My conversation with my client earlier today started off rather pleasant, really.
Our talk was lighthearted – what were the plans for Superbowl Sunday, the latest buzz about work – the winter weather in Chicago and the prospects of warmer weather arriving soon – hopefully. It wasn’t the reason for my call, but the banter was really my attempt to put off the inevitable. I needed to have “the talk.”
“Your child is ugly.”
No segway – no transition – I just came out and said it.
“Your child is ugly.”
Again – silence. I inhaled deeply expecting the click and then the drone of the dial tone, but I could still hear the background noise of the TV on the other end of the line.
“Excuse me?” my client asked?
“Everyone thinks your child is ugly. Especially me.”
How many times have you run into an acquaintance – maybe at the mall – where their little infant or toddler was with them in-tow. You’re introduced to the little one – and perhaps you are taken off guard – a little. Let’s face it – sometimes some people have ugly kids. You wouldn’t say anything out loud or to the parents – usually – you’d smile – but in the back of your mind, you think – “geeshh – that’s one damn ugly kid.”
Okay – I really didn’t tell my client that her child was ugly – but in a round about way, I sorta did.
Last year, at the end of October, I again sorta initiated the talk – it wasn’t as harsh as “your child is ugly” – more like – “your child may not have everything going for him, but at least he has a nice personality”.
I’ve had my client’s listing on the market now for eleven months. We’d renewed once and reduced the price as well. Traffic came to an absolute standstill in October – miraculously, I showed it three times this week – but with no feedback. Just buyers starting their search – they’re testing the market. But time has finally run out – the listing was about to expire.
Rather than continue the masquerade, I finally came out and told my client what I truly thought their condo was really going to sell for in today’s market. The listing renewal was up for discussion. If I was going to continue to represent them in listing the home, I would not take it unless they made a roughly $60,000 price reduction. It may not be what they perceived it’s worth to be, but it is what buyers might be willing to pay. Problem was – they weren’t willing to hear the news last October and I quite frankly wasn’t quite – yet – willing to tell them the truth.
I guess I thought that telling my client that they had to make a $60,000 price reduction on a condo priced in the mid $300,000 range was too difficult. Maybe I too felt hopeful that things would improve.
It wasn’t until today that I thought – enough is enough – the truth is ugly.
How many ugly children are on the market today? Prior to making the call this morning, I was listening to the news regarding the latest housing statistics – the shear number of homes on the market through out the US. I also recently read that in Miami alone, the absorption rate is over 3 years. I really began to wonder what the impact would be if sellers understood just how ugly their kids were?
My clients want to move but they don’t need to move. The bulk of my conversation this morning was to revisit my client’s motivation to sell. Had their situation changed? Were they still okay financially? Was a sale dire?
No.
It was motivated by a “want” to move up, but unfortunately, even in the past – short – three months, values have really fallen to the point that made their “want” to move simply no longer possible. The new target price was below their mortgage value, potentially prompting a short sale. Their equity is gone and hence the ability to move up was an impossibility – even exploring FHA financing on a potentially new home. Had their situation changed from want to need, their decision would have been very different, however, the call ended – pleasantly. I was left with one fewer listing.
In terms of running our real estate business like any other business, I believe we wouldn’t want to carry inventory, unless it was priced to sell. I don’t want to stock the shelves with “stuff” if no one is buying – or at least not buying at the wrong price.
I think we need to do a better job at cleaning out the shelves.
I often wonder what portion of this crisis is attributed to the ugly children? I am not referring to the short sales and foreclosures. As real estate professionals, are we acting responsibly by having the tough conversations with sellers to really align price with market conditions. If not, how many of us walk away?
Michelle DeRepentigny says:
I am the current guardian of an “ugly child” listing – I wish its’ parents would get a little more realistic about how much lipstick is on this pig. Just love mixing metaphors at 5am! I am ALMOST ready to abandon it to the cold, cruel world.
January 31, 2009 — 3:19 am
Doug Quance says:
I have personally taken few listings over the last two years – for precisely this reason. The ones who didn’t listen to pricing reality have either not sold to this day… or have been foreclosed upon.
