So you’ve decided to sell your home
and have a fairly good idea of what you think it is
worth. Being a sensible home 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 homes, you remain
convinced your house is worth more. When you interview
the third agent’s figures, they are much more in line
with your own anticipated value, or maybe even higher.
Suddenly, you are a happy and excited home 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 that cares about putting the most money in your
pocket. This is an agent that 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 that 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 home 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 a homeowner who has
an inflated perception of his home’s value. On the other
hand, there are some agents who engage in this sales
practice routinely.
What Happens Behind the Scenes
Whichever the case, if you start out
with too high a price on your home, you may have just
added to your stress level, and selling a home 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 home
to a homebuyer. That isn’t very efficient. Listing
agents market and promote your home to the hordes of
other local agents who do work with homebuyers,
dramatically increasing your personal sales force.
During the first couple of weeks your home should be a
flurry of activity with buyer’s agents coming to preview
your home 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 home. After
all, they are Realtors, and it is their job to know
local market conditions and home values. If your house
is dramatically above market, why waste time? Their time
is better spent previewing homes that are priced
realistically.
Dropping Your Price...Too Late
Later, when you drop your price, your
house is "old news." You will never be able to recapture
that flurry of initial activity you would have had with
a realistic price. Your house 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 house
won’t appraise. Your deal falls apart. Of course, you
can always attempt to renegotiate the price, but only if
the buyer is willing to listen. Your house could go
"back on the market."
Once your home 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 home in the beginning, you could
actually end up settling for a lower price than you
would have normally received.
