Sellers face reality

From Bankrate:

5 tips: Selling a house in a buyer’s market
By Holden Lewis

A successful poker night begins before you reach the table, when you resolve not to chase after hands that you have no realistic chance of getting. Similarly, a successful home sale begins before the house is listed, when you decide not to expect to make a killing.

“All you can do in a falling market, if you have to sell, is have the best possible product out there at the price it should be,” says Diane Saatchi, an agent with Corcoran Group on Long Island, N.Y. “Not what you wish you could get, not what the neighbor got two years ago, but at the price you should get now. That’s the reality.”

It takes discipline to face that reality. Humility, too. For many sellers, “the only disappointment is that their friend, six months or a year ago, got more than they’re getting,” says Bill Christiano, a loan officer with MortgageIT in Westchester, N.Y. “Ego gets in the way when they’re trying to sell. Or stubbornness, I should say.”

Break through your ego and stubbornness by looking at the good deals that your neighbors are offering. “The most important thing is to really shop the competition on the market right now,” says Elizabeth Razzi, author of “The Fearless Home Buyer,” published in 2006, and of “The Fearless Home Seller,” to be published in February.

Saatchi says that when buyers outnumber sellers, you can get away with selling a house with ratty carpet, smelly furniture and walls that need painting. The market was like that last year, but not now. Saatchi suggests hiring a house inspector before putting the house on the market. “Know now, and fix it,” she says.

Finally, “Don’t get greedy,” says Pam O’Connor, president and CEO of Leading Real Estate Companies of the World, a national network of 650 regional and independent brokers. “Just because it went up to some astronomical value and it went down from there, you have to be realistic that there has been moderation in the market.”

It takes research, often conducted by a real estate agent, to come up with a realistic asking price, and discipline to abide by it.

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45 Responses to Sellers face reality

  1. Sg says:

    The ego is really showing out there among sellers. I have been monitoring SFH in one large development in Bridgewater. Most of these houses were built in 90’s, and all look exactly same and have pretty much same configuration. Here are 2 examples of large variation on asking prices, for what I would call pretty much identical twins.

    MLS: 2308259 Asking: $549,900
    MLS: 2323245 Asking: $689,999

    Everything is pretty much same. 4 Bed, 2.5 bath, same lot, in same neighbourhood.

    On the same note, I have been monitoring about 200+ houses, but haven’t seen any sale in last 2 months.

  2. gary says:

    A little off topic but I just have to share this with you. The wife and I went to an open house in Bergen County this past weekend. It was a nice, newer Center Hall Colonial about 25 years old that could’ve used a little sprucing up and a coat of paint here and there. Upon entering the house, the realtor, reading a magazine at the kitchen counter, (with his BMW sitting outside) immediately told us that an offer had been made the previous day. He didn’t even look at us or greet us as he said it. He seemed to really not care that we were there. I immediately felt the negative vibes.

    So I asked him how much the house went for and now he looks up and says, “Oh, I couldn’t tell you that, that wouldn’t be fair to the buyer and would be unethical.” So I said to him, “but it’s not unfair and unethical to the buyer to hold an open house with hopes of squeezing a little more money from someone else, right?” Well, his face turned red and there was 5 seconds of silence. I looked over to my wife, with her mouth wide open and said, “c’mon let’s go.” We just walked out.

  3. gary says:

    By the way, I failed to mention that the realtor stated that the offer was accepted and the house was going into attorney review the following day.

  4. Sg says:

    This cracked me up :-)

    It takes research, often conducted by a real estate agent, to come up with a realistic asking price, and discipline to abide by it.

    I just gave an example above of large difference in asking price. Both sellers were guided by Realtor !!!

  5. James Bednar says:

    MLS: 2308259 Asking: $549,900
    MLS: 2323245 Asking: $689,999

    MLS: 2308259
    ## O’Keefe Rd

    Purchased 9/23/2005 – $579,000
    Originally asking $589,000
    Currently Asking $549,000

    Seller is taking a serious loss on that home if they accept asking price. Nice find, thanks for posting it.


  6. KAA says:

    Uh, Gary, while I agree that brokers shouldn’t be rude, you should realize that this guy was working for the seller, not for you. Maybe he didn’t want to have another open house but the seller told him to, and so he did. (And maybe resented sitting there a little too obviously.)

