We’ve all seen it – over priced homes on the market for sale. Not just a little over priced, but REALLY over priced! Not a home that’s maybe $4,000 or $5,000 too high, but more like $40,000 – $50,000 too high. It makes you wonder what the seller is thinking. Makes me wonder what the Realtor is thinking.
I know it’s a numbers game. I know that a lot of Realtors (especially those agents who are brand new to the business) will take an over priced listing in hopes that they will get a few phone calls from the for sale sign (or Realtor.com or the newspaper, etc…) and be able to convert the caller to an appointment and eventually to a buyer. According to statistics and research, each listing can generate from 2-4 additional transactions for that listing agent.
Am I a fool for not taking grossly over priced listings? Yes, according to some people, I’m sure. Last year, I had a call from a seller whose house was on the market with another agent, but they were terminating the listing with that broker. Seems the seller wasn’t happy with their current agent because buyers were not looking at their house and submitting offers. I told the seller I would do some comps and give them a call back. My research showed that the house was about $30,000 too high. It was on the market for $169,900. In that neighborhood, the highest price paid for a house (at the time) was $140,000 (the average price was $135,000).
I called the seller back and told him my findings. Needless to say he wasn’t happy about what I had to say. Of course, I told him “Don’t shoot the messenger”. That’s what the numbers showed… $30,000 too high. Hey, I didn’t make the numbers up, they were staring me straight in the face! I told him that he needed to list the house at $142,000 and be prepared to drop the price if we got no showings in the first 3 weeks. Apparently, he REALLY didn’t like what I had to say because he called another Realtor and listed the house them. No hard feelings, that’s business. I did watch the listing on the MLS though. That other agent listed the house at $159,900 (still… $20,000 too high). After a while they dropped the price, then they dropped it again and again and again. I saw that they had finally dropped the price to $142,000 (the price I initially told the selller it needed to be), then the listing expired. Now, you must know by this time it’s about 6 months later and the housing market cooled off even more.
After the listing expired, I tried contacting the seller, but never heard anything back. I noticed that they didn’t get the house listed in the MLS again, but did see in the county records that it did actually sell. So the house must’ve went under contract or something right when it expired, boy did that agent (and home seller) get lucky! (or was the price finally right at $142,000?). I don’t know what the house actually sold for (since it was expired and the sold information not reported to the MLS), but I wouldn’t be surprised if it was less than the seller could’ve got if he had just listed the house at the price I told him to begin with. I’m sure he netted less since he had another 6 months of taxes, insurance, and interest he had to pay.
Am I fool? Maybe so. That other real estate agent may have gotten a couple of buyers off the sign and (I’m not sure since the listing was expired and the sold info not reported to the MLS), but it looks like that the agent did finally sell the house. I just don’t prefer to do business that way. When I’m being honest with someone and they can’t handle truth, as a matter of principle, then I’d rather not do business with them. Does it cost me a paycheck sometimes? Sure, often actually. Thank goodness I have an understanding wife! 🙂 My reputation is worth more than a commission.
Now, that’s not to say I don’t make mistakes (hey, I’m not perfect!). I’ve listed houses before that I actually thought were priced right (and according to all the numbers, it was)… but no buyers. The housing market changes all the time, on a day to day basis (more so now than a few years ago). Boy, I hate when I have to make that call, “Hey Mr. and Mrs. seller, I was wrong about your house, the market is changing and we need to adjust the asking price to match today’s housing demand.” But every Realtor makes a mistake from time to time on pricing. When you’re pricing a home (right), typically, you use historical data to help predict a price point based on an anticipated future sale. Normally it’s pretty accurate, but with the ever changing market, it’s important to stay on top of it!
So why do Realtors take over priced listings? In a nutshell:
- Maybe the agent made a mistake on pricing point
- Maybe they want the home buyer calls from the sign
- Maybe they’re trying to win some contest at their office for who can get the most listings in one month
- Maybe they’re new and don’t know any better
- Maybe they don’t know how to educate their seller on pricing
- Maybe they just don’t care
- Maybe for their ego!
Their ego? Sure, maybe they want to go around saying they listed (X) number of homes last year. If you are ever interviewing an agent to list your house and that agent even bothers to try and say something like.. “Well, I’ve listed 4,000 homes in the last 6 months.” TAKE THAT WITH A GRAIN OF SALT! ASK THEM… “OKAY GREAT, WELL OUT OF ALL THOSE HOUSES YOU LISTED, HOW MANY DID YOU ACTUALLY SELL? WHAT’S YOUR ‘SOLD TO LIST’ RATIO?”
Ego, sometimes, could be the motivation behind a Realtor trying to ‘buy your listing’ too. “Buying My Listings? What’s that?” I’m glad you asked! It’s actually real estate jargon for when an agent (and recklessly, I might add) will inflate the recommended list price in hopes to win your listing.
Here’s the scenerio: You are going to interview a couple of different agents before you put your house on the market. Realtor (A) comes to your house, does their marketing presentation for you, he/she ask you questions about your needs and expectations, etc… shows you the comps for your neighborhood and other data they have for your property and suggests to you an asking price of (let’s say) $185,000. Not exactly what you wanted to hear. Okay, now Realtor (B) shows up with his nice shiny briefcase (but doesn’t open it. Heck, he could have last month’s issue of “Fishing and Wildlife” in there and you wouldn’t know it). Realtor (B) walks around your house glances in the closets for a second, opens a cabinet or two, makes a nice comment about that painting in your living room, tells you that he listed 4,000 properties in the last six months, and then takes a deep breath and sniffs and says “Hmmmm… I could probably get you $210,000 for your house” Which Realtor do you pick? Hopefully, you pick Realtor (A) and run from Realtor (B)!
Unfortunately, many sellers would choose Realtor (B)! And Realtor (B) knows this. That home owner got told what they wanted to hear… that their house is worth more than it really is. That home seller just got “played”, unfortunately. Not every Realtor is unethical, but it only takes a few bad apples…
I was at a listing appointment a couple of years ago. The seller was interviewing several agents. When I was talking to the home owner, she said that one real estate agent (I’m not going to mention names) came in and right off the bat told her that she could get her almost $20,000 more for her house than what the rest of us were saying. Fortunately, she ran from that Realtor. I didn’t get that listing. But the real estate agent that the home owner did choose priced the home right and it sold in a timely manner. Although I didn’t get the listing, it was refreshing to know that the real estate agent who tried to buy the listing did NOT get it after all.
If your home is on the market now and it’s not being shown to buyers or it’s getting shown but no offers are coming in, then ask your agent to do another CMA for you and see if you need to adjust the asking price.
If you’re planning on selling on your home, keep an open mind about the asking price. It’s unlikely that any agent can sell your home for more than it’s actually worth. There are rare occurences where the buyer would be willing to pay more than market vlue or that the agent the buyer has working for them doesn’t actually know the real value. Hey, luck happens, but it can be rare. More often that not, a seller will actually net less for their house if they start out too high and have to drop the price over several months. In almost all cases, the seller benefits more if they just listed their house at the right price to begin with.
A really high asking price (over priced), is it worth it? In most cases, no. Take into account what your Realtor says and what the numbers tell you. DON’T JUST LIST YOUR HOUSE WITH AN AGENT THAT RECOMMENDS THAT YOU LIST YOUR HOME WITH A GROSSLY OVER INFLATED ASKING PRICE.
My dad used to tell me… “Son, if someone is telling you something that you don’t want to hear, it’s probably the truth.”
