I had a client this past year who was stunned when I gave her the CMA for her home. We were in the midst of signing a listing agreement, and I had prepared all of the things necessary to get her house on the market.
She had talked to me the year before, but when I told her what her house would sell for she went with another agent who convinced her she could get radically more. Well, a year later and she was calling me back. Unfortunately for her, the market had declined during that time in that area, and her house was worth less.
Her new CMA was approaching $100,000 less than the original CMA. J. Phillip Faranda posted an excellent blog on pricing a property right. (Compelling Reason to Price Your Home Right from the Start)
In that blog he posted a graph of what the variables are over the course of 120+ days when a house sits on the market. That information should be included in every listing presentation we make in the future.
Seller afer seller will have a dollar amount in mind when they call you to list their property. We need to be frank with them about price in the beginning. I know a lot of Realtors who are so hungry for listings they will accept the homeowner's opionion over their own Realtor commonsense. Friends, there some very negative consequences in making that choice.
- The house can lose value over the months, and in some cases years, it sits on the market. The one in my illustration lost over 30% in a little over a year.
- The house may go into foreclosure if the sellers are trying to sell an upside-down house through a fair market sale. Make sure you get all the details before you take a listing. Some sellers will tell you enough to take the listing, but they may not tell you enough to know their situtaion. You may need to steer them to a short sale to save their future pain.
- The house becomes nearly unmarketable because it becomes stigmatized by other Realtors and people who pass by it month after month. "I wonder what's wrong with that house?"
- The house can deteriorate if it's empty.
- The house can cost you money if you're paying for adversting. How many months can you carry advertising expenses on an overpriced house? I had client who expected monthly paid advertising on her listing, but the total commission would have been less than 6 months advertising. Count the costs.
- The house can cost you a potential new seller in the future. Neighbors driving by that sign for 3,4,5,6,7 months begin to wonder what's wrong with you because the house hasn't sold. You must be doing something wrong. You must not be marketing it right. You can't be doing your job. Other houses are selling, but you can't sell this one. Your name becomes stigmatized.
I'm sure you could add to the list, but you get the idea. It's better to walk away from a potential listing than list a house that will simply not sell. I realize everyone can use more business, but none of us need
business that will undo our business. Just say, "No!" when a seller wants to control how you list, market and price a property. You're the expert. Dazzle them with your insight and knowledge, and if you can't, walk away.