Where Are the Offers? The Danger of Overpricing a Listing

Where Are the Offers? The Danger of Overpricing a Listing

By John Giffen

As published on Inman News on August 25, 2019

I tell agents getting a listing is relatively easy if you are prepared and know how to present your value proposition to a prospective seller. Once you get the listing, selling it takes work.

That work begins with pricing the property accurately. Our first job as a listing agent with the seller is to partner together in establishing the right price before putting the property on the market.

Every agent should know that a new property listing should be correctly priced before the ink on the listing agreement has time to dry. A brand-new listing always appears on MLS on the “hot listings” page or at the top of the active property list. Newer listings usually sell for a higher price than properties listed on the market for a more extended period. As the weeks pass, potential buyers begin to wonder why it hasn’t already sold. So, what should you do to prevent a very long listing period? Could the list price be to blame for the property’s failure to sell quickly?

The list price a seller puts on his or her home must be carefully considered before placing it on the open market. A high price will cause the listing to remain on the market too long and become stagnant. A below market price will lead to a rapid sale, and the seller will lose money. A competitive pricing strategy will result in a marketable listing that’s more likely to lead to an offer, a bound contract, and a successful closing with both the buyer and seller meeting their real estate objectives.

The following six key points should be discussed with your seller client when deciding how to price their property:

1. The seller must understand the real value of their home is determined by what a buyer is willing to pay for it in today’s real estate market. Market price is determined by what other comparable properties have sold for during a specified period — usually the most recent six months. Pricing the home above the market price will undoubtedly ensure an extended listing period.

2. An impartial evaluation of market activity is the most effective way to estimate a property’s selling price. A comparative market analysis (CMA) is a great tool to present to a seller so they can see similar, nearby properties that recently sold. The CMA can also show homes that are currently active on the market, as well as those under contract or those that recently failed to close.

3. The longer a property remains on the market, the lower the price must be for it to sell. Statistics show that when a property is not correctly priced from the start, it nearly always ultimately sells for far less. As a result, the seller will lose a considerable amount of time and money.

4. When discussing pricing with a seller, a listing agent must convey the three elements impacting the sale of a home: price, condition, and location. Of these three, the seller can control price and condition. Condition can have a bearing on what a buyer will offer for it. The agent needs to ensure the seller does everything possible to present the home in a condition that will allow it to compete with similar properties for sale.

5. Another critical point in pricing revolves around the seller wanting a certain amount of cash from the sale of their home. What the seller wants to receive at the closing table doesn’t affect the home’s market value. The market does not care what they need! This fact is painful for some sellers to accept because they may be counting on money from the sale of the home to go toward the purchase of their dream home. If they cannot grasp this reality, then the listing you worked hard to get will not be a marketable one, and your efforts to sell it will be for naught.

6. Many times, agents will find themselves competing against other agents for the listing. When I was actively selling homes, I remember numerous sellers saying they spoke to another agent who said the listing price should be at “X.” What a competing listing agent says about what the price should be doesn’t affect its value. Unfortunately, some agents will tell sellers what they want to hear regarding value, only to then badger them later to keep reducing the price so they can sell the property. Good listing agents advise clients to price it right from the start and convince sellers the right price is the best price.

Your primary responsibility as a listing agent is to find that one “ready, willing, and able” buyer to purchase your client’s home. If the property is not priced right from the beginning, the seller — and you — will find yourselves waiting a long time for a buyer to submit an offer to purchase. An essential part of your fiduciary responsibility to your client is to provide your seller with guidance in determining a price that will sell their home.

Pricing it right from the beginning benefits the seller by giving them more money in their pocket and closing on the property in a timely manner. Poor pricing will do the opposite and not only delay the sale of the home, but it will also, most assuredly, impact your relationship with the seller. Sellers begin losing confidence in their listing agent when their home remains on the market for a long period of time.

John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”

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