figures his 2,500 sq ft home is probably worth around $90 per sq ft at current market prices. If he’s correct that would mean his home is worth around 2,500 x $90 = $225,000. Way to go Joe! Joe figures he’s got a sizable chunk of equity built up in his home–enough to cash some of it out and surprise his wife with a newly remodeled kitchen. However, Joe doesn’t know that his next-door neighbors have been meeting with a REALTOR® about listing their home. Before Joe has a chance to meet with his lender, a sign goes up in the neighbor’s yard. Sure enough, by the end of the week, there’s a SOLD rider added to the sign…[Joe has a bad feeling about how quickly the neighbors house sold.] Soon thereafter Joe meets with his lender about that cash-out refinance, and everything is looking good for that new kitchen. Joe’s excited. Sometime that next week, though, the lender contacts him with some not-so-great news about the appraisal that was ordered for his home-equity line of credit. “Unfortunately” the lender says, “the appraisal came back at $85 per sq ft. While some of the comps were closer to $90 per sq ft, they were from a few months back; and, the most recent sale in your area–the home next-door to yours–sold for only $80 per sq ft.” The lender proceeds to tell Joe that he’s still got enough equity to get the money for that new kitchen. But, as Joe mulls it over, it becomes clear to him that the new kitchen will simply have to wait. Joe explains to the lender that the $20,000 cash-out that he was planning on was based on the assumption that his home was worth $225,000; but, based on this appraisal, his home’s only worth $212,500—$12,500 less than what he was figuring on. Based on how much he still owes on his mortgage, a $20,000 cash-out at this point would simply be too risky. Later that afternoon, Joe reluctantly calls the contractor that he’d already lined up to do the kitchen remodel. Embarrassed, Joe apologizes for “wasting” the contractor’s time, and promises he’ll call him later on when the time is right. The contractor is understanding and, after his conversation with Joe, calls the plumber, electrician, carpenter, painter, and tile setter to cancel the jobs he’d scheduled for each of them.

A Tale of Two Listing Agents
So, what are we to make of Joe’s situation? Though it may seem far-fetched or exaggerated, this domino-effect actually happens in the real-world–probably more than you realize. We could say: “Joe, that’s too bad, but, hey…that’s life. You’ll just have to deal with it.” Granted, that would be true. Life is filled with unknowns. Unforeseen events throw a curve ball at you and your plans just don’t work out sometimes. Or, instead of focusing on Joe, we could flip his story around a bit, and look at it from a totally different perspective. What if we could help Joe? What if you could help Joe? Fire up the DeLorean and let’s travel back in time a few weeks. You’re sitting in on that meeting between the next-door neighbor and their listing agent. Better yet, let’s just pretend you are the next-door neighbor. This listing agent knows all the right things to say; and, about 15 minutes into their presentation, you’re starting to see things from their point of view. Sure, you’d like to sell for top-dollar; but, you’re starting to realize all the “dangers” of overpricing your home. The time to sign the listing agreement approaches and the listing agent flips over to the signature page, whips out a pen and places it in front of you. What do you do? Do you really need to sell fast? What’s your hurry? If you hire this listing agent who takes an ‘average’ price approach to marketing your home, here’s how it’s probably going to pan out:

1. Your listing agent will probably sell your house quickly. (Your buyer will be happy they found such a good deal)
2. Your listing agent will get a paycheck quickly. (They’re happy they didn’t have to do much marketing.)
3. You’ll have to find a place to live very quickly. (Yeah…have fun with that one.)
4. You’ll get less money for your home when it sells for an ‘average’ or below average price. (But, you’ll never really know how much you could have sold for, because waiting around for the right buyer would’ve been too risky. Right?)
5. You’ll hear about Joe’s unfortunate appraisal, and hope you won’t see him at Walmart anytime soon (because, you’re not really at the top of his Christmas card mailing list right now).

On the other hand, let’s say you wait. You don’t hire the first listing agent during the first meeting. Instead, you decide to interview another listing agent who specializes in helping sellers achieve top-dollar sales. So, you schedule the meeting, and they come by your house. Immediately you notice this agent doesn’t seem to be in as much of a hurry as the other listing agent was. Oddly, they’re not talking about the “risks” of overpricing either. In fact, though they are telling you it will take longer to sell and you’ll need to be patient, they’re proposing a less stressful, customized plan to sell your home for top-dollar. If you go with this listing agent, the story could pan out like this:

1. Your listing agent will spend more time shooting photos & video footage, gathering information, and creating internet ad campaigns upfront, in order to market your home strategically, for a longer amount of time.
2. Your listing agent won’t get a paycheck as quickly. (They’re fine with that though. They believe that investing more of their time to achieve a top-dollar sale for you will pay off in the long-run when you refer friends and family to them in the future).
3. You’ll have plenty of time to find your next “home-sweet-home”—without having to settle for something less, simply because the prospect of temporary homelessness seems imminent.
4. You’ll get more money for your home when it sells for an above average price. (You’ll be glad you were patient.)
5. Joe might just hug your neck the next time he sees you in Walmart. At the very least, he’ll probably be sending you that Christmas card. (And don’t forget…Joe and his wife will love the new kitchen, thanks to the contractor, plumber, carpenter, painter, electrician and tile setter–who all get paychecks for a job well done.)

Sometimes, it really is just about selling a house as fast as possible. For those clients, we can and will help them do just that. Often though, selling quickly isn’t really essential. When time is on your side, perhaps you should consider a top-dollar sale. With patience and the right kind of marketing, we can help you sell for an above-average price. Why not give Joe and the rest of the neighbors a little more home equity as a going-away present? Give us a call.

The numbers don’t lie. Our top-dollar marketing strategies have a positive, real-world impact on sellers’ finances and the neighborhoods they leave behind.