They Listed at $600,000 and Sold for $400,000 -- What Happened?
"The market was hot and we were optimistic." That was the climate when Dave, who asked that we not use his real name, and his wife put their house on the market for $600,000. The house, located in a Washington, D.C. suburb, received no offers. More than a year passed, during which time they painfully pecked away at the price, dropping the listing $10,000 here, 20 grand there. It finally sold for less than $400,000. What on earth went wrong?
Dave bought the three-bedroom, two-and-a-half bath house with his wife for $250,000 in April 2002. He says, "It was a good buy; we were happy. It was in a nice neighborhood on a nice, flat lot at the end of a cul-de-sac. It wasn't a fixer-upper, but it needed some work." Soon after moving in, Dave replaced the carpets on the lower level with wood flooring. He modernized the kitchen with stainless steel appliances and updated the bathrooms. The improvements ran about $10,000.
"We had one kid and another on the way, and we thought, 'The real estate market is booming! Let's sell this house at a big profit, and we'll buy a bigger house.'" The couple found a new-construction neighborhood they liked. In February of 2005, they put down a large deposit on a home that had yet to be built. As he waited for the new home to be ready, Dave listed his house for sale in October of 2005 for $600,000.
Foreshadowing: The Open House
"The house had appreciated a whole lot in the previous year and the local real estate market was skyrocketing. There was a house in our neighborhood that was smaller than ours and wasn't very nice that sold for half a million. We wondered, 'Wow, who would pay $500,000 for that? But this is good for us.' All of these things get you primed. We figured we'd be aggressive with our pricing to start, and who knows who'll bite."
Dave and his wife were looking forward to their first open house. He says, "We got the house perfectly cleaned up and we were very proud to show it. The agent came in and we took off. I remember taking her phone call at the end of the day and asking, 'How did it go?' These were her exact words, 'Well, it was a bust,' which was not exactly what I wanted to hear, but it foretold what our experience was going to be like."
They wrote off their disappointment in the open house as merely being early on in the process. However, as more buyers came through and looked, the house still didn't conjure up any real interest. Dave says, "A couple weeks turned into a couple months and a couple months turned into more than a year that it was on the market. We thought, 'The initial listing was way too high, but we can start high and then we can lower it."
Dave's real estate agent regularly evaluated comparable listed homes and recent sales to ensure their pricing remained in the ballpark. They chased the market downward by dropping the price in $10,000 to $20,000 increments about every month and a half. "We had a good experience with our real estate agent. She did everything we asked her to do and she didn't do anything we didn't ask her to do. Our agent was probably caught up in the heat of the market just like we were," says Dave.