\n<\/p>\n
Hubris<\/em>.<\/p>\n It\u2019s a noun.<\/p>\n It originates from the Greek language.<\/p>\n And rather ironically, it\u2019s something that is typically possessed by those who can\u2019t identify it within themselves.<\/p>\n If we\u2019re playing a word game today, which suddenly it seems that we are, then what do you think would be the opposite\u00a0<\/em>of \u201chubris?\u201d<\/p>\n Any ideas from the linguists among you?<\/p>\n I have one!<\/p>\n How about\u00a0humility<\/em>?<\/p>\n The word \u201cmodesty\u201d comes to mind, but for the purposes of today\u2019s discussion, I think that \u201c\u2018humility\u201d is the word that we\u2019re looking for.<\/p>\n Lately, I\u2019ve seen some exceptional examples of both \u201chubris\u201d and \u201chumility\u201d in our real estate market, and they often originate from the same issue in the market.\u00a0 The reason why\u00a0both<\/em> are present, even though they are complete opposites, is because people can respond differently in similar situations.<\/p>\n Imagine for a moment that you invested in some stock and paid $100 for the shares.\u00a0 Now imagine that three years later, they had risen to $180, but one year after that, they were trading at $160.<\/p>\n Let me ask a simple question to introduce today\u2019s theme:<\/p>\n If you needed to free up some cash, would you sell these shares for $160, even though they had previously traded for $180?<\/p>\n<\/blockquote>\n Sure, why not?<\/p>\n In fact, you probably wouldn\u2019t have ever considered the opposite action, which is to refuse to sell the shares simply because, at one point, they\u00a0did<\/em> trade higher.<\/p>\n But imagine the person who\u00a0needs<\/em> cash but for some reason refuses to sell unless or until the shares reach a new record price?<\/p>\n That doesn\u2019t seem logical, does it?<\/p>\n Very often in my blogs, I compare the stock market to the real estate market simply to prove a point.<\/p>\n It\u2019s because so many people do things, think things, or have expectations within the workings of the real estate market for which they would never hold those same thoughts or expectations in the stock market.<\/p>\n Let me tell you two stories.\u00a0 One will represent\u00a0humility<\/em> and the other will represent\u00a0hubris<\/em>, but both stem from the exact same situation.<\/p>\n Last fall, a house was listed on the west side for $1,339,000.<\/p>\n At the time, I felt it was significantly overpriced and I wasn\u2019t at all surprised to see the property sit on the market.<\/p>\n About one month later, the property was \u201cre-listed\u201d but for the same price: $1,339,000.\u00a0 All told the house sat on the market for about ten weeks, via two listings, both at the same price.<\/p>\n The listing was terminated before Christmas and then re-listed in the first week of January, once again, for that very familiar price of $1,339,000.<\/p>\n Once again, it sat on the market, but only for two weeks this time around.<\/p>\n After those two weeks, the property was re-listed for $1,079,900, but with an offer date<\/em>.\u00a0 That\u2019s a strategy that typically doesn\u2019t work in this market.<\/p>\n I mean, under-listing works, but under-listing\u00a0after<\/em> listing higher doesn\u2019t really fool anybody.<\/p>\n It\u2019s like if your doctor prescribes you a drug that will fix all your problems and then says, \u201cIt\u2019s a placebo.\u201d<\/p>\n The entire point of a placebo is to work because the person taking it isn\u2019t aware.\u00a0 If you tell them it\u2019s a placebo, it defeats the entire purpose, and won\u2019t work!<\/p>\n This offer date didn\u2019t work.\u00a0 In fact, even though the property was under-priced at $1,079,000, zero offers<\/em> were received.<\/p>\n The next day, I was speaking to the listing agent about one of her other listings.<\/p>\n I asked her what was going on with that house and she said, \u201cThe sellers are having a really hard time with it.\u201d<\/p>\n I agreed that it was a slow start to the year and that some sellers were feeling disappointed, but she said, \u201cNo, you don\u2019t understand.\u00a0 I mean they\u2019re having a hard time with it because they turned down an offer of $1,300,000 last December.\u201d<\/p>\n Oh.<\/p>\n That<\/em>.<\/p>\n Right.<\/p>\n Yup, I can see how they\u2019re having a hard time with it<\/em>!<\/p>\n Imagine turning down $1,300,000 for your home and then receiving zero offers when you under-price at $1,079,000?