Hubris.
It’s a noun.
It originates from the Greek language.
And rather ironically, it’s something that is typically possessed by those who can’t identify it within themselves.
If we’re playing a word game today, which suddenly it seems that we are, then what do you think would be the opposite of “hubris?”
Any ideas from the linguists among you?
I have one!
How about humility?
The word “modesty” comes to mind, but for the purposes of today’s discussion, I think that “‘humility” is the word that we’re looking for.
Lately, I’ve seen some exceptional examples of both “hubris” and “humility” in our real estate market, and they often originate from the same issue in the market. The reason why both are present, even though they are complete opposites, is because people can respond differently in similar situations.
Imagine for a moment that you invested in some stock and paid $100 for the shares. Now imagine that three years later, they had risen to $180, but one year after that, they were trading at $160.
Let me ask a simple question to introduce today’s theme:
If you needed to free up some cash, would you sell these shares for $160, even though they had previously traded for $180?
Sure, why not?
In fact, you probably wouldn’t have ever considered the opposite action, which is to refuse to sell the shares simply because, at one point, they did trade higher.
But imagine the person who needs cash but for some reason refuses to sell unless or until the shares reach a new record price?
That doesn’t seem logical, does it?
Very often in my blogs, I compare the stock market to the real estate market simply to prove a point.
It’s 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.
Let me tell you two stories. One will represent humility and the other will represent hubris, but both stem from the exact same situation.
Last fall, a house was listed on the west side for $1,339,000.
At the time, I felt it was significantly overpriced and I wasn’t at all surprised to see the property sit on the market.
About one month later, the property was “re-listed” but for the same price: $1,339,000. All told the house sat on the market for about ten weeks, via two listings, both at the same price.
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.
Once again, it sat on the market, but only for two weeks this time around.
After those two weeks, the property was re-listed for $1,079,900, but with an offer date. That’s a strategy that typically doesn’t work in this market.
I mean, under-listing works, but under-listing after listing higher doesn’t really fool anybody.
It’s like if your doctor prescribes you a drug that will fix all your problems and then says, “It’s a placebo.”
The entire point of a placebo is to work because the person taking it isn’t aware. If you tell them it’s a placebo, it defeats the entire purpose, and won’t work!
This offer date didn’t work. In fact, even though the property was under-priced at $1,079,000, zero offers were received.
The next day, I was speaking to the listing agent about one of her other listings.
I asked her what was going on with that house and she said, “The sellers are having a really hard time with it.”
I agreed that it was a slow start to the year and that some sellers were feeling disappointed, but she said, “No, you don’t understand. I mean they’re having a hard time with it because they turned down an offer of $1,300,000 last December.”
Oh.
That.
Right.
Yup, I can see how they’re having a hard time with it!
Imagine turning down $1,300,000 for your home and then receiving zero offers when you under-price at $1,079,000?
I asked the agent why the sellers turned down that offer of $1.3 Million and she said, “It was literally submitted two days before Christmas. We had just signed paperwork to take the listing down over Christmas and New Year’s. They weren’t in the right mindset, plus the closing date being offered was for February and they don’t close on their new house until April.”
She added, “They’re kicking themselves now.”
She asked me, “What do you think this is worth? Honestly, where do you think we should be priced?”
I asked her, “Did you advise them to accept the $1,300,000 offer?”
She said, “Yes, of course.”
I then said, “Well, that’s good, because now I can truly be honest and say that $1.3 Million for that house would have been amazing. Honestly, I think it’s worth $1.2 Million. Tops.”
She thanked me for my honesty and said, “I’m going to tell them to accept the loss, be brave, be humble, and bring it back out at $1,299,000 tomorrow. Or less.”
And that’s what she did. The “or less” part too.
The property was re-listed for $1,279,000 which was $21,000 less than they had turned down in December.
But the property sat on the market.
In fact, it was further reduced to $1,249,000 thereafter.
The property was now priced $51,000 less than the offer that had been turned down in December, and it wasn’t about to get any better for these folks.
I know this agent well and we chatted about it after that price reduction.
“They’re freaking out,” she said. “They can’t understand why the property won’t sell.”
I told her quite honestly, “This property is worth $1.2 Million. If they had some crazy person offer them $1.3M in December, that was like a lottery ticket! Seriously, it’s a great house, but the property six doors down sold for $1,200,0000 last August and it didn’t have a finished basement like yours, but it had parking – and you don’t, and it had a main floor powder room, and a better kitchen. That $1.3M offer was nuts.”
In the end, the value of the home isn’t what today’s blog is about.
Today’s blog is about hubris and humility, and the owners of this property demonstrated the latter when they finally accepted an offer for $1,200,000.
That was $100,000 less than the offer that they had turned down two months ago.
That’s humility, right?
Call it “common sense” or call it “an intelligent decision,” but that is humility in our market.
But the problem is: humility is often hard to find in our market.
In fact, in many cases, it’s downright mission impossible.
I have a physical therapist that I see from time to time for various ailments, who today we’ll call “Tamara,” and last year, she told me that she and her husband, Brad, had made an offer on a house in Newmarket.
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.
The property had been listed all through 2024. First for $1,899,000, then for $1,799,00, then eventually for $1,699,000.
“They paid $1,600,000 during the pandemic,” Tamara told me. “This house was barely worth what they paid.”
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 “willing to overpay” to get the house, which was also in close proximity to her in-laws.
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.
“It 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. This was our price. The house was barely worth this.”
Tamara hoped for good news but the seller countered at $1,750,000.
