Seller Denial Leads To Brokerage Switch
A: After reading a post on Matrix the other day regarding seller denial in realizing that their home may not be worth they hoped it was, I decided to go ahead and write this post that I was planning on writing a few weeks ago but hesitated. I hope I don't get slack from colleagues over this discussion as I will be focusing on a specific high end property on 5th Avenue.
Apartment 4A at 1158 5th Avenue, now marketd by Sotheby's Int'l broker Reginald Fairchild, has been on the market since September of 2005; thats not a typo as this unit has been on the market for over 14 months now. Originally an 8-room apartment, the seller renovated to the 7-room property that is marketed today with plenty of sunlight and direct Central Park views from all rooms. So, why isn't it moving? One word, PRICE!
You can argue that because it is located between 96th & 97th streets that its the location that is hurting this property's chances of selling, but I wouldn't. According to Wikipedia:
Known for its "suburban" family-friendly atmosphere, Carnegie Hill boasts many fine restaurants, upscale boutiques, and gourmet food stores. Following New York City's tradition of similar stores residing next to one another, the stretch of Madison Avenue that runs through Carnegie Hill is known for its numerous children's clothing boutiques. The neighborhood also includes several schools, including Dalton, St. David's, Nightingale-Bamford, Trevor Day School, Convent of the Sacred Heart, and HCHS.In short, its a desireable neighborhood to live and raise a family and will always retain value because of its proximity to Central Park and leading schools.
To understand one of the fundamentals that is currently powering NYC real estate at this price point (seller denial in valuing their home), we need to look at the listing history of this property. Here is a chart showing the price changes since the listing first hit the open market:
Now, let's anaylze. The seller priced the apartment high late last year to start. Fine; many sellers do this and should be prepared for price cuts within the first 2 months. The first price cut was a big one of $620,000 but wasn't done until May of this year, some 8+ months after the property hit the open market. Not Fine; generally speaking if you have had 25 buyers come through your property without a reasonable offer submitted than your asking price is too high. Moving on, the original marketing broker got another price cut to $3,200,000 two and a half months later. Fine; actually the original broker did a great job getting the property down to realistic market levels although it was about 6 months too late.
So, what happens? The broker loses the exclusive listing, the seller switches to another brokerage firm (because it must be the broker and NOT the price that is contributing to the property not selling), and then get this, RAISES THE PRICE BACK UP TO $3,400,000!
WHY WHY WHY! The apartment had a 8 week fire sale being offered to the public for $3,200,000 yet was unable to catch any fish. While I understand the switch to another brokerage firm (as it could be a number of reasons why the seller decided to go with another broker and company if they were unsatisfied with the level of service they were getting), I do NOT get the price increase?
Jonathan Miller had a great post the other day on seller denial which included this statement that I agree 100% with:
Sellers are used to being in charge - The economy is slowly weakening as evidenced by the erosion of GDP but its still relatively solid. Sellers have enjoyed a dominating postion for much of the past nine years, not quite as long as the Republicans have controlled Congress (sorry, but election day is still ringing in my head). Perhaps thats the reason for the seller's delay in adjusting to the market (not the shift in power to Democrats). They are simply used to the way things have been.Perhaps this seller feels the same way and now that a new broker is in charge of marketing, the seller wants to regain control of the listing that was lost after 13 months on the market with the old broker and price cuts totaling $800,000!
Smart? NO! The seller finally got over the initial denial that plague's many sellers in today's real estate market only to revert back to the old devil with a fresh start that was offered by the new brokerage firm. I don't expect this listing to sell above the $3.2M price that was being offered a few months ago and any good buyer broker should advise their clients of this property or any other property for that matter listing's history.
LESSON TO BE LEARNED: As a broker, you should educate your seller's on the current market conditions and explain to them honestly and confidently why they should lower their price if they expect you to sell it within a specified period of time.
As a seller, you should listen to your broker's advice without emotion as he/she tries to do their job and sell your property for the highest and best price possible. That may mean a few price cuts! When you do finally get over the denial that your home is probably not worth what you thought it was worth, be strong! Don't revert back to a higher price as that will only do more harm than good; especially if you must sell. If you really don't need to sell and are just testing the market to see if someone will pay $1,500 a square foot for your apartment, I offer you my best of luck and hope that the broker you hired is not counting on this commission to pay bills anytime soon.
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