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Understanding Seller Psychology – They Are Greedy

I’m batting 0 for 2 now, the offer on a second home (this one I wanted more than the last one) wasn’t accepted. The list price of the home was $275,000 and I offered $275,000 with an escalation clause up to $290,000 including a deposit of $2,000 (up from $1,000). One thing this home did teach me was the psychology of the seller and working harder to understand their motivations. I’ll explain what I mean…

I put a bid on the house at this address: 8840 Willowwood Way SW, Jessup MD 20794. (I can’t find a listing anymore, but here is the realtor’s page for this property [3])

But essentially what happened was last Friday, 8840 Willowwood was listed at $300,000 and presenting offers at 6pm, Monday. As it so happened, 8822 Willowwood (and another townhome – For Sale By Owner) were listed as well. We looked at 8822 Willowwood as well and it looked better on the inside (nicely painted walls, carpet wasn’t wrinkled) but didn’t have the extra loft space that 8840 had. 8822 was listed at $290,000 so 8840, in the same day, dropped its list price to $275,000.

This should have indicated to me that the property was really worth $290,000 but the sellers wanted to get out ASAP so they dropped it to $275,000. That meant my strategy should have adjusted to the $290,000 price and perhaps tightened up the timeline [4].

Add another wrinkle – 8822 presented offers Tuesday night, a day after the property I put an offer on. 8840, originally scheduled to present offers Monday night, decided to wait until Tuesday night to present. Why? Because with people still coming into the neighborhood to see the other property, they might stop by because of the For Sale sign. If those people are using the $290,000 (8822) as their benchmark, then 8840 would fetch more. I should have recognized and offered more, if I truly believed the home was worth more (I didn’t think it was worth more than my max price of $290k). Ultimately, they wanted to hold out and get as much as they could. Of course, this is all conjecture, but this is what makes business so interesting.

Sour grapes? Perhaps – It was a very nice property. But my vision of a $300k home is one that would require zero work to make ideal (this could be a misplaced vision). This one would’ve needed some wallpaper work, some carpet stretching, repainting, and some other minor cosmetic improvements to reach ideal.

If I manage to learn the final purchase price, I’ll let you all know. Any thoughts? I figured readers who own their homes now and have gone through this process might have some insight on this.

Update 6/25/05: The information as made it into the MD Real Property Search [5], the 8840 Willowwood property sold for $300,000, a good $25,000 over the list price. The 8822 Willowwood property’s information still hasn’t posted yet.

Update 10/31/09: Many years later, I looked up the real property data and the 8822 Willowwood sold for $300,000 in mid-2005 but was resold two and a half years later for $280,000. 8840 was resold a year later for $330,000, a nice 10% appreciation in a year!