    And as for not telling you the amount of the offer so that perhaps you’d go higher… Well, wouldn’t you want your broker to do that if you were trying to sell?

  7. gary says:

    KAA, you had to be there. He was reeking of BS with his demeanor and facial expressions. And when I sell, I will not be using a realtor. I’ve done it before and I’ll do it again. This guy had his own interests at heart, not the sellers.

  8. UnRealtor says:

    Nice work Gary. Well, the broker disclosed they had another offer, what did he expect.

    I just noticed some Greedy Grubber flippers who listed a house about 20% higher than houses have ever sold on their street.

    The current market should provide a rude awakening for them.

  9. gary says:


    Exactly! He was playing games and I didn’t appreciate it.

  10. gary says:

    And another thing, I’ll tell you why this realtor was a jerk, it’s because sales are coming far and few between because potential buyers are pissed now and the party is over for the do-nothing realtors.

    Now, they’ve got to work real hard for a fraction of their previous comps and it’s not going over well.

    He wants the BMW but he’s not seeing the easy money anymore.

    The buyers got used and abused big time for the last 6 years. Now, the shoe is on the other foot and they don’t like it. Too bad, a family deserves to live in a nice home without having to sell their soul while the “middleman” drives a BMW. BullSh*t.

  11. James Bednar says:

    Some more info on ## O’Keefe..

    MLS# 2082642
    Listed on 06/03/2005
    OLP: $605,000
    Reduced: $579,900
    Sale 10/7/2005
    Sale Price: $579,900

    New owner lists on: 8/9/2006

    MLS# 2308259
    OLP: $589,000
    Reduced: $549,900
    Currently 50 days on market

    Given a 5% commission, if the seller gets asking, the loss will be approximately $57k.


  12. Seneca says:

    Say I am using the previous 1998 sales price of a home to calculate current value. Grim says grow it by 3% a year and that should be fair. Question: If I know a $100,000 extension was added to the home a few years after current owner moved in, do I add that amount on top of the original sales price? Do I also grow that at 3% since addition was added?

  13. njresident286 says:

    Gary –

    I think in the future we will see a lot more homes sold sans realtor. The reason being no one wants to pay 6% on a 650k sale. It was different when houses were being sold for 275k. the sums of money are just huge.

    Also, when there is a glut of homes for sale, you sometimes do not get the attention that you think you deserve. Now with the internet, people have better ways to advertise then ever before.

  14. njresident286 says:

    Seneca –

    I would do 3% from 1998 until the extension. at that point, add the 100k to your figure and continue the calculation.

    At the same time, is 3% low?? I thought I have read 4% or 5% on here a few times.

  15. James Bednar says:

    Two acquaintances are selling FSBO, both of them refuse to list due to paying commissions in a slow market. Neither of them know of, or read, this blog.


  16. James Bednar says:

    Say I am using the previous 1998 sales price of a home to calculate current value. Grim says grow it by 3% a year and that should be fair.

    I had mentioned that I thought the sales price of that particular home was fair, given 3% annual appreciation from the earlier price.

    This isn’t an analysis, just a quick and dirty calculation.

    You could get a bit more granular by using CPI less shelter for this area, and adjusting that by 1 or 2 percent. Of course, that requires that your initial sales price be “fair”. You’ll get a radically different end result if you are looking at time periods like 1993-1995 versus 2000-2002.


  17. chicagofinance says:

    grim: did you get that WSJ D1 article?

  18. James Bednar says:


    I have it scheduled to post shortly before the afternoon rush.


  19. Seneca says:

    >> You could get a bit more granular
    >> by using CPI less shelter for this area,
    >> and adjusting that by 1 or 2 percent. Of
    >> course, that requires that your initial
    >> sales price be “fair”.

    What does “less shelter” mean? I have been using a range on the low end of 3% and on the high end of 5% figuring thats a ‘good’ deal for anyone who owns RE. I also believe the starting point is fair. There were three other homes on the same block that all sold within 10-20k of the same price.

    New analysis question:
    “House A” was built in 1960, fully renovated in 2003. Taxes are $11k a year and the lot size is 122×230. Asking price is $695k.

    “House B” was buit in 1962, renovated maybe in 1980. Taxes are $8.5k a year and the lot size is 100×194. Asking price is $528.