<\/p>\n I asked the agent\u00a0why\u00a0<\/em>the sellers turned down that offer of $1.3 Million and she said, \u201cIt was literally submitted two days before Christmas.\u00a0 We had just signed paperwork to take the listing down over Christmas and New Year\u2019s.\u00a0 They weren\u2019t in the right mindset, plus the closing date being offered was for February and they don\u2019t close on their new house until April.\u201d<\/p>\n She added, \u201cThey\u2019re kicking themselves now.\u201d<\/p>\n She asked me, \u201cWhat do you think this is worth?\u00a0 Honestly, where do you think we should be priced?\u201d<\/p>\n I asked her, \u201cDid you advise them to accept the $1,300,000 offer?\u201d<\/p>\n She said, \u201cYes, of course.\u201d<\/p>\n I then said, \u201cWell, that\u2019s good, because now I can truly be honest and say that $1.3 Million for that house would have been amazing.\u00a0 Honestly, I think it\u2019s worth $1.2 Million.\u00a0 Tops.\u201d<\/p>\n She thanked me for my honesty and said, \u201cI\u2019m going to tell them to accept the loss, be brave, be humble, and bring it back out at $1,299,000 tomorrow.\u00a0 Or less.\u201d<\/p>\n And that\u2019s what she did.\u00a0 The \u201cor less\u201d part too.<\/p>\n The property was re-listed for $1,279,000 which was $21,000 less<\/em> than they had turned down in December.<\/p>\n But the property sat on the market.<\/p>\n In fact, it was further reduced to $1,249,000 thereafter.<\/p>\n The property was now priced $51,000 less than the offer that had been turned down in December, and it wasn\u2019t about to get any better for these folks.<\/p>\n I know this agent well and we chatted about it after that price reduction.<\/p>\n \u201cThey\u2019re freaking out,\u201d she said.\u00a0 \u201cThey can\u2019t understand why the property won\u2019t sell.\u201d<\/p>\n I told her quite honestly, \u201cThis property is\u00a0worth<\/em> $1.2 Million.\u00a0 If they had some crazy person offer them $1.3M in December, that was like a lottery ticket!\u00a0 Seriously, it\u2019s a great house, but the property six doors down sold for $1,200,0000 last August and it didn\u2019t have a finished basement like yours, but it had parking \u2013 and you don\u2019t, and it had a main floor powder room, and a better kitchen.\u00a0 That $1.3M offer was nuts.\u201d<\/p>\n In the end, the\u00a0value<\/em> of the home isn\u2019t what today\u2019s blog is about.<\/p>\n Today\u2019s blog is about\u00a0hubris<\/em> and\u00a0humility<\/em>, and the owners of this property demonstrated the latter when they finally accepted an offer for $1,200,000.<\/p>\n That was $100,000 less than the offer that they had turned down two months ago.<\/p>\n That\u2019s humility<\/em>, right?<\/p>\n Call it \u201ccommon sense\u201d or call it \u201can intelligent decision,\u201d but that\u00a0is<\/em> humility in our market.<\/p>\n But the problem is: humility is often hard to find in our market.<\/p>\n In fact, in many cases, it\u2019s downright\u00a0mission impossible<\/em>.<\/p>\n I have a physical therapist that I see from time to time for various ailments, who today we\u2019ll call \u201cTamara,\u201d and last year, she told me that she and her husband, Brad, had made an offer on a house in Newmarket.<\/p>\n The house was purchased in August of 2020 for $1,600,000, and the timing of that complicates matters since this is an area where prices were really inflated around the time of the market peak, and they have come down substantially since.<\/p>\n The property had been listed all through 2024.\u00a0 First for $1,899,000, then for $1,799,00, then eventually for $1,699,000.<\/p>\n \u201cThey paid $1,600,000 during the pandemic,\u201d Tamara told me.\u00a0 \u201cThis house was barely worth what they paid.\u201d<\/p>\n But the house had an exceptional pool and as a physical therapist, Tamara said that she needed a pool and it was of tremendous value to her, so she was \u201cwilling to overpay\u201d to get the house, which was also in close proximity to her in-laws.<\/p>\n They made an offer in October of $1,600,000 through a friend of theirs who was acting as their agent, but the offer was made with the caveat that they were starting at their best price.<\/p>\n \u201cIt would be so stupid to offer $1,500,000 just for the purpose of a bunch of sign-backs, so we put $1.6 Million on paper.\u00a0 This was our price.\u00a0 The house was barely worth this.