I have a listing right now that I listed (against my better judgment) for $360K two years ago. Back then, I told the sellers that $325K was a better starting point… and to be ready to go to $300K. After six months they dropped it to $350K – then decided to pull it off the market at the end of one year.
I now have it listed again… first at $270K… now at $260K… with a price reduction to $250K coming – and this is no ugly duckling. Yesterday, I told them that the market may take them to $230K before all is said and done.
Value is determined by the buyers – not the sellers.
January 31, 2009 — 7:13 am
BostonKayakGuy says:
This is really at the crux of what is ailing the housing industry.
Sellers want the best professionals, but don’t want to listen to what they have to say. So many realtors cop out and say what the sellers want to hear.
And so we end up in a market where buyers don’t and won’t trust the price on a listing – resulting in trust and market gridlock.
I just had a prospective client threaten to go live in a tent when I delivered the pricing news about their home.
They don’t need to move; they haven’t wanted to update in over 20 years; and they say they’ll wait. Wait for what??
What is everyone waiting for??
We have strayed so far from what the housing market is all about – really about.
And Washington’s continued denial of injecting a proper, thoughtful, and non-pork laden stimulus into an industry that is a fundamental to the U.S. economy, will continue to keep a stranglehold on real estate.
Robert Reich thinks money shouldn’t be put into the construction industry because there are too many “white males????????”
Banks won’t lend because they’ve been giving out frivolous executive bonuses, meeting unrealistic investor ultimatums, and going on corporate buying sprees.
Sellers refuse to understand market economics and buyers are spooked.
So the “ugly child” syndrome is in need of major plastic surgery, not a band-aid.
January 31, 2009 — 11:37 am
Tom Vanderwell says:
Thomas,
I sold real estate from 1988 to 1991 before I jumped to the lending side of the business. I firmly believe that even in that market (Persian Gulf War I) I would have been infinitely more successful as a Realtor if two things had happened:
1. I had been able to tap into the collective wisdom that hangs out here on a daily basis.
2. That I had been taught and instructed more vehemently on the exact topic that you’ve just laid out so well. We all need to be more concerned about what’s right and telling it like it is.
I hope lots of Realtors read and take your advice to heart! Well said!
Tom
January 31, 2009 — 11:38 am
Karen Geselle says:
I looked at a few “ugly children” a couple of days ago. Thought I’d preview a few homes just to familiarize myself with what’s on the market here in the Boise Idaho area. Here’s what I found:
House #1. Sides up to a busy street, needs updated and priced (my opinion) about $30,000. too high.
House #2. Has some real location issues but also has very little “living” space for a house of its size. Has 4 bedrooms and a family that needs that many bedrooms better have more living space. Priced too high for its problems.
House #3. Location’s okay – has a wide open area behind – but sits on a “flag” lot and the only view out the front is of the side of its neighbor’s garage. And yep, price is too high.
I agree with the comments of the author of this blog -“As real estate professionals, are we acting responsibly by having the tough conversations with sellers to really align price with market conditions. If not, how many of us walk away?”
It’s hard to walk away from a listing – especially if we know the sellers well. But we’re not doing the seller nor ourselves any favors by letting them think their child is beautiful. I know of a few listings I didn’t get because I was upfront with the seller at the listing presentation. No regrets. One house that was a potential listing for me is still on the market after 9 months because the agent who got the listing told them what they wanted to hear. Now they’ve had to reduce their price over 20% and still don’t have a sale.
January 31, 2009 — 12:01 pm
James Boyer says:
I have carried very few listings this past year. Mainly because of my chronic inability to tell sellers what they wanted to hear. It has allowed other Realtors to swoop in and list homes that I interviewed for at prices 15% and more higher than I was willing to do.
Of those listings I lost, only one of them has sold, and it sold for 60K less than I was willing to list it for, and it took 9 months to sell as well as 2 different listing Realtors.
