John is selling his brick-and frame, 1,500 square foot ranch-style home in Sunnydale. He has set up listing appointments with three real estate brokers who have been referred to him. John is trying to sell his house for the fourth time in three years. His house was previously listed at the following prices: $315,000 (180 days on the market), $300,000 (90 days on the market), and $250,000 (90 days on the market).
There are currently six listings for ranch-style homes between $175,000 and $235,000. There have been no listings in Sunnydale as high as $315,000. There have been five 2,000 square-foot, two-story dwellings listed for $285,000-$299,000 during the past three years. The highest sale of a ranch-style home in the past six months is $215,000 with 125 days on the market. The highest sale of a two-story home is $265,000 with 137 days on the market.
Anita, a real estate broker with Air Tight Realty, arrives at John’s house for a listing appointment. She has a digital camera, a smartphone, and a listing presentation. As she starts her presentation, John states “I need at least $200,000 after I pay your commission. And I hope you aren’t as pushy as the last couple of agents I spoke with. They told me I didn’t have a chance of selling my house for that kind of money.”
Anita makes some quick calculations and looks at the Comparative Market Analysis (CMA) she had prepared. She responds, “In order for you to pay our commission of 5% and receive $200,000, we would have to sell your house for $210,500. But that doesn’t cover your other closing costs. We should add $5,000 for good measure, making it $215,500. This will be tough as the highest sale of a ranch in Sunnydale is $215,000, and that property was in better condition than your home. Can you be flexible about your asking price and sales price? “