Meeting with Realtors
So you’ve decided to sell your property and have a fairly good idea of what you think it is worth. Being a sensible seller, you schedule appointments with three local listing agents who’ve been hanging stuff on your front doorknob for years. Each Realtor comes prepared with a "Competitive Market Analysis" on fancy paper and they each recommend a specific sales price.
Amazingly, a couple of the Realtors have come up with prices that are lower than you expected. Although they back up their recommendations with recent sales data of similar properties, you remain convinced your property is worth more. When you interview the third agent, the figures are much more in line with your own anticipated value, or maybe even higher. Suddenly, you are a happy and excited seller, already counting the money.
Which Realtor Do You Choose?
If you’re like many people, you pick Realtor number three. This is an agent who seems willing to listen to your input and work with you. This is an agent who cares about putting the most money in your pocket. This is an agent who is willing to start out at your price, and if you need to drop the price later, you can do that easily, right? After all, everyone else does it!
The truth is you may have just met an agent engaging in a questionable sales practice called "buying a listing." He "bought" the listing by suggesting you might be able to get a higher sales price than the other agents recommended. Most likely, he is quite doubtful that your property will actually sell at that price. The intention from the beginning is to eventually talk you into lowering the price.
Why do agents "buy" listings? There are basically two reasons. A well-meaning and hard-working agent can feel pressure from an owner who has an inflated perception of his or her property’s value. On the other hand, there are some agents who engage in this sales practice routinely.
Behind the Scenes
Whichever the case, if you start out with too high a price on your property, you may have just added to your stress level, and selling a property is stressful enough. There will be a lot of "behind the scenes" action taking place that you don’t know about.
Contrary to popular opinion, the listing agent does not usually attempt to sell your property to a commercial buyer. That isn’t very efficient. Listing agents market and promote your property to the hordes of other local agents who do work with buyers, dramatically increasing your personal sales force. During the first couple of weeks your property should be a flurry of activity, with buyer’s agents coming to preview your property so they can sell it to their clients.
If The Price is Right
If you and your agent have overpriced, fewer agents will preview your property. After all, they are Realtors, and it is their job to know local market conditions and property values. If your property is dramatically above market, why waste time? Their time is better spent previewing properties that are priced realistically.
Dropping Your Price...Too Late
Later, when you drop your price, your property is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your property could take longer to sell.
Even if you do successfully sell at an above-market price, your buyer will need a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months and current market conditions do not support your sales price, the property won’t appraise. You deal falls apart. Of course, you can always attempt to renegotiate the price, but only if the buyer is willing to listen. Your property could go "back on the market."
Once your property has fallen out of escrow or sits on the market awhile, it is harder to get a good offer. Potential buyers will think you might be getting desperate, so they will make lower offers. By overpricing your property in the beginning, you could actually end up settling for a lower price than you would have normally received.
Realtors Talk to Each Other
Plus, remember those two conscientious agents who got aced out of the listing? If your listing agent routinely engages in "buying" listings, he has probably aced out scores of other agents in the same way. Being human, Realtors talk to each other. If they don’t like your listing agent, not as many of them will be showing your property.
In short, you may have ended up with an agent who was good at selling you, but not good at selling your property. And you’re going to pay them a commission for it.
It is human nature for you to want the highest price for your property. However, when you choose the agent who promises what you want to hear, it often leads to stress and frustration. Most of the time, it will take you longer to sell your property. Possibly, you will end up selling at a lower price instead.
Or maybe as a result of reading this article, you will choose one of the "good" Realtors in the first place. They are out there, you know.