At this point the real estate buyers seem to be on strike, they know that the vast majority of listings are over priced, and they are not playing that game.
January 31, 2009 — 7:45 pm
Thomas Hall says:
@michelle – maybe it’s time to just tell them they’re kids ugly?? 🙂
@doug – sounds like it’s so ugly it may be simply worth putting them out of their misery. At the point you’re at – sounds like you need to move in front of the market rather than chasing it.
@boston – What is everyone waiting for?? GREAT QUESTION! I am sharing the facts as I see them to both potential buyers and sellers. If you need to sell today, be prepared to price at 2004 levels – if a buyer writes an offer you’ve just learned the value of your property – period.
@tom – sometimes the school of hard knocks is the best learning experience, but I am in complete agreement – how great is it to share and learn experiences from our colleagues?
@karen – loved your comments – I wonder if part of the “ugly child” syndrome is the fact that we are too lax with the feedback we provide. Maybe we aren’t sharing the truth if we share it at all?
@james – I have a few buyers that are hesitant to get in the market – I am encouraging my qualified buyers to write offers – I’ve written a few offers that were hard to deliver, but every single seller countered. My comments back to the seller’s agents have always been, why didn’t they price it at their counters?
Love the comments everyone, thanks again for sharing your thoughts!
January 31, 2009 — 9:49 pm
leanne finlay says:
Some properties do put the UG in UGLY.
February 1, 2009 — 1:00 am
Joshua Hanoud says:
How about this crazy idea…
If you don’t think you can sell the property (whether it be because the product is ugly or because it’s overpriced)…you (gasp) turn it down and let them waste some other agents time/money?
I regularly turn down 9 out of 10 listings and I don’t even bother going on listing appointments unless I’ve already advised the seller of the price range they need to be in and they’re able to accept it.
It’s not worth my time to argue with a seller over what their home is worth in today’s market (especially not when it’s a 6 month argument). I run my numbers, send them to the seller and discuss the situation over the phone – if they’re amicable, great – if not, that’s ok too…I tell them to call 5 agents and chances are 4 out of the 5 will be happy to spend money on their ugly/overpriced child…just not me.
I hear many agents talk about how the market would change if only we could convince more buyers to buy…
I say the market would change just as well if not better if we could stop agents from taking ugly listings that just muck up the works.
February 1, 2009 — 9:21 pm
Thomas Hall says:
@joshua – amen
February 1, 2009 — 9:37 pm
Jose Lopez says:
Ugly Child! LOL. This is a good one. I have one myself, but he is a dear friend, and he just does not see reality at this time. Even though we have had only 3 showings in 4 months.
Sarasota Florida Foreclosures
February 2, 2009 — 8:57 pm
Deborah Bradley says:
The title is misleading I almost didnt get it until I read the whole article. Now get back to get back to the point yes there are people who just cant accept the reality that they have an ugly and overprice property.
February 3, 2009 — 11:39 am
Mack Perry says:
In today’s market it is our job to tell the sellers what there house is worth. I was on a listing presentation Monday evening and the seller was convinced that his home was worth more than it actually was. I had the ammunition to show him how his zip code had declined in value 7.94% in the last year and his school district had declined 9.76% in the last year. On top of that, in his area in the last year on 31% of all listings had sold, primarily to being overpriced. We don’t necessarily have to be the bearer of bad news, we have to be able to provide the sellers with the information to make an educated decision.
This seller wants to think over the information that I provided him and that is fine. I have no desire to take an overpriced listing and waste the marketing dollars on it.
February 4, 2009 — 3:51 am
Susan says:
I am brutall honest with sellers in this market. The last thing I want is an over-priced listing. It just doesn’t make any sense for me as the Realtor or for the sellers either. There are many examples that I can talk about with them that resulted in the sellers netting less money because of an overpriced listing.
I do think sellers are finally starting to see this clearly at this point. I suppose its a natural struggle.
February 12, 2009 — 4:30 pm
Susan says:
Excuse the typo…’brutally’…you know what I mean!
February 12, 2009 — 4:32 pm