    House A is a nicer newer home on a larger lot while House B is a less renovated home on a large but still smaller lot than “A” and requires a new roof and some restoration work to get the nicotine smell out of the walls, floors, etc.

    Based on the lot size, Price psf on House A is $24.77 while price psf on House B is $27.21. Does a home with the same livable space but on a very large lot lose bang for the psf dollar? Can I make an offer on House B based on the psf price on House A as a comp? (Obviously, I would bid even lower since house B needs more work but I am just trying to make a point to the seller that their asking price is out of line with other homes on the market. I imagine they will counter with the fact that the other home has higher taxes, more grass to mow, etc.)

    I welcome all input.

  20. Seneca says:

    Forgot one thing, House B is FSBO so they don’t face the 6% to the realtor.

  21. Hard Place says:

    This is a two unit multi family that I took a look at in Summit. Looks like the flipper redid the place (new kitchen, carpets, bathroom, fresh paint) and may now get burned. The BR’s are small and it lacks a garage. Carpet and paint certainly smelled fresh. Maybe the previous sellers in 2003 updated kitchen, not sure. Place is empty so they are looking to sell. After brokers commission they are in the hole.

    MLS#: 2319177
    OLP: $725,000
    LP: $699,000
    PP: $661,000 on 5/31/06

  22. njresident286 says:

    Hard Place

    do you know the sale price in 2003?

  23. Hard Place says:

    Yes, 410k on 11/24/03. They made 61% in almost 2 1/2 yrs. Even if it was them that redid kitchen & bath than they made a nice return.

  24. James Bednar says:

    The “CPI less shelter” figure is exactly that, the change in CPI less the changes associated with “shelter”. That data is available on a local level.

    Basically, we’re looking at all inflation other than housing related inflation. Becuase we’re looking for the change in “shelter”, we can’t adjust using a figure that already takes that change into account. We would be overstating that change by simply using the CPI. For the NY/NJ MSA, CPI ran at 4.7% YOY in August, CPI less shelter was 3.4%.

    You are relatively new here, so I’m not sure what your background is, is this new to you, or am I preaching to the choir?

    Either way, the issue is that you can’t compare a dollar today with a dollar from 5 years ago, they are two different animals in terms of purchasing power. Inflation erodes the value of the dollar, so you need to adjust for that erosion. Otherwise, we’re just confusing inflation with appreciation. The difference is, did the asset appreciate, or did the currency the asset is valued in depreciate.


  25. lisoosh says:

    Gary –
    He WAS rude. And you’re right, it is a sign that he hasn’t had to work too hard for a while that he would be that flippant with ANY potential customer.
    Someone who lives on commissions and sales should be pleasant to anyone and everyone. He should have offered you his card, taken your details in case the current offer fell through, found out more about you and offered his services. For all he knew, you could have been a potential listing or a hungry buyer. His behaviour was unprofessional and just plain stupid.

  26. James Bednar says:

    It is only when we get a dollar equal to a dollar (and yes, I know how odd that sounds), that we can know what the “real” appreciation was.


  27. Shailesh says:

    Very valid points raised earlier on Housing valuation. If you look at the chart in following link, it’s easy to see that in 90’s prices did not move at all, even though there was inflation. That says in Real terms housing lost valuation. That changed from 98 onward and housing moved much above CPI numbers.

    NJ RE and CPI chart

    Hence, I don’t think taking 1998 value and appreciating by 3% is valid number for 2006.

    I would approach it other way. I read somewhere that in 2003, the House prices reached real inflation adjusted level. I would take 2003 as base price and then apply CPI + 1% or 2% to come to proper valuation. I know that may not sound much, but it will still be 25% below 2005 prices.

  28. gary says:


    Yes, my thinking exactly. He wanted to do business on his terms, that’s why I knew his words were a bunch of BS.

  29. John says:

    SG, I have been watching that same community in Bridgewater and it seems like the best deal for the value is:

    MLS: 2319706 Asking: $549,900

    This house is bigger than O’Keefe
    Just not sure if my wife is ready.

  30. BC Bob says:

    “Ego gets in the way when they’re trying to sell. Or stubbornness, I should say.”

    Unfortunately, for sellers, the market does not buy ego.

