<<< Gordon Gekko

Yesterday an agent was coming out of the house next door to one of my listings.  I knew that the owner of that home was thinking of selling - they had had trouble with the tenants, who finally vacated without notice.

I had told her about the four critical steps to selling:

1. Have the home look spectacular

2. Make it easy to show

3. Hire a good local expert to represent you

4. Put an attractive price on it.

So what does she do?  Hires her out-of-county relative to be the agent, and lists it 5% higher than the price I told her.  This happens on virtually every listing around town.  The sellers INSIST pushing the list price about 5% to 10% higher than recommended.

Why are sellers so fascinated with getting that extra 5%?

In this case, the agent went on to explain that the owner had a negative cash flow on all her properties of $20,000 per month.  She has about 30% equity in this property and is now eating a payment of around $3,500 per month, but she just HAD TO inflate her list price by the extra 5%.

WHY? How did it get this way?

In the 1980s if you could sell your house for more than you paid for it within a year or two after you bought it, you had done well.  What happened since?

1. Gordon Gekko, who in the 1987 movie 'Wall Street' uttered the now-famous line, "Greed is good".

2. The creation of the lottery, and people dreaming of being rich.

3. The 'Las Vegas-ization' of America, with casinos everywhere.

4. The eight-year bull run in real estate.

In the early 1990s we learned a lesson about greed that left its mark - greed is NOT good when the market is in decline - if you hold out, you'll end up selling for less, later.

Of course the ensuing 8-year bull run in real estate obliterated the memory of the early 1990s.  Now sellers not only feel overly-optimistic about what their house is worth, the greed has soared to new heights  to the point where sellers IGNORE the tough market conditions, IGNORE the advice of their realtor, and still INSIST on pushing for the extra 5%, believing that they know better than anyone what the house is worth - and how to go about selling it.  Many sellers don't even know why they want the extra 5%, they just do.

Consider how the market has changed.  Compare this year to 2004:

San Diego County

Jan 1 to May 17       2004             2007         % diff

Total listings          11,052           17,358        +57%

Total closings          9,266             5,735         -38%

The chances of selling have dropped considerably.  Buyers are fully aware, and are only buying the properties that stand out as exceptional buys.

We will be hearing about the 'housing slump' for as long as sellers are living in their '5% fantasy world'.  The incessant need to push for more dough has stalled the market place.

If you're selling, and you catch yourself pushing for that extra 5% with justifications like:

I need the money, I want the money, I deserve the money, my house is better, my house is different, my area is different, I don't have to sell, I'm not desperate, I can wait, etc.,

then recognize that today's buyers aren't very tolerant of greedy sellers, and are willing to wait until they see a property with an attractive price on it.

Here's how sellers can tell if their price is right:

Buyers are making offers:    Price is within 5% of being right.

Buyers are coming, but no offers:   Price is 5% to 10% wrong.

No buyers are coming:   Price is 10% or more wrong.

What does it hurt to go a little higher?  Sellers only have one chance at making a first impression on buyers - and there is enough inventory that buyers forget about you in a hurry.  Get it right from the beginning, or adjust quickly.