Blame the realtor if the house won't sell
When a property lingers on the market, it’s often the real estate agent who gets the blame for it – didn’t work hard enough! However, it could (also) be a simple matter of pricing – the property could be priced significantly over its value.
When you're thinking of selling your house and are interviewing agents, the one that proposes a higher list price will get your attention. However, that doesn't make the house worth a penny more.
An overpriced listing is one that’s listed significantly above the true market value of a home. Normally, these overpriced listings don’t sell, although there still might be showings. As attractive as the subject property may be, if it’s not priced right it won’t sell. Instead, the buyers will opt for another property.
You are free to stick whatever price you fancy on your property. However, if it's more than the market will bear, it just won't sell. It might get showings but no sale.
WHO OVERPRICES LISTINGS?
Ridiculous as it sounds, there are lots of real estate agents who take overpriced listings. It happens almost every day, even here on the Sunshine Coast. Agents instantly harm themselves, when taking an overpriced listing because one looks like a fool amongst one’s peers – that’s not good in a tight-knit community where most agents know each other. An agent loses a lot of credibility when taking an overpriced listing, so why would they? Agents aren’t doing their clients a favour either – because overpriced listings just won’t sell. Buyers aren’t stupid. They make their comparison and choose the best price-value balance for themselves. Hence … the overpriced ones just won’t sell.
Some agents will just “get” the listing, no matter home much the seller wants for the place. In another scenario, agents are asked by the seller what they think the property might be worth. Then, some sellers choose an agent based on which estimate is highest. Obviously, the seller feels encouraged by hearing higher prices, perhaps even flattered. Sellers perceive the agent’s enthusiasm to be a great help in selling the property. Although that might be true, the agent’s enthusiasm is no ground for a higher property value.
An experienced and successful agent will be less likely to take an overpriced listing - they don't want to waste their time and their clients' time.
EXPERIENCE WILL TEACH YOU
Obviously, it’s far more important to have a great marketing plan, strong negotiation abilities and loads of experience. The brutal truth of the situation will be that the market place establishes value. The agent can go stand on the roof and scream “this is the best house”; unfortunately, that’s still not good enough.
Sometimes, a seller may say that they "need" a certain amount out of the sale of their property. That's unfortunate because market value has nothing to do with their "needs". Nothing at all.
UNREASONABLE EXPECTATIONS
Sometimes, even the most sophisticated sellers have unreasonable expectations. Obviously, it can happen that a seller has an inflated idea of the value of his or her property. Most people really like their own house and have got used to its downsides. In real life, the agent may explain how appraisers determine value. An agent should also be honest and explain how buyers determine value. Some agents will agree to take an overpriced listing because they just don’t want the listing to go to another agent. The combination of the unreasonable expectations of a seller, along with an agent who likes to toss around high potential sales numbers, is the most non-functional.
There are many other reasons why agents could decide to take an overpriced listings. Agents like to put up for-sale signs; their own name and number prominently displayed. It’s a form of free advertising for the agent in that every sign displays contact information and sometimes even a photo of the individual. A for sale sign is a billboard for the agent.
Another reason why agents like for-sale signs is that it gives them access to buyers. Often, an innocent buyer will phone the number of the sign and a slick agent may endeavour to recruit the buyer to work with him or her. That potential client may already be “working with another agent”. Still, some will see the opportunity fit to manoeuvre a foot in the door.
Open houses are sometimes permitted (not every seller allows it) and many agents like to host open house because (again) it exposes them to various buyers out there. Contacts are often made that way. Remember that, at open houses, it’s not so much that particular house that’s being sold. The agent is “trawling” for other clients.
There are some benefits to overpriced listings. Those are possible benefits to the agent, not to the home seller. An overpriced home just hurts the seller, quite seriously actually.
ADVERTISING AN OVERPRICED LISTING
Advertising an overpriced listing has also certain benefits to the agent. Other sellers may see it and “try” this agent. Also, the overpriced listing will attract some buyers through advertisements. These people can then be channeled to more affordable listings. In such a scenario, the agent may use the overpriced listing to “soften” the buyer – then show the buyers a more reasonable choice.
Even if an agent knows darn well that he or she is taking an overpriced listing, there is a good possibility that when the home doesn’t sell within a certain period of time, the seller can be persuaded into lowering the price. Then it may hopefully sell; the agent will still make a commission at that time.
Buyers tend to look at a number of houses before they make their decision. They'll pick the best value home; at the same time overpriced listings just repel them.
NOT QUITE TO THE SELLERS BENEFIT
In all, it’s not to the benefit of the seller to put the house on at an over-market price. Buyers aren’t stupid. Buyers do their homework and look at comparables. If you’re even slightly overpriced, your house will NOT sell.
Many studies, however, have shown that interest in a home goes down after a few weeks. At that time, there will be fewer buyers for that home. Even when the price falls, those that would have been in the market for that particular home, have already dismissed it as being too expensive – it’s a perception that may stick even through a hefty price reduction.
Buyers also think there is something wrong with a home that takes a long time to sell. A price reduction may even have the adverse effect of suggesting that the seller is now getting “desperate”. Or that a major defect has been discovered, all of a sudden. Price reductions aren’t generally good business. They hurt the seller, and they often make a buyer wonder how much lower the price could drop. So, a buyer will often offer even less after a price reduction.
The very best selling price is attained if the house is priced just right. It might even happen that buyers will get excited and offer full price. Or above, which could occur in a bidding situation.
A well-priced listing attracts sufficient buyers so that it WILL sell in a reasonable amount of time at a price that's very close to the asking price, sometimes even above the asking price.
THE CONCLUSION SHOULD BE:
Do not hire an agent because they throw around high potential sale prices. Instead, choose your agent based on honesty, ethics, reputation, experience, competence and marketing skills.
Pricing is an all-important step in the marketing process. However, there's more to marketing than picking the right sale price. Here are some blog articles to read more about marketing real estate.
MARKETING (more to read):
Sunshine Coast real estate marketing: http://www.menno.ca/?p=6568
What actually drives real estate markets: http://www.mennorealty.ca/Blog.php/drivers
The marketing strength of the MLS system: http://www.mennorealty.ca/Blog.php/mlssystem
Checking the market value of real estate: http://www.mennorealty.ca/Blog.php/investigate