There’s a poignant saying in real estate, be…
- The First Child
- The Second Spouse
- The Third Realtor
“Reap the Low Hanging Fruit”
And with most humor, there is an element of truth in the saying. Experienced Agents refuse the over priced listing like the plague. Instead they wait— they wait until Seller frustration sets in, they wait as the days and months go by, they wait until the over-priced listing expires.
We Can Always Come Down In Price — Right?
You’re excited — You’re in control. A higher list price means more money — doesn’t it? The Buyer will pay my price — and there’s so many things I’m going to do with that extra cash. That long over due vacation, a bigger house, money for the kids. When most Sellers sit down and speak to an Agent at a listing appointment, those comps (comparable sales) don’t apply to me — my home is superior. Unfortunately, head-strong Sellers choose the agent that suggests the highest price, which is the worst mistake a Seller can make.
I’m Going To Get My Price!
The truth is, your need for money, rational or irrational, has no bearing on market value. The Sellers opinion of value, your Agent’s opinion of value, what your neighbor thinks… There are two people that matter — the Buyer, and the Appraiser for the Buyer’s Lender. That’s it! The Buyers control the market, they make the offers.
The Art of the Deal
Pricing is part art and part science. Experienced Agents who know the market well, will quickly be able to give a general range of value based static items… number of bedrooms and baths, lot size, and square footage. However, there is a lot of latitude in comparing similar sold properties, comparing amenities, and making adjustments for the differences between them. The market is ever rolling in starts and fits. Inventory grows then retracts, the local economy is strong or it is weak. The area school systems have a positive reputation or otherwise. Property taxes are welcoming or prohibitive. In other words, there is no iron-clad formula to determine price. Pricing is an educated guess.
What Makes the Market?
It’s simple —
- Rising Prices — are determined by the number of Buyers in the market. If there are more Buyers than homes for sale — prices go up.
- Dropping Prices — more homes for sale then Buyers in the market.
- Flat Market — amount of housing supply and number Buyers are equal.
I’m Not Going to Give It Away?
In all my years working in real estate, rare is the “Give Away” circumstance. Bottom line is that homes sell at a price a Buyer is willing to pay and at a price a Seller is willing to accept. It’s completely voluntary! A strategy is to price the home under the competition — the Seller will likely receive multiple offers in a short listing time. With multiple offers, there is little danger in setting the opening price at or below perceived market value. Multiple offers will likely drive the price to market value or higher. The real danger is pricing too high, and then the property becomes stale, eroding precious value.
How It Starts To Go Wrong
The Seller of a Large Home and a busy county road didn’t even interview her first agent. She choose the first agent off the Internet because, “He looked professional.” He priced her home at $429,900. After 180 days, the listing expired.
King of Pain
The next agent, from the out-of-town big box company, listed the home at $399,900. Months passed. Another 6 months passes — the price dropped to just under $369,900. Still no takers. A trickle of showings, but no serious buyers.
More Than a Year Later
The third Agent was hired to list this home. The seller was disenfranchised and weary. It was now 12 months later. Together, the seller and her agent priced the home at $339,900. It quickly sold for all cash. The stark reality is the comparable sales in the neighborhood fully justified a price of $375,000, a net loss to the Seller of $35,000 plus carrying costs — OUCH! But the home had been on the market for too long at the wrong price, and now the market had softened.
Opportunistic Agents Specialize in Expired Listings
There are many Agents who make very good incomes by focusing on acquiring expired listings. Everyday there a new expireds that go off market. And just as quickly there is a bevy of Agents waiting the swoop in. It’s the low hanging fruit — a battered Seller with a prior unsuccessful sale price. The prior Agent invested hours upon hours in marketing, setting appointments, and placating the Seller for zero revenue to both. The new Agent repackages the listing at a lower price and quickly sells the listing.
The Pain of Regret
The question is how much money and stress have those expired listings cost the sellers? The financial loss often exceeds the extra carrying cost (mortgage payments, property taxes, maintenance) paid and goes beyond the unheralded and uncompensated hassle Agents face in hoping and wishing for a “Get Lucky” Buyer. Time erodes value, it affects the value that a buyer ultimately chooses to pay because it’s not a fresh listing anymore. It’s like a loaf of bread on a grocery store shelf, now stale, dated, stigmatized, and disregarded by the market . Don’t let the over priced listing happen to you. Don’t become the seller of an expired listing. Price it right from the start.