Virtually everyone who sells a house wants sell it for the most money possible. A good real estate agent can make that happen. However, pricing your home too high can actually do the opposite. Let’s talk about how overpriced homes cost sellers money. Most people have certain preconceived notions about real estate. There’s a desire to price a house high in order to “save room for negotiation”, or “see what happens”. But what really happens when a house is significantly overpriced? Many times, not what you expect. There will be dramatically fewer showings and generally no offers. When showings dry up, then what? Unbeknownst to the sellers, their equity is beginning to slip away and they have no idea it’s happening.
Can I Be Honest With You?
One of the first things I always promise prospective clients is that I won’t list their house for sale just for the sake of having another listing. If I don’t think I can help someone better achieve their real estate goals, I’m very honest about it. I think the general public has a hard time understanding why any agent would take on an overpriced listing. They assume if an agent recommends a certain price, that the agent must be right. Further, the agent who recommends the highest price must be the best agent. However, that’s almost never true.
Listings are essentially an agent’s “inventory”, which they use to market and grow their business. An agent who doesn’t want to miss out on the opportunity to list a house may let a seller believe their home is worth more than it actually is. I tend to believe this is more often about them not wanting to offend the seller, rather than them being dishonest. Regardless, who doesn’t like the sound of MORE money?
The sad part is the agent is supposed to be the expert in this situation. When an agent says the house is worth X amount, it must be true. Therefore, the agent recommending the highest price must simply have the best Realtor Magic, or the know something the others don’t. Right? Wrong! A skilled agent will certainly get top dollar for his or her clients, but when something sounds too good to be true, it usually is.
Choosing the Wrong Agent
If a seller isn’t working with an agent they truly trust, they may feel they need to drive the process. They assume all agents are the same and either hire the cheapest option, or who ever promises them the highest price. At this point, the seller’s confirmation bias kicks in and a business relationship is founded upon misinformation. By now, the damage is done. The sellers have hired the wrong agent.
Often, it won’t be long before their agent asks them to reduce their price or make improvements to the house (read this article about making improvements to house you’re getting ready to sell). Other times, the house just sits on the market for a long time. They may get a few lowball offers. They often have unexpected repairs pop-up while waiting to sell the house. And whatever plans they had when they originally listed their house for sale, they were unable to go through with those plans. This almost always costs the seller money.
Good ol’ Supply and Demand
To illustrate what happens when an overpriced home hits the market, let’s talk about supply and demand. In a market when houses are selling in X days or weeks, a house that sits on the market longer can become stigmatized. People begin to assume there must be something wrong with the house. At best, buyers know there’s less competition and any offer they write would reflect that. In fact, there’s a good chance the best buyers for your house don’t even know it’s for sale. Most people search for houses by price bracket (multiples of $25k, $50k, $100k, etc), and having your house in the wrong bracket makes it invisible to many of the best buyers. An agent with a great pricing strategy knows where the buyers are looking and how to price a house in such a way that it creates lots of interest.
Have You Been to an Auction?
If you’ve ever been to an auction, you know that the auctioneer will generally start the bidding low and go up from there. Auctioneers know that people become emotionally engaged once they start bidding, and getting multiple people to bid against each other will drive up the price. Now imagine an auctioneer starting his bidding high, then dropping the price until he gets a single bidder. Sometimes, this happens by accident. And if you’ve seen it in person, you know what I’m talking about. Generally, the crowd freezes. Nobody wants to be the first bidder. They all want to see how far the price will drop before jumping in.
Real estate is a little different, but the idea of getting the highest number of people to fall in love with whatever you’re selling is much better than bargaining with one person who has a better negotiating position than you. A seasoned agent knows how to maximize this to your advantage.
When interviewing real estate agents to sell your home, it’s very important you don’t choose your agent based on who suggests the highest list price. Instead, look for an agent with a comprehensive pricing strategy who can show you, right up front, exactly how they’re going to get you absolute, top dollar for your house.
I hope this helps! Questions? Feel free to reach me below.
Justin Rollheiser – REALTOR®
Keller Williams Realty | Diamond Partners, Inc.
13671 S Mur-Len Rd | Olathe, KS 66062
Mobile 913-800-7653
Office 913-322-5878
www.JustinRollheiser.com
Comments or Questions?