Desperate Sellers Negotiate and We're Not Desperate
Yesterday, I met with a couple who are looking to sell their Franklin TN house. After discussing the process and reviewing the recent comparable sales, they threw out a price that was a little high in comparison to other homes in their neighborhood.
They have only been in their house for a couple of years and have already made some improvements. They arrived at their price by taking the price they paid, adding the price of the improvements and then adding the agent commissions to get their list price.
First, that's not the way to price a home. A house is only worth what a buyer is willing to pay for it. Based upon the other sales in their neighborhood, a buyer doesn't seem to be prepared to pay their asking price.
Second, if the most recent comparable sales reflect a lower price, then the home may not appraise. Most buyers will write an appraisal contingency into their offer. This protects them from over-paying for a house. If the house doesn't appraise, then the buyers will come back and attempt to re-negotiate the purchase price to the appraised value.
This prompted the seller to ask if he was required to re-negotiate. No, you are not required to re-negotiate the sales price if it doesn't appraise. However, a buyer will not be able to get a loan for more than the appraised value. The lender will require that the buyer make up the difference between the appraised value and the value of the loan.
If a buyer is making a large down payment, then this may not be an issue. Most buyers don't want to overpay for a new house. Even if, they have the ability to make up the difference.
The seller's response, "Then we'll wait for a buyer who will make up the difference."
I was shocked at this statement. So I asked, "What is the lowest offer you will accept?" They then said, "Five thousand under list price." That would mean they had to sell at 99.2% of list. That was surprising. Especially, given what the current sales reflected.
Then the husband said, "Desperate sellers negotiate and we're not desperate."
I explained that negotiation is part of the process. Only in a few markets are we seeing homes selling close to list or above. Unfortunately, his price point and neighborhood didn't support his price.
When looking to sell your home, it's important to recognize that agents don't determine the list price by what you want to get. Price is determined by what recent buyers paid for homes in the same neighborhood with similar size and amenities.
This seller was planning on listing his home approximately $45,000 higher than the most recent comparable. Even worse than that, his belief that only desperate sellers negotiate isn't true.
The truth is motivated sellers negotiate and they weren't motivated.
My advice to him was to stay in his home a little longer until he could sell at that price. Otherwise, I would be happy to list his home at my suggested price.
I don't expect to hear from this seller again. It's probably a good thing, considering only desperate sellers negotiate and they're not desperate.