When selling, don’t check reality at the door

SUMMER DAYS DRIFTING AWAY

One of my favorite posts.

Sellers tend to learn the hard way.

That’s the message of a piece in today’s New York Times, which chronicles the bad decisions that some sellers made when they listed their homes.

Among a few anecdotes, the newspaper quotes a couple who ignored their broker’s advice to ask no more than the prices of houses near their 4,000-sf place in suburban Houston:

You’re emotionally attached, so you think your home is worth more. I had a landscape service and a Sub-Zero refrigerator and an icemaker on every floor, but buyers don’t care, they want deals.

Listed originally for $825,000, the house being sold by Michel and Rick Shanks underwent four price reductions and eventually sold for $605,000 after 10 months on the market.

Well, doh.

Sellers may want to forget about offer amount

(Flickr photo by Welfli)

Okay, I wrote that headline to get your attention.

The amount of an offer obviously matters, but it’s not everything.  In a sense it is not the most important thing.

What should matter to sellers is the quality of the offer, and that depends on several factors.

Some sellers shouldn’t reduce the asking price

When a listing doesn’t sell within a reasonable amount of time, it always is tempting to suggest that the seller chop the price.

I have been maintaining forever that the only reason a property doesn’t sell is its price.  Offer a $1 million apartment for $900,000, and buyers will swarm with their offers.  Offer it for $100,000, and it will go to contract virtually in seconds.

So it’s price, right?

The High Road: Brokers may take too much credit

(Flickr photo by Tumbleweed)

When an apartment sells for more than similar units — in the neighborhood or, especially, in the same building — the listing broker takes and gets a huge amount of credit for that achievement.

But how much of the number is attributable to the broker’s skill?

The fact is

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What $1 million buys

When should a property no longer be shown?

The period from the moment that a seller accepts an offer for the sale of real estate and a contract is signed and delivered can stretch for weeks in New York.

Factor in the time that can pass before the transaction is completed and months can pass.  The variables include the approval process by a co-op board as well as the diligence that lenders require for clearing the release of funds before the deal can close.

Anything can happen until settlement, so sellers and brokers are constantly on edge.

If the transaction doesn’t close for any reason,

That maxim about the first offer proves correct

Sellers who resist a first offer can count on crying over spilled milk. (Flickr photo by +tajc)

Conventional wisdom has it that the first offer on a property usually will be the best one.

With two co-ops on the market of which I have knowledge, such has been the case.

One was listed for $799,000 at the outset and the other, for $3.95 million.

The first apartment went on the market in early February. A few weeks later, I presented an offer

Accept no offer until your home is on the market

The garden I tended behind my rowhouse in Washington, D.C.

How tempting it is when you get an unsolicited offer to sell your home before you put it on the market.

Maybe you’ll have no, or at least a reduced, brokerage fee. There’ll be no open houses that require your preparation and evacuation. And forget about the anxiety of waiting for a buyer to bite, conducting fruitful negotiations and wondering, “What if?”

Don’t do it.

The situation arises more often that you might imagine. Hell, it happened to me when I moved back to Manhattan from Washington, D.C.

But don’t do it.

There is ample for reason for rejecting an early offer or equivocating  should one surfaces:

The High Road: Auctions produce but one winner

For bidders at this auction last February, hope springs eternal.

The willingness of distressed developers to resort to real estate auctions puzzles me.

I also wonder why a consuming public puts up with them.

But I don’t doubt why the companies that run auctions love them: money, of course.

Prompting this screed are three things: 1.  A blogger for the New York Times called to interview me about auctions; 2. A couple of auctions have been scheduled of condos in East Harlem; and 3. I noticed an advertisement just yesterday for 10 properties in the outer boroughs.

The pitch that the auctioneers make to developers is that they can benefit from instant establishment of the market value of their properties.

If the developers decide against selling out the building or don’t accept some of the bids, they’ll know exactly what to charge for the remaining units.  So goes the pitch.

All they have to do is dangle before buyers a few apartments in their building as available “absolute,” the auction companies contend; that strategy guarantees the seller’s acceptance of the winning bids.  Other units will be offered at the same auction with ridiculously low minimum bids, but the developer retains the right to reject the eventual winners.

In either case, buyers can be counted on turn out in droves in the hope of snaring a bargain. They are doubtless the same buyers who shun bidding wars in horror.

Yet an auction is nothing more than a bidding war.

True, a few buyers — even many at times, depending on circumstance — buy property at a good price.  But

Seller timetable is essential in setting price

A real estate broker who called me after reading one of my posts was telling me about his approach to sellers when recommending a listing price.  Basically, he has them agree to progressively lower prices depending upon how long the property stays on the market.

I have a somewhat similar approach.

What I do is