When you sit down with the typical client at the listing appointment, it is easy to get caught up in the feel good moment of pricing the client’s home. The client has many reasons for wanting to have the price set high. Some being, not qualifying as a short sale, having more money left over to pay off debts, more money for a down payment for next home, or paying for that long sought after vacation. There needs to be a soft reality interjected into the listing appointment, unfortunately many agents just don’t want to go down that road, they want to just simply accept the price that the sellers are happy with and hope they change their mind down the road.
We understand that the reality is many clients choose their agent by who says their home is worth the most, forget the fact that no matter how much the client loves their home, or how much they want the neighbors to see how their home is worth, it just doesn’t make any rational sense. It does not matter what the agent thinks, or a handful of agents think, sadly it does not matter what the client thinks their home is worth. It only matters what the “Market” knows is the value, and what those potential buyers value the home at.
The pricing is an art, mixed with science, or a sciart (yes I made that up, so if it sticks you can thank me), you can make many psychological pricing tweaks and adjustments with comparables in mind, to come to a decision that will stick. This does not mean it is the end all be all, but simply a good educated guess.
In today’s market, pricing a home too low is not much of a problem as this will probably start a bidding war and raise the price to the level the listing agent wanted in the first place (a common practice we advocates do not care for). Too low, and the other agents will surely catch on and be wary of making offers, thus hurting the listing in the long run.
Pricing a home too high has many, many negative attributes that come along with this sort of practice. For the homeowner, they become frustrated with the agent that the home is not selling when they themselves approved and wanted the higher price. They will blame an agent who told the client that the price was too high. Many consumers will not even see the property on their searches due to the fact that if they are looking for a home less than $200,000.00 and your home is $200,000.00 then most searches cut off at $199,999.00 and thus you don’t even come up, or if the agent is smart and realizes most homes are priced low, they will pull up homes lower than $150,000.00 knowing that bidding wars will reach higher than the client can afford. So your home is not even being pulled to be shown.
Having an overpriced home also means that the home will sit on the market for too long and then the buyers simply move on thinking that there is something wrong with the home. It also over-inflates the comparables in the neighborhood and creates a false sense of a market in that neighborhood, sending shock-waves through the comparables and thus tearing down a whole neighborhood in the process. Many agents don’t think of the market as a whole, but when they pull the potential listing’s competition, a few overpriced homes which are more money makes the client feel as if they need to also price theirs up that high, and thus creating an entire map of homes overpriced destined to fail.
The homes end up staying on the market many, many, months, even a year or so and the agents get fired and a new one gets hired, and then fired, and finally the home owner frustrated ends up selling all cash at much lower than expected. They are upset, the agents fired are upset, and the domino effect on the rest of the homes rises exponentially.
In the end it costs the seller and the agent a lot of money. It costs the seller money in interest, and mortgage payment that were paid the many days it was on the market too high, utilities, and possible cost them the home they wanted to buy because this home was sold on contingency. It costs the seller in value because the seller is not going to try that hard for a market worn, stale, and old listing. It costs the agent in time and marketing money, as well as the headache and stress in dealing with the after effects of a client listing gone wrong.
Make sure you look at all the reasons a home does not sell. The reason a home does not sell may not be just price, it could be that a home seller does not wish to put a sign out front, (usually for vain reasons), which is much akin to winking at a pretty girl in complete darkness, no one knows your doing it but you. Put a sign out, many potential buyers drive around selecting homes, this is free advertisement and should be utilized. Also how does the home look, should it be spruced up? Higher market value homes also have another reason for failing to sell. With these type homes, the sellers only want appointment only, or no lock box, I call these appointments for failure listings. Good luck selling a home you can’t show, there are far too many homes these buyers will see that don’t have these restrictions and the buyers get the last laugh as the home sits and waits for an even lower market. Don’t let this happen to you as a seller, or to your clients, as agents, it does no one any good to not state the truth in the beginning.
Well that was our 8 cents, remember to listen to our podcast and subscribe today! Feel free to comment on this or any of our other blog postings. http://realestaterant.podbean.com
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