There was a blog the other day which talked about overpriced listings. I posted a reply...and at the request of a fellow AR member, I'm posting that response as its very own blog. Hopefully, it'll offer some of you a new (and hopefully interesting and effective) way to handle those overpriced listing situations everyone seems to be running into lately.
All of us know too well that many, many agents will take overpriced listings as "business generators". They feel that at least they'll have a sign in the yard for the whole neighborhood to see!! Maybe it'll look like they're actually doing business, when in actuality all they're really doing is what ANYONE with a license could do. Does that make them a good or bad Realtor? Is it wrong??
That's a tough question.
It's a fact that sign calls can convert into real transactions, even when the resulting sales are NOT on the subject property. That can be a good thing, right?? It simply becomes a loss-leader. You know you might not make any money on the overpriced listing...but perhaps you can parlay an interested buyer into another home?
Car dealers do it all the time. Price one car at cost or wholesale...and generate a lot of foot traffic off the ad. Tell everyone the car was sold that morning, but "here's one you might be interested in!"
Or...you can refuse to take the listing. But should you??
When I sold real estate, I did a bit of a "hybrid" approach. I had watched several listing opportunities fall by the wayside when I refused to list at the price the sellers wanted. Then, I sat on the sidelines, and watched as "ABC Realtors" took the listing. There was a sense of "justice" when the property didn't sell for three months. And then, the unthinkable happened!! The sellers reduced the price, and the listing soon showed up on the MLS as "Pending". Thirty days later it closed for $499,900 (the sellers originally listed at $579,900) Grrr!!! Some other agent just made $XX,XXX dollars in commission!!!! I hated that!!
So, I vowed to never let it happen again. But how would I accomplish that without losing all sense of self-worth or integrity?? Well...it came to me....and here's an illustration of how I handled those situations from then on.
If my sellers wanted to list at $399,900, but the property only comped at $349,900, here's what I would do.
I created a form that I had them sign. The form stated that it was my professional opinion that their property value did not exceed $349,900. BUT...that I'd be willing to list and fully market their home under the following conditions:
1.) They needed to acknowledge that we MIGHT only be marketing their home to 3% of the general public (the percent of buyers who pay cash), as the other 97% required financing...and that the actual value would be dictated by the appraisal required on the new loan.
NOTE: This was a perfect time to suggest that they purchase a certified appraisal to determine value. We could also then market the home stating "Appraisal already in at $_____________". Historically, offers will come in at 97-100% of value in those circumstances, versus 90-95% of value on initial offers for properties without an appraisal.
2.) They understand that most experienced Realtors who show property in that particular neighborhood are very familiar with the area's values...so the seller had to acknowledge that they're aware the property may not be shown often (and consequently the marketing timeframe would be extended.)
3.) Sellers had to acknowledge that payments on their existing home loan would continue throughout the marketing period. If we didn't sell their home for 4 months during the "overpriced stage", they'd have to initial where it said the inactivity could result in additional mortgage payments of:
$________________ X _______ months. An example might be $2,300 x 4 months = $9,200.00
NOTE: You could often get them to immediately lower the price by $10,000 with that alone!
4.) If after a specified period of time passes (in my case, usually 60 days)...they acknowledged that a price adjustment may be necessary. I'd explain that we'd re-research the market conditions at that time, and take into consideration any increases or decreases in housing values throughout the neighborhood, and re-price the home accordingly.
What you, as the Realtor, get out of it....is preservation of your professionalism. You also get at least 60 days of business generation from the sign...and/or any internet traffic. You lay the groundwork for the inevitable price adjustment to actual value...and you get name recognition in the neighborhood, which always gave me the opportunity to door-knock and hand out the most impressive listing brochures the surrounding sellers had ever seen!!! I could also take those opportunities to explain to the surrounding neighbors that we had priced the home a bit high during the initial marketing phase...but would make whatever adjustments may be deemed necessary in order to sell the home. That usually covered my rear end if neighbors saw that the house hadn't sold yet!!
It worked every time...and my integrity remained intact. And ABC Realty didn't get the commission.
I DID!
WIN/WIN
Dave
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;)
Love your post.