\u201d<\/p>\n Tamara hoped for good news but the seller countered at $1,750,000.<\/p>\n Keep in mind, that the house had been sitting on the market for two months at $1,699,000, so countering with an amount above<\/em> the list price was absurd.<\/p>\n Tamara said that the owner of the home was a nightmare to deal with and that he was messaging her<\/em> directly.<\/p>\n I told her this was inappropriate and that the seller should be communicating through his agent, but Tamara said, \u201cThe listing called me personally to apologize for the seller\u2019s actions!\u201d<\/p>\n That\u2019s funny since the listing agent also<\/em> shouldn\u2019t be calling Tamara directly, and should be communicating through Tamara\u2019s\u00a0agent<\/em>!<\/p>\n Tamara and Brad let the offer lapse and didn\u2019t give it another thought until three weeks later when the listing agent called Tamara (again, directly, bypassing her agent) to ask if she would like to continue negotiations.<\/p>\n Tamara said that she and Brad were still interested in the house, but that they were already overpaying at $1,600,000, and they would still have to sell their own house in a soft market.<\/p>\n She conveyed this to the listing agent and amazingly, the listing agent divulged, \u201cMy clients know exactly what that\u2019s like!\u00a0 They bought a home and they need to sell\u00a0this<\/em> house so they can close in January.\u201d<\/p>\n You would\u00a0think<\/em> that perhaps this meant the sellers were motivated to act reasonably and get a deal done.<\/p>\n But not so much, it seemed.<\/p>\n Because after much prodding from the listing agent, Tamara and Brad put their offer of $1,600,000 back on paper, and this time the seller counted at $1,745,000.<\/p>\n \u201cI told that agent not to contact me again,\u201d Tamara said.<\/p>\n And the agent didn\u2019t.<\/p>\n Until\u00a0December<\/em>, that is!<\/p>\n In December, the listing agent called Tamara and said, \u201cMy client would like to present you with a reverse offer.\u201d<\/p>\n This meant that the seller<\/em> was making an offer to the\u00a0buyer,\u00a0<\/em>and while it\u2019s exceptionally rare to see this, it does happen.<\/p>\n Incredibly, the offer was for $1,650,000.\u00a0 The seller, after responding ridiculously twice<\/em> before, had finally come to his senses and put a realistic offer on paper.\u00a0 I mean, it was still more than the house was worth, but it wasn\u2019t above the list price, and it wasn\u2019t $5,000 less than his previous sign back either.<\/p>\n But aside from the price, there was a major problem: the seller wanted a closing date of January 20th.<\/p>\n \u201cBrad and I would have to sell our house to close on the purchase,\u201d Tamara told me.<\/p>\n \u201cI mean, we weren\u2019t going to pay $1,650,000.\u00a0 In fact, we wouldn\u2019t have even paid the $1,600,000 that we originally offered,\u201d she said.<\/p>\n \u201cThe market here was dead.\u00a0 Prices had dropped.\u00a0 Our own house was worth less than it was two months ago when we gave them our original offer, so we weren\u2019t going to pay the same price,\u201d Tamara added.<\/p>\n Price aside, it seemed to reason that the closing date was impossible.<\/p>\n In order to get bridge financing, the buyer of a home must have his or her own home\u00a0sold firm<\/em> by the closing date of the purchase.<\/p>\n Tamara and Brad couldn\u2019t seriously be expected to sell their home in thirty days, right?\u00a0 Especially over Christmas and New Year\u2019s!<\/p>\n In January, the house was still on the market and the sellers\u2019 closing date for\u00a0their<\/em> new home was fast approaching.<\/p>\n The listing agent called\u00a0Brad<\/em> this time and told him, \u201cMy clients are closing on their new home on January 28th.\u00a0 They need to sell their home by then in order to close,\u201d she said, and asked Brad to get back to the negotiating table.<\/p>\n Brad told her, \u201cTalk to my wife.\u201d<\/p>\n You gotta love that.<\/p>\n The listing agent called Tamara and gave her the same story, but Tamara wasn\u2019t moved.<\/p>\n \u201cIt felt like we were the only buyer on the planet for this house,\u201d she told me.<\/p>\n But then she added, \u201cHad we paid $1,600,000 for that house in October\u00a0and<\/em> sold our house at the same time, then okay, alright.\u00a0 But now in a much worse market,\u00a0that<\/em> house is worth less and\u00a0our<\/em> house is worth less, so their proposition made no sense.