When your Selling Price is too HIGH! BEWARE
Meeting With Realtors in Today’s Market
So, you’ve made the decision to sell your home and you have a fairly good idea of its worth. As a savvy home seller, you schedule appointments with three local listing agents who have a strong presence in your area. Each Realtor comes prepared with a “Competitive Market Analysis” and recommends a specific sales price.
Surprisingly, a couple of the Realtors suggest prices that are lower than your expectations. They support their recommendations with recent sales data of similar homes. However, when you review the figures provided by the third agent, they align more closely with your own anticipated value, or even higher. You feel pleased and excited as a home seller, already envisioning the potential profit.
A Balanced Approach
If you’re like many people, you choose Realtor number three. This agent appears willing to listen to your input and work with you. They prioritize maximizing your profit and are willing to start at your preferred price, with the possibility of a price adjustment if needed, right?
After all, this approach is commonly employed!
However, it’s important to acknowledge that you may have just met an agent who engages in a questionable sales practice known as “buying a listing.” By suggesting a higher sales price, they may have “bought” the listing, despite having doubts about achieving that price. Their intention from the beginning might be to eventually convince you to lower the price.
Understanding the Motivation
Agents may engage in this practice for two main reasons. Some well-meaning and diligent agents might feel pressured by homeowners who have an inflated perception of their home’s value. On the other hand, some agents routinely resort to this strategy.
Behind the Scenes Dynamics
Regardless of the agent’s intentions, starting with an excessively high price can add unnecessary stress to the selling process. Several activities take place behind the scenes, beyond your knowledge.
Contrary to common belief, the listing agent typically doesn’t directly sell your home to a buyer. Instead, they focus on marketing and promoting your home to other local agents who actively work with buyers. This effectively expands your sales force. During the initial weeks, your home should generate significant activity, with buyer’s agents visiting to preview your property and potentially present it to their clients. But remember, this is contingent upon the price being right!
If you and your agent have overpriced your home, fewer agents will show interest. After all, Realtors are professionals who possess extensive knowledge of local market conditions and home values. If your house is significantly above market value, they may see it as a poor investment of their time. Instead, they will prioritize previewing homes that are priced realistically.
Avoiding Price Adjustments Too Late
If you later decide to lower your price, your home may be perceived as “old news.” You won’t be able to recreate the initial surge of activity that a properly priced home would have generated. Consequently, your home may take longer to sell.
Even if you successfully sell at an above-market price, your buyer will likely need a mortgage. The mortgage lender will require an appraisal, and if the comparable sales data from the past six months and current market conditions don’t support your sales price, the house won’t appraise. This can jeopardize your deal. While attempting to renegotiate the price is an option, it depends on the buyer’s willingness to cooperate. Otherwise, your home could go back on the market.
The Impact of Prolonged Listing and Desperation
If your home falls out of escrow or remains on the market for an extended period, it becomes more challenging to attract a favorable offer. Potential buyers may assume you’re becoming desperate and will submit lower offers. By overpricing your home initially, you might actually end up settling for a lower price than what you would have achieved