I have written about the headache that Realtors have trying to put a price on a listing, a price that makes sense; and therefore can be rationalized when talking with the seller, potential buyers and buyers’ agents. The task is getting to be hazardous in a hot market when real estate pros are using all kinds of bizarre strategies and tactics to yield the best deal for the owner while forging for themselves a reputation of superhero.
The one scenario, or what I call a gimmick, that has been in vogue the last two years or so, consists of putting a price on a property well below what the listing agent perceives to be today’s market value, in order to create a bidding war that may result in multiple offers well over the asking price.
This technique sometimes works to the benefit of the seller, and always works to the benefit of the listing agents. They can brag in the media that they are so darn good that they get top dollar (like 10-20% more than the list-price) for their listings. Obviously a bunch of would-be sellers are supposed to be so impressed by the performance that they will want those superheroes to list their homes and duplicate the magic.
Between you, me and the rest of the world, I have a hard time understanding how reasonable home sellers can fall for such a deceptive marketing formula! I mean, if you have a $315k home which may go for $340,000 in a “sellers’ market” and you list it at $300k, it does not take an eagle to predict that the house will likely sell around the same $340,000 or so. Hello?
Such edgy way to do business, in my opinion, is not only dangerous but is creating lots of unwelcome side-effects. Let’s deal with these two points, one at a time:
When we play games with the market, the market can play games with us. Real estate is not an exact science. If you deliberately underprice a property, there is no certainty that the gimmick will work every time. When it does not, the seller (and the perspiring agent) may be faced with a nasty dilemma or how to respond to clean offers just matching the asking price. At the high-end, you never can count on a host of qualified buyers fighting over a property. Often, there is only one candidate writing a bid, and he sure does not want to pay a dime more than he has to. Also, after months of madness in the marketplace, mostly due in many areas to a record low inventory, many are the buyers who are emotionally exhausted. They keep on writing offers and get rejected time after time, losing to the one buyer who cannot live without that particular home, at any price. The excitement of trying to buy can quickly become the discouragement of over-negotiating and coming up empty. Most buyers are no longer willing to play games. Sellers beware.
Not all sellers, on the advice of their agents, underprice their home in order to get more. The great majority of the sellers list their homes at market, if not a bit over; makes sense. The problem is that, even though they are told by their agents that the listing price is indeed on the high side, lots of sellers, intoxicated by ads suggesting that some brokers routinely sell homes 5 or 10%, sometimes 25% over asking, fully expect that they too will get a heck of a lot more than the advertised price. It’s contagious.
One humble and practical piece of advice to Realtors out there: When you think of a price (rational or not) for a listing, be sure to have a good, clear talk with the seller, to explain what your strategy is and what he/she can reasonably expect in the way of offers. Not a bad idea to repeat the explanation again & again. Nothing is more deceiving than a false expectation, in fact, it’s a relationship killer. You want a win-win, not a lose-lose. The time to prepare the minds and set up the stage for what’s coming is before you jot down the price on the listing contract. Good luck!
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