\u201d<\/p>\n Tamara explained this to the listing agent, and the listing agent fought her.\u00a0 Or tried to.<\/p>\n But the listing agent finally asked, \u201cWhat\u00a0would<\/em> you pay for this house today?\u201d<\/p>\n Tamara told her, \u201cIt was over-priced then and it\u2019s worse now.\u00a0 I would buy your house for $1,550,000.\u201d<\/p>\n The listing agent told Tamara to put this offer on paper, and so begrudgingly, she and Brad did.<\/p>\n The seller countered at $1,600,000 even.<\/p>\n Then the seller emailed Tamara personally and said, \u201cWhy would anybody accept a\u00a0lower<\/em> offer than what they had seen previously?\u00a0 I will not sell my house to you for less than you had offered.\u201d<\/p>\n The email was so incredibly inappropriate, but Tamara just laughed it off.<\/p>\n \u201cThis guy is fucked,\u201d she told me during one of our sessions.\u00a0 \u201cHe\u2019s going down with the ship.\u201d<\/p>\n This was in mid-January and the clock was ticking.\u00a0 The listing agent had divulged that the seller was scheduled to close on a purchase on January 28th.<\/p>\n \u201cWe were literally the only people that could save him,\u201d Tamara told me.<\/p>\n Three days before the scheduled closing date of January 28th, the seller made another reverse offer to Brad and Tamara for $1,600,000, this time, offering a late-March closing so they could have a realistic chance of selling their own home.<\/p>\n \u201cWe were intrigued,\u201d Tamara told me.\u00a0 \u201cAnd as a sign of \u2018good faith\u2019 as they say, we decided to give him another $5,000, so we signed back at $1,555,000.\u201d<\/p>\n But the seller countered again at $1,600,000.<\/p>\n Again, he emailed Tamara and said, \u201cYou have already offered $1,600,000 for this home.\u00a0 I cannot be expected to sell it for less.\u201d<\/p>\n And that was the end of it.<\/p>\n Tamara and Brad\u2019s agent told the listing agent that it was over; that they were\u00a0out<\/em>.<\/p>\n Three weeks later, Tamara was out for a run and happened to go past the house.<\/p>\n The \u201cFOR SALE\u201d sign was down.<\/p>\n She asked her agent if the property had sold, but her agent said that the listing had been terminated.<\/p>\n Even though Tamara wasn\u2019t interested in the house, she said she simply \u201chad to know what happened,\u201d so she broke down and emailed the listing agent about it.<\/p>\n The listing agent\u00a0called<\/em> her this time and was quite verbose.<\/p>\n \u201cHe decided to blow everything up,\u201d the listing agent said in a rather forthcoming manner.<\/p>\n \u201cHe didn\u2019t sell his house so he couldn\u2019t close on his purchase,\u201d she told Tamara.\u00a0 \u201cHe was in breach of contract and now the sellers of the house he bought are suing him.\u201d<\/p>\n Tamara was shocked.\u00a0 Not only that the listing agent would divulge this, but by the situation.<\/p>\n \u201cI guess he couldn\u2019t afford it?\u201d Tamara said.<\/p>\n But the listing agent replied, \u201cHe had no mortgage on that house.\u00a0 He was downsizing and paying cash.\u00a0 He\u2019s just a really stubborn man.\u201d<\/p>\n Incredible.<\/p>\n The listing agent told Tamara that the seller had a $100,000 deposit now being fought over, and Tamara wondered why the guy would rather lose $100,000, plus costs<\/em> than simply accept an offer of $45,000 less than what he had previously turned down.<\/p>\n Hubris<\/em>.<\/p>\n There\u2019s no other explanation.\u00a0 This is literally \u201cgoing down with the ship.\u201d<\/p>\n This is where I believe that \u201cpeople are people\u201d and it\u2019s just human nature to act against your own best interests sometimes.<\/p>\n Once the dust settles on any legal action, that guy could lose another $100,000 \u2013 $200,000 if the house re-sells for less than he contracted to pay for it.<\/p>\n But in the heat of the moment, sometimes people just can\u2019t get out of their own way.<\/p>\n Accepting\u00a0less<\/em> money than you would have, could have, should have taken?<\/p>\n No way.<\/p>\n It\u2019s\u00a0mission impossible<\/em>.<\/p>\n There is, however, some good that\u2019s come out of this!<\/p>\n Tamara is such a passionate storyteller that I think she\u2019s spent more time, effort, and energy on my patellar tendon and iliotibial band than she might have otherwise.<\/p>\n By the way, anybody running the half-marathon in May? \ud83d\ude42<\/p>\n\n