At the end of the day yesterday I received a phone call from the son of prospective sellers who own a luxury one bedroom condominium on the Upper West Side of Manhattan. This is precisely the phone call that I and my colleagues are most happy to receive…at least that’s been the case for the past 10 years. This call was a bit worrisome however.
The owners (their son actually) of the property contacted me because I am currently selling a similar property in their building. They were excited by the video tour that I was using to represent that property and encouraged further when I informed them that the apartment was currently in contract and likely to close in the next couple of weeks. All seemed well as our conversation progressed and we discussed recent sales in the building, current signed contracts, and similar apartments that were actively being marketed in the building by other real estate agents. All was well until I shared the price at which I thought this seller could actually sell their apartment. My price opinion was met with stone cold silence. "Hello…hello, you still there?" I said. "I’m here…uh…um…my parents were thinking of a much higher number."
No kidding!!! Here’s the important info that I provided when completing my comparative market analysis to come up with my pricing opinion (btw…he insisted on me doing this over the phone which I never like to do):
- 15 similar one bedroom apartments have sold in the building since January with an average price per square foot of $1,142.
- 1 similar one bedroom (on a lower floor) is in contract (I’m the seller’s agent) for $1,139/sf.
- 8 other similar one bedrooms remain on the market for months at an average asking price of $1,331/sf.
- This seller’s apartment is 847sf.
I also felt it imperative to explain to this prospective seller that:
- Because the location of their building is in very close proximity to several new development projects, their is an inventory issue: more inventory for the lux condo buyer to choose from in this specific area than others in the city.
- The 8 similar one bedrooms in the building at $1,331/sf are creating a building specific inventory issue aside from what exists outside of the building.
- Lastly, the majority of "flippers" in this particular project are barely breaking even and many are losing thousands of dollars.
Again I was met with deaf ears as this gentleman proceeded to explain to me why his parent’s believed that their apartment was worth $1,416/sf or more than 20% more than everything else that has recently sold or gone into contract in the building. This gave me a flashback! Circa 1992.
Back in 1992 when I began in the real estate industry, sellers often called our offices begging us to market their properties. Often times…not always…but often, we would suggest ways in which they could market the homes on their own so we wouldn’t get "stuck" marketing an overpriced property for up to 2 years. That’s right…I said 2 years! It wasn’t unusual to have an exclusive on a property for 1 year at a time and to still be marketing an apartment 20-24 months after your initial conversation with a seller. Buyers were hard to find and thus they were golden. Sellers were a dime a dozen and those who had unrealistic expectations outnumbered the realists. A solid, qualified buyer was what every agent sought. They were our life-line. Back to 2007.
For the past 10 years, buyers have been treated like second class citizens (I’m guilty too!) as property was KING and if you had an exclusive right to sell a property, you were just about guaranteed to earn your commission. So perhaps now you can see why the conversation that I had with this potential seller yesterday scares me. At $995,000, this seller could actually procure a buyer (possibly more than 1) and sell at $1,174/sf or more which is still better than the average of what has recently sold. He wanted me to take the exclusive right to sell at $1.2M or $1,416/sf. No thanks. My response to his request to list his apartment 20% too high:
"With all due respect, I’m sure you will find an agent out there who will be more than happy to market your apartment at that price. In fact, there are 8 such agents who are actively marketing other overpriced apartments in your building. If, however, you decide you really want to sell the place, call me and we’ll discuss price again. If you choose to list at $1.2M, my guess is that you may be calling me next year. My next guess is that my market analysis next year won’t be a whole lot different than the one I just provided. It could be a little better…it could be a lot worse. Feel free to touch base with me at anytime if you have further questions. Best of luck!"