We spent our summer deep in Real estate; selling one house and buying another. It had been the culmination of more than a year’s worth of work, preparing our house for the market. In the first post, I described the back-story and the process leading up to the purchase of our new house. Now I’ll talk a little about my experience selling the old house.
As I mentioned, it was my first time buying, and my first time selling. I had spent my entire time in the house we were in (that I married into) improving things here and there. Many improvements were small, but there were a few bigger projects too. The architect in me always wanted to make the house better, and the do-it-yourselfer in me always wanted to increase the value through sweat equity.
I was working right up to the very end. In fact, we had signed a purchase agreement to buy a new house before I was ready to put the old one on the market. I knew I was close though, so having a closing date for the new house would be motivation to get the job done.
It was the selling side of things that taught me the most about the process. Being a buyer before the house hit the market, I knew what the mindset was, and what buyers would be looking at when they considered my house. I knew that Realtors point clients to “comps” or comparable homes in the area to determine fair market price. I also knew that, though buyers would want to negotiate, the lower the starting price, the closer you’ll be in the end to asking price.
We also knew that the house we bought was a different market than the house we were selling. It’s a larger house, in a higher price-class. We were selling a house that, for us, was a starter home. It was in a neighborhood full of people who were living in their first or second homes; older people weren’t moving into the neighborhood, they were moving out. The house we bought, however, was one most people (including us) could only afford after building up equity in another house first. Many of our new neighbors are empty-nesters who bought their homes when their kids were in high school or older. We really bought in a buyer’s market, and were about to sell in a seller’s market.
Knowing this, we picked a price that was right in the middle on the comps. We knew that, even in a seller’s market, if we started too high, the house would sit and wouldn’t sell. However, we were also too scared to start too low. Legally, you have to accept any offer that comes in at asking price (with some caveats, like selling contingencies.) We thought it would be great to get an offer at, or even above, asking price.
Our agent counseled us to start low too. In the end, we ended up meeting in the middle between what he suggested and what we had decided we wanted to ask.
We had seen throughout the process thus far that we could trust our agent. Agents have a perverse incentive, especially when representing sellers, to act against their clients’ interests, but we had no reason to suspect our agent of behaving that way.
Just to interject here, the reason they are incentivized to work against their clients is that by the time the offers come in, the work is largely done on their part. There is more work to do once a purchase agreement has been signed, but the hard work is mostly behind them. If an offer comes in a few thousand dollars below what a seller is hoping to get, it comes out to a small amount that hits the Realtor’s commission. A $5000 difference to the seller might mean a $100 lower commission for the agent. $100 is usually not worth an extra couple weeks’ worth of work to find another buyer willing to pay more, so agents often push their clients to take less money and be done.
I was also warned ahead of time by my agent, and had other agents repeat the same thing, that the first offer that comes in is often the best offer. Multiple agents have told me that it’s “uncanny” how often deals fall apart and sellers find out later that the price negotiated was fair. Subsequent offers end up negotiating to the same, or lower price. Agents counsel their clients that it’s not worth the stress of keeping a home on the market longer given the unlikelihood that they’ll get a better deal in the end.
So our house was on the market and we were off to the races on trying to get a sale. The first two weeks are the most critical; if it takes longer than that for an offer to come in, the showings start to decline. We began feeling the stress right away.
We did our best to make the house available. With four kids, three being boys of prime mess-making age, I will go to my death-bed likely saying that selling a house when we did was the most difficult thing I ever did. We had to keep our house clean like never before.
Showings were coming in though. From the beginning, we were getting an average of 1-2 showings every day, which is pretty good, even in a seller’s market.
In addition to showings, we had decided at listing-time to schedule an open house. We really didn’t want to have one, but hoped that having one on the schedule would motivate buyers to get their offers in quickly.
By the time the open house started approaching, we already started to see somewhat of a decline in showing requests. We knew we were going to have to do the open house, despite not liking the idea. However, when the time came, it ended up being very successful. The open house only lasted two hours, and the agent said it was so busy he couldn’t keep track of all the people coming in and out.
We ended up getting an offer the next day. A young couple had come through the open house, and had taken nearly half the time from our agent. She had been through once already though. They were engaged, and soon to be married, looking for their first house, and she wanted him to see the place.
Normally it might not be the best thing for a seller to have his agent spend half of an open house with one potential buyer, but it was great for us. Our house was over 40 years old, and I had been worried about some things being turnoffs for potential buyers. I was full of anxiety over what an inspection might find. Many of my concerns were brought up by the buyers, and having my agent there to talk to them about them helped a lot. This is where my agent really earned his commission! He really rocked it. Having a strong background in construction helped a lot too, he was able to see that the problems really weren’t as big as the buyers feared, and showed how simple most were to fix. For example, there were two boards on the deck that had rotten spots. He was able to show them that the rest of the deck was in great shape, and only needed to be re-stained. He even offered to personally replace those two rotten boards (which he did.)
When the offer came in the day after, it was pretty low. We were really put off by how low it was. However, after putting in a couple lower offers ourselves, we knew that it was in the buyers’ interest to find our bottom price. The most stressful part, though, was being told that they already lost one sale and wouldn’t be too happy if we stalled waiting for a better offer. We decided to counter right in the middle, coming a little lower than we had hoped to sell for. However, we made it clear that we wouldn’t go any lower, and if they found anything during inspections that needed fixing, they’d have to fix it without our help.
To make things sting a little more, we did have another showing the following morning (after the offer and counter had been hashed out verbally). Nothing had been signed yet, and it would be our last chance to find a better offer. This showing was someone really interested in the house too! Unfortunately, they didn’t have financing lined up, and weren’t able to get their offer in right away. We’d have to take the first offer or risk losing both if the second wasn’t able to secure proper financing.
By the time we got the deal signed, we had really learned a lot. I would do things a little differently if given an opportunity to do it all over again. That will be the subject of the next post.