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 the list price was absurd.
Tamara said that the owner of the home was a nightmare to deal with and that he was messaging her directly.
I told her this was inappropriate and that the seller should be communicating through his agent, but Tamara said, “The listing called me personally to apologize for the seller’s actions!”
That’s funny since the listing agent also shouldn’t be calling Tamara directly, and should be communicating through Tamara’s agent!
Tamara and Brad let the offer lapse and didn’t 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.
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.
She conveyed this to the listing agent and amazingly, the listing agent divulged, “My clients know exactly what that’s like! They bought a home and they need to sell this house so they can close in January.”
You would think that perhaps this meant the sellers were motivated to act reasonably and get a deal done.
But not so much, it seemed.
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.
“I told that agent not to contact me again,” Tamara said.
And the agent didn’t.
Until December, that is!
In December, the listing agent called Tamara and said, “My client would like to present you with a reverse offer.”
This meant that the seller was making an offer to the buyer, and while it’s exceptionally rare to see this, it does happen.
Incredibly, the offer was for $1,650,000. The seller, after responding ridiculously twice before, had finally come to his senses and put a realistic offer on paper. I mean, it was still more than the house was worth, but it wasn’t above the list price, and it wasn’t $5,000 less than his previous sign back either.
But aside from the price, there was a major problem: the seller wanted a closing date of January 20th.
“Brad and I would have to sell our house to close on the purchase,” Tamara told me.
“I mean, we weren’t going to pay $1,650,000. In fact, we wouldn’t have even paid the $1,600,000 that we originally offered,” she said.
“The market here was dead. Prices had dropped. Our own house was worth less than it was two months ago when we gave them our original offer, so we weren’t going to pay the same price,” Tamara added.
Price aside, it seemed to reason that the closing date was impossible.
In order to get bridge financing, the buyer of a home must have his or her own home sold firm by the closing date of the purchase.
Tamara and Brad couldn’t seriously be expected to sell their home in thirty days, right? Especially over Christmas and New Year’s!
In January, the house was still on the market and the sellers’ closing date for their new home was fast approaching.
The listing agent called Brad this time and told him, “My clients are closing on their new home on January 28th. They need to sell their home by then in order to close,” she said, and asked Brad to get back to the negotiating table.
Brad told her, “Talk to my wife.”
You gotta love that.
The listing agent called Tamara and gave her the same story, but Tamara wasn’t moved.
“It felt like we were the only buyer on the planet for this house,” she told me.
But then she added, “Had we paid $1,600,000 for that house in October and sold our house at the same time, then okay, alright. But now in a much worse market, that house is worth less and our house is worth less, so their proposition made no sense.”
Tamara explained this to the listing agent, and the listing agent fought her. Or tried to.
But the listing agent finally asked, “What would you pay for this house today?”
Tamara told her, “It was over-priced then and it’s worse now. I would buy your house for $1,550,000.”
The listing agent told Tamara to put this offer on paper, and so begrudgingly, she and Brad did.
The seller countered at $1,600,000 even.
Then the seller emailed Tamara personally and said, “Why would anybody accept a lower offer than what they had seen previously? I will not sell my house to you for less than you had offered.”
The email was so incredibly inappropriate, but Tamara just laughed it off.
“This guy is fucked,” she told me during one of our sessions. “He’s going down with the ship.”
This was in mid-January and the clock was ticking. The listing agent had divulged that the seller was scheduled to close on a purchase on January 28th.
“We were literally the only people that could save him,” Tamara told me.
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.
“We were intrigued,” Tamara told me. “And as a sign of ‘good faith’ as they say, we decided to give him another $5,000, so we signed back at $1,555,000.”
But the seller countered again at $1,600,000.
Again, he emailed Tamara and said, “You have already offered $1,600,000 for this home. I cannot be expected to sell it for less.”
And that was the end of it.
Tamara and Brad’s agent told the listing agent that it was over; that they were out.
Three weeks later, Tamara was out for a run and happened to go past the house.
The “FOR SALE” sign was down.
She asked her agent if the property had sold, but her agent said that the listing had been terminated.
Even though Tamara wasn’t interested in the house, she said she simply “had to know what happened,” so she broke down and emailed the listing agent about it.
The listing agent called her this time and was quite verbose.
“He decided to blow everything up,” the listing agent said in a rather forthcoming manner.
“He didn’t sell his house so he couldn’t close on his purchase,” she told Tamara. “He was in breach of contract and now the sellers of the house he bought are suing him.”
Tamara was shocked. Not only that the listing agent would divulge this, but by the situation.
“I guess he couldn’t afford it?” Tamara said.
But the listing agent replied, “He had no mortgage on that house. He was downsizing and paying cash. He’s just a really stubborn man.”
Incredible.
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 than simply accept an offer of $45,000 less than what he had previously turned down.
Hubris.
There’s no other explanation. This is literally “going down with the ship.”
This is where I believe that “people are people” and it’s just human nature to act against your own best interests sometimes.
Once the dust settles on any legal action, that guy could lose another $100,000 – $200,000 if the house re-sells for less than he contracted to pay for it.
But in the heat of the moment, sometimes people just can’t get out of their own way.
Accepting less money than you would have, could have, should have taken?
No way.
It’s mission impossible.
There is, however, some good that’s come out of this!
Tamara is such a passionate storyteller that I think she’s spent more time, effort, and energy on my patellar tendon and iliotibial band than she might have otherwise.
By the way, anybody running the half-marathon in May? 🙂