  31. 007 says:

    I was looking into BW also. I was in several open houses last year(peak). They were asking for 650K or close to 700K. Houses have not moved that fast. Now, within a year, it dropped by 100K. Several days ago, I just printed out all the intestested house details and I plan to revisit them half year from now. The price is going to adjust, I will wait.

    BTW, where is Bob? On vacation?

  32. njresident286 says:

    with 140k in cash, really how much does someone need to make to afford a 700k house? I guess we can use a 30 year fixed mortgage with 8k a year in taxes

  33. njresident286 says:

    Seneca –

    Type up a written propsal and submit it as an offer. that way it gives the seller an idea of where you are coming from. from what I have learned on here, all offers by law must be submitted so you know the seller will see it

  34. James Bednar says:


    Why do you feel the need to justify your offer? It’s just an offer, all business, no apology required. The seller knows what they can and will accept. I’m not sure any level of persuasion by the buyer is going to sway a seller into accepting a lowball.

    However, I do want to be able to explain to the current owners how I came up with my value.

    It is a novel concept. I remember hearing stories out of California where sellers were requiring potential buyers to submit essays on why they should be chosen as buyer.


  35. lina says:

    I’m new here – I’m looking into buying a home in Essex county (Maplewood/S. Orange), and am totally confused navigating this market!

    Is there a general rule of thumb a buyer should be using to mark down the listing price of a property? For example, in today’s market, should you automatically assume that the listing is 15% too high and start negotiating from there?

  36. SG says:

    All this valuation talk make me feel, there should be Blue Book kind of approach to valuing the houses. The approach that takes into account all the factors (inflation, land prices, year built, lot size, house size etc…). This may not be accurate but at least will help people justify what they should be paying.

  37. FirstTimeBuyer says:

    Grim – any chance you can look up the sale price for the house in comment 29?

    MLS: 2319706 Asking: $549,900

    It would be interesting to see if this is another fire sale too. My husband & I have been looking in Somerset County for the past year and prices seem to finally be coming down. In our opinion they haven’t come down far enough yet.

  38. James Bednar says:

    MLS# 2319706
    OLP: $575,000
    LP: $549,000
    DOM: 14

    It was previously listed under MLS# 2277884
    OLP: $649,000
    DOM: 123

    Owner is Licensed RE Agent

    Purchased: 7/15/1996 $217,358

  39. J says:

    I am new in housing, Any one could tell me where or how to find the old prices(1998,2000,2003) for town or a neighborhood?

  40. Seneca says:

    jb wrote:
    “Why do you feel the need to justify your offer?”

    Thanks for asking me that question because it was just the kick in the pants I needed. You are right, I DON’T need to justify ANYTHING! It’s my nature to want to, I suppose, because my first career was in commercial and multi-family real estate as an analyst on the sell-side of transactions. I would spend hours coming up with just the right cap rate and set of comps. And it really didn’t matter because even with the inflated asking prices I ended up with, bidding wars drove the price even higher. I was working in markets that had a bubble to what SFH/Condos have experienced over the past 5-6 years.

    I suppose I hope that a ‘soft’ approach to my offer will at least mean that the sellers call me back in 6 months when they realize they will NEVER get the price they are currently asking for or anything close to it. And you know what? By then, I will have bought a much nicer and much more reasonably priced home elsewhere.

    Thanks for knocking some sense into me.

  41. UnRealtor says:

    “With 140k in cash, really how much does someone need to make to afford a 700k house?”

    Simple formula – PITI (principal + interest + taxes + insurance) should be LESS than 35% of gross income.

    Factor in maintenance, utilities, and property tax increases of about 3% a year forever.

    At the $8K in property taxes you state, you’ll need about $120K annual gross income.

    Other factors: kids, serious illness, job loss, etc.

  42. James Bednar says:

    Sorry Un, but I don’t agree.

    With a 140k downpayment (assuming this isn’t the entire nest egg), annual income needs to be closer to the 200k mark, if not higher.


  43. njresident286 says:

    JB that was what I figured. I had estimated 190k, but I wanted to see what others thought here.


  44. UnRealtor says:

    Well, for a $700K house with $8K property taxes:

    Principal + Interest: $3,540 (30-year fixed @ 6.5%)
    Property Taxes: $667
    Insurance: $100
    TOTAL: 4,307

    According to my calculations, it would take $145K gross for PITI to fall around 35%, how are you getting near $200K for needed gross income?

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