The House Was Perfect. The Numbers Were Not.

By Kelly DeBrosse | eXp Realty | 24+ years serving Raleigh, Wake & surrounding counties

When Walking Away Is Worth Its Weight in Gold

A few years ago, just as we were beginning to see the first signs of the real estate market slowing after the craziness of COVID, I was working with a young couple who had a pretty unique situation. They were looking for a home that could accommodate a family member with Down syndrome who would be moving in with them, and ideally they wanted a separate living area where he could have some independence.

We found a house that was almost perfect for what they needed. It was a fairly new, large home in a crowded neighborhood with a detached living space above the garage. But the real attraction was that another part of their family lived just a block away and was equally involved in caring for him. This would give him two family homes within walking distance of each other, and the ability to move back and forth between them. Finding another property that could offer that arrangement was going to be incredibly difficult, and I knew that.

The problem was that I really didn’t like the house from a resale perspective. It sat at the end of a street, had a rear-entry garage and roads running along multiple sides. There was virtually no privacy anywhere. I remember walking through and thinking, who in the world is going to pay this much money for a house where every window seems to look out onto a road? Yes, it was relatively new and it was big, but those were about the only things I thought would appeal to a broad group of buyers.

Under normal circumstances, I wouldn’t have recommended this property to someone. But these weren’t normal circumstances, and this particular family had needs that made the house unusually valuable to them.

One of the most important things I do when working with buyers is try to understand what they’re really looking to accomplish, not just what they want in a house. I want to know what’s important to them personally and financially, what their plans are and what might change in the years ahead. In this case, I understood exactly why they wanted the house, but I also knew that someday, if they needed to sell it, the next buyer probably wouldn’t have the same very specific reasons for wanting it.

So I was particularly concerned about what they paid.

The comparable sales supported a price about $25,000 below asking, and that’s where we made our offer. I also knew the house was sitting vacant and that the subdivision covenants prohibited renting it, which meant the sellers didn’t have the option of putting a tenant in while waiting for the market to improve.

The sellers weren’t interested in negotiating. Their agent told me they simply couldn’t afford to sell the house for what we were offering.

That made me curious, so I went back and looked more closely at what they’d paid for the property and how it had been marketed when they bought it. That’s when I found what I believed was a pretty significant mistake in the previous listing.

The square footage of the detached living area above the garage had been included in the home’s reported living area. Under our MLS reporting requirements, that detached space should have been identified separately rather than added to the square footage of the main house. It was a substantial difference, and it affected how the property appeared to buyers and how its value had been evaluated.

The previous appraisal had also failed to identify the problem as I believed it should have. In my opinion, had the property information been accurately reported and analyzed, the purchase price the current owners paid would not have been supported in the same way.

Unfortunately, the sellers were now trying to recover what they’d paid in a market that was beginning to slow. I understood why they were in such a difficult position, but that didn’t change what I believed the house was worth.

I went back to the listing agent and explained what I’d found. She was actually grateful that I’d caught it, and I suggested that the sellers seriously consider our offer. I also recommended that they speak with an attorney about whether there might be an opportunity to recover some of their financial loss through the professionals involved in the original transaction.

I felt terrible for them. They were dealing with a financial problem that appeared to have originated with mistakes made before we ever became involved. I wasn’t interested in assigning blame, but I did want them to know there might be another avenue worth investigating rather than trying to recover that money from the next buyer.

The sellers still weren’t willing to negotiate.

Now I had a difficult conversation to have with my buyers because I knew how much they wanted this house. They were excited, they were ready to be finished looking, and they actually told me they were fine with paying the asking price. They just wanted the house and wanted the purchase process to be over.

I understood that completely, but I was really uncomfortable with that decision. I already had concerns about the property’s resale potential, I knew what the comparable sales supported, and now I’d uncovered what I believed was a significant valuation problem from the previous transaction. I wanted them to have the house, but I didn’t want them paying a price that could leave them facing the same financial difficulty someday.

What made me reasonably comfortable recommending that we wait was that I couldn’t imagine a large group of buyers wanting this particular property at that price. The lack of privacy was a significant drawback, and the very thing that made it so desirable to my clients, the proximity to their family, wasn’t something that would have the same value to the next person looking at it.

I also knew the house was vacant, the owners couldn’t rent it, and we were beginning to see signs that the market was changing. All of those things factored into my assessment of how likely it was that another buyer would come along and pay what the sellers were asking.

Of course, I could have been wrong. Someone could have purchased the house the following week, and my buyers would have lost an opportunity that might have been impossible to replace. I explained that risk to them because I wanted them to understand exactly what we were deciding.

I’ve always considered risk management to be a large part of what I do in real estate. I can’t guarantee an outcome, but I can look at the information available, evaluate what I believe is most likely to happen and explain the possible consequences. I also tell my clients what I would do if I were in their situation, because I think they deserve to know which direction I believe makes the most sense and why.

In this case, I told them I would walk away and take the chance.

Fortunately, these buyers were the adult children of longtime clients of mine, so there was already a foundation of trust. They understood my concerns and agreed that they didn’t want to inherit someone else’s financial problem, even though they really wanted the house.

So we walked away, but I certainly didn’t forget about it.

About once a month, I’d check to see what was happening with the property. It continued sitting on the market, and after a few months the sellers began reducing their asking price. When I saw that, I reached out to the listing agent again to see whether they might finally be willing to negotiate.

This time they were.

We were able to put a deal together, and my buyers got the house they had wanted from the beginning, with the detached living area and their family just a block away. I was thrilled for them, and I was particularly proud that we’d managed to save them thousands of dollars in the process.

One thing I learned early in my career is that you can’t own the value of the past. You can only work with what the market supports today. If we sit down in February and look at comparable sales, I may give you a very different opinion of value than I would if we were having that same conversation in June. Four months can make an enormous difference when the market is changing, which is why I believe every conversation about value deserves a fresh look at the current data.

You have to be willing to move with the market rather than fight against it. In this situation, I was beginning to recognize a change that the sellers weren’t quite ready to accept. I couldn’t predict exactly when that would change, but I believed we had enough information to justify being patient.

Timing can play an enormous role in real estate, and knowing when to wait and when to move quickly is something I’ve learned to pay close attention to. Sometimes time is your greatest asset in a negotiation, particularly if you have the flexibility to use it and can keep your emotions from making the decisions.

That’s not to say I always recommend walking away when a seller won’t negotiate. There are plenty of situations where I would advise a buyer to move quickly or even pay a premium because the circumstances justify it. Every property and every buyer is different, which is why understanding both the market and the people I’m representing is so important.

In this case, the house really was perfect for this particular family. I just didn’t believe they needed to pay what the sellers were asking to get it, and fortunately, we were able to prove that patience was worth taking a chance on.