By Larry Hotz, All Denver Real Estate
“Even though it’s important to observe the effects of the human condition, it’s also important to remember that we are part of it.” What does that mean?
That’s what I said yesterday it to a client when we were discussing the psychology of the seller in today’s marketplace. The part of the human condition that I was referring to is pride of ownership. And, the pitfall that sellers can face in today’s market is that their pride can outweigh their objectivity. It’s easy to overprice a property based on subjective pride.
As Realtors, we often say that we bring value to a transaction. Sometimes that value is in suggesting a higher price. But, even if the value is in suggesting a more realistic, lower price, there is a value proposition. As the detached observers, we are better suited to realize the value of a property in today’s market and ultimately still achieve the best price possible.
Yes, there are times that we suggest higher values than what a seller has in mind. I remember several years ago I was very pleased to sell a home owned by Clifford May, the former columnist for the Rocky Mountain News, who left town to take a job as Communications Director for the Republican National Committee. Cliff was very surprised when I suggested a higher list price than he had in mind. We did sell the home very close to my suggested price and Cliff was very pleased with the results. Even wrote me an unsolicited testimonial letter which is available upon request.
But more often than not, a seller can have an inflated impression of the value of his home based on his own subjective pride of ownership. It is after all part of the human condition to be proud of an exceptionally fine piece of our own work. So, especially when a seller has made substantial improvements with his own sweat, taste and money, it is natural to value those improvements more than the market would. What’s more common is that the seller never thinks to ask how the market will value those improvements. Instead the seller makes the supposition that all improvements will yield at least 100% of the time and effort invested. In reality, the market often will yield a smaller fraction than that. The only way to find out of course is through a detailed market analysis.
So, the subjective pride of ownership for a seller can be a pitfall. A few years ago a seller could say “let’s just start little higher we can always come down.” But that’s no longer a smart strategy. The Denver multi-list system now tracks along a property is been on the market, how many and what price reductions have been taken. Even if a property is taken off the market for a while and then relisted with another broker, the information remains available in the MLS system. So now, any buyer can obtain all that information from their broker.
So, now the best strategy for a prudent seller is to employ a good broker to help recommend the proper initial listing price. Then, an offer is more likely to be forthcoming. Also, that strategy will keep the listing from becoming aged. It’s not uncommon that a seller who initially overprice as a property will have to reduce it several times and ultimately take a lower price than she otherwise would have.
The client I was discussing all this with yesterday made the point that he thought that he was going to be too subjective in the pricing. I urged him to talk to as many brokers as he wanted so that he would feel comfortable with his final selection of a broker. After all, advice is only as good as the person giving it. He agreed, “I just don’t want to be a victim of my own pride but I don’t want to leave any money on the table either.”
Yes, all of us are part of the human condition. Pride is part of the human condition. And, fortunately for me a smart seller is going to try to seek the advice of a good broker before setting the price in determining the marketing for the selling of their most prized possession, their home.