Listen & read to Daniel discuss why listing prices are, in many cases, "pure fiction".

Hi this is Daniel with DROdio Real Estate. Hope you're doing well today. Wanted to have a little discourse about home prices, because one thing that I am seeing clients do very, very often is limit themselves based on home prices. And I cannot stress enough that in today's market, which this is the Spring of 2008 going into Summer soon, in today's market the home list prices are just purely fiction, they have no basis in reality in many cases. Now the reason that is a difficult statement to make is just because it varies and it varies based on the seller and it varies in a way that most buyers don't realize, which is the following; If you make an offer on one property you are very unlikely to find a seller who needs to sell and obviously the more a seller needs to sell the better of a deal you can get or I guess the better deal we can get you by negotiating on your behalf. But if you make multiple offers you are much, much more likely to find a seller that really needs to sell. And so the strategy that by definition you need to take is to be ready to put multiple offers on multiple properties in order to find that seller that just absolutely needs to sell. And the best way to do that is or the best way we found to do that is through a system where we use electronic signatures to stamp your signature onto the documents. We email them to you to approve and then you email us back an approval. That let's us be very efficient in making multiple offers quickly.

Now you can't make more than one offer at once unless you're ready to buy more than one home, because if you made two or three offers at once you would be obligated to those offers if the seller expected them and ethically I am not allowed to make more than one offer on a property if you are not planning on buying more than one home. However, having said that, what we can do is make an offer on a property with a quick expiration date. Most realtors do not think to put expiration dates on their offers, but we do. Because there's no predefined spot in the regional sales contract, which is the preprinted contract that most realtors use. There's no predefined spot for expiration dates and so, you know, since a lot of realtors, all they really do is just kind of fill in the blanks and don't necessarily understand the contractual language behind them.

Most realtors do not put expiration dates, but we do. So when we make an offer we will put a very quick expiration date, usually several days into the offer and when we make the offer we say to the seller, look my buyer has several properties that he could buy, we're making an offer on your property first, but if you don't accept our offer, we're just going to move onto the next property. And that puts tremendous pressure on the seller to accept the offer that we're making. Now usually the seller won't accept it, because it's such a lowball offer that they just can't, but they'll often counter with their counter offer very aggressively. So let's say a property is being listed for four hundred thousand dollars, we make an offer of three hundred or somewhere in the low three hundred's. The seller might counter at three-fifty, well we just gotten a fifty thousand dollar discount off the price of the home. But then again the seller might counter at three ninety-five and we just don't know. That's the thing that I find most difficult to explain to clients in a way that they understand is we do not know how the seller is going to react. And as good as I am at getting the listing agent to give up information about the seller's motivations when I call them, I have found that sellers react differently when something is presented to them in writing where all they have to do is initial it in order to have a ratified contract. It is very, very difficult to predict how a seller is going to react. And so the reason I say that listing prices are fictional right now is because let's say there are two properties listed for sale next to each other, they're both the exact same style and model of house, but the two sellers behind those properties are very different people with very different motivations and very different needs.

When the listing agents list those properties for sale it's very unlikely that they're going to list them at drastically different prices even if the sellers have drastically different levels of needing to sell, because the listing agent wants to list the price at the market value. Obviously it's the listing agent's job to try to optimize or maximize the price that the seller gets for that property. So you know, if the average price for a neighborhood is four hundred thousand dollars and the seller just says to the listing agent, look I just want to sell this place, just get it off my books. Let's say maybe the owner died and it's a family trust and the kids don't want to deal with the property or for whatever reason, you know, the seller has to go take care of a sick family member on the West Coast and just needs to get out of town, I mean you just never know the seller's motivations. So you know, there might be a property, a property A where it's priced at four hundred thousand dollars, but the seller would really take three-twenty for it, they just want to get it off their hands. It's been in the family for fifty years, you know, the original owner paid thirty thousand dollars for it, you know, thirty years ago kind of thing and their basis is very low in the property. Compare that to seller B in the house next door, which is the exact same model of the house and it's listed at the exact same price, because that's the market value for the property, but that seller, maybe that seller bought it a year ago and paid four-twenty for it and so the seller actually owes more on the property than he can sell it for, that seller is going to be much less flexible on the price of the home. Well if you just choose to make an offer on property B, because you like it a little bit more than property A, you know, you are missing out on eighty thousand dollars of value. And the only way to know the motivations of seller B versus seller A is to make offers on both those properties. So you have to pick the one you like more, make an offer on that one first, get a counter back from that seller then you do not respond to the counter, but you move onto the second property, make a quick expiration date on the second property, get a counter back from that seller and then you can compare apples to apples. Then you really know what's going on. If the first seller counters at three ninety-five and the second seller counters at three-fifty you know that the second seller is the one you want to negotiate with first. And maybe you liked the first property a little bit more, but maybe you just like it a little bit more because of the paint, which is, you know, a one or two thousand dollar item. Or maybe you just like it a little bit more because it has a deck, which is a three to five thousand dollar item. I mean if you can save fifty or eighty thousand dollars on a property, you know, you start liking property A, a little more knowing you can get a much better deal on it. And so buying a property emotionally is probably one of the biggest issues that buyers have, where they walk in and they say, oh honey I love this property, but they happen to be walking into property B where property A next door or down the street or in the neighborhood is a much better value and it's just not apparent, it's not clear to the buyer, because they're buying emotionally instead of logically. So as a buyer just remember, listing prices are pure fiction in many, in some or in many cases. You don't know which listing prices have the most room for negotiation until you start making offers.

Many realtors are lazy, they do not want to make multiple offers, because it usually takes a lot of work running back and forth between seeing clients, it's very arduous, but we have found a way to do it efficiently using electronic signatures and getting your authorization to send offers in by email so you don't have to run to a fax machine every time you make an offer. Buy logically not emotionally. When you walk into a property don't fall in love with it, but think to yourself what is this property worth to me. Attach a dollar value to that property. Maybe it's listed for four hundred thousand dollars and it's not worth that to you, you don't like it, you would normally just walk out, but instead of walking out ask yourself, what would I pay for it, would I pay three hundred thousand dollars for it if I can get a hundred thousand dollar discount. Obviously yo'd pay a dollar for it. I'm sure yo'd pay a dollar for just about any property in the D.C. area. So you know, it does have some value to you. You have to decide what the value is and every single property that you look at you should be thinking that. What is this property's value to me? Then out of the properties that you see choose two or three of them to make offers on even if you're not in love with them, in fact it's better if you're not in love with them, just lower the value that it's worth to you then we lower that a little more to make an offer so we can negotiate up to it's value to you and then you get a property at a price that you're comfortable with even if you don't love it, you then have the equity and you have the money to put into the property to make a property that you love. So that's my discourse. Most buyers buy emotionally, don't be one of those buyers, buy logically. Realize listing prices are fiction and the only way for you to know that is to make multiple lowball offers with quick expiration dates and that's something that DROdio Real Estate is very, very good at doing and we're happy to help you through the process. Again, my name is Daniel, founder of DROdio Real Estate. I hope you enjoyed this and I'm sure many more postings that we'll be producing in the future. Take care.