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If He's Lying...Please Show Me How to Do It His Way.

Much has been discussed about the theory of "overpriced listings", which many of us avoid like the plague (having learned the hard way).

Still ongoing is the purported practice of "buying listings"- accomodating an unrealistic seller with the price determined by them, not our own common sense. The lament goes something like this: "I was honest; I'm not taking overpriced properties; let someone else do it."

Having BEEN that person, it's time to rethink, and here's why:

We "lost" two properties due to an unwillingness to succumb to a sellers unrealistic expectation. Not surprisingly, both properties ended up listed...and with the same person, at an intial price offering higher than what the seller had hoped for. Guess what?

HE SOLD THEM BOTH.

In what appears to be a superb presentation, this particular local agent overpriced the house, but dropped increments were steady. Both properties sold at the price that we'd indicated was "market"- no surprise. $100,000 (give or take) is a HUGE price drop in a 5-600k range.

Somehow, however, he was able to get across to the sellers that yes, he'd respect their "hopes"- while at the same time, gearing them up for what would ultimately be a sale price 20% below their expectations- and this is key- in fairly short order.

Do I think that he "lied" to the seller, creating false hope? Nope. He simply took what the environment was offering at the time, created his own scenario of price reductions, explained to the seller all, and GOT THE JOB DONE.

I believe that a house should be priced correctly out of the gate. I also believe that tough sellers are more realistic than we give them credit for. If a seller compels us to offer that small bit of "OK- for thirty days it's yours- after that, we take reductions" is that somehow misleading?

For this particular Realtor, he afforded the sellers time to experience the downside themselves (no showings, or low offers) and permitted the market to establish the outcome. I can't find fault with that.

Posted by Laurie Mindnich North fork Long Island Real Estate on 12/26/2008 03:57 PM

Comments (26)

Overpriced Listings in the ActiveRain Channel

Post is included in group: ETHICS and the REALTOR

26 Comments on If He's Lying...Please Show Me How to Do It His Way.

DEC

Hi Laurie. Hmmm.....that is something to definitely mull over. Might have to be done sometimes. I usually just don't take the listing, but this is food for thought. Thanks! :)

Pamela, the price reductions were well timed (consistent)- he gave the sellers the "experience" of this market, which is new to most of us, but considered reality, as well. I've dug my heels in when a comprehension of seller confusion (along with an imposed solution) might have been a better plan- thanks!

At the same time it is particularly risky for the sellers. What if it didnt sell? What if they ended up dropping $150,000 and still no sale? Then Dom is high and the listing expires. Next agent rolls around and has to further drop the price in order to get a sale. This happens all the time. I think the agent in this case took a big gamble and won but that isnt always the case. Even worse things can happen trying to do it like that agent tried to do it.

That's happened to me, too. The owner's daughter had wanted to use my services, but she just can't get over the higher list price that the other agent agreed to.

The sad part is, the other agent's marketing, in my opinion, were not of the highest quality. This was a waterfront property with fabulous views of the bay --- yet the main photo was of the front of the house dominated by the garage door. I also suggested ripping out the carpet and refinishing the floors. They balked at that suggestion. Like your competition, this listing kept dropping in price. Finally, they did what I had suggested in the first place. The agent lowered the price repeatedly, and they took more and better pictures. And a year later, sold it for $150K less than list price.

Should I have taken that listing?

I don't want to take overpriced listings --- but as long as the sellers and I have an understanding that after a certain period of time (2-4 weeks) we can amend the price to where I think it should be, I am inclined to give it a shot.

Some folks a listing is better than no listing at all. In many ways, that may be true .... BUT ....!

Shane, I see your scenario ALL of the time- Realtors that take overpriced, but HAVEN'T gotten a price reduction plan of action in writing. I think that that might be the difference- 30 day increments. I'm with you, but thinking about a seller's perspective, and need for that 30 days to gain market comprehension first hand in order to accept the reality. It's tough out there. I agree with you, but admire whatever program my succesful competitor has done, that's worked. Thank you.

Pacita, that's exactly the dilemma: people selling seem to need time (that we know is to their disadvantage) in order to "get" the quickly changing market. Providing a time frame, with our own assessment (but a willingness to try their own for thirty days or LESS) affords respect for confusion faced by sellers. It's a process.

Laurie, that is something to think about. Usually listings like this in our market go stagnant even with the price reductions they don't attract a lot of interest. It is an interesting post, and that other agent must do a terrific job of communication with the client and marketing of the home!

This topic comes up all the time in our office. I don't think you really can ever know for sure if taking the listing is the right decision just because it can so easily go either way. I've had the experience where I took the overpriced listing with the seller's agreement to reduce the price in 30 days if we didn't have any activity and/or and offer. Thirty days came and went; and then 60. That's when they told me they really didn't care if it didn't sell. I gave the listing back after 90 days. With the lack of motivation and inflated price, it just wasn't worth it to me. That was the first time I did it, but I have to admit it felt pretty good. Always a tough call to make, though...always.

Laurie, I think you have to use your judgement in these situations. If I have potential sellers that CAN sell but may want to test the market for a while AND they are motivated and reasonable then yes I may very well list their property at a higher price. Built in price reductions is not a bad way to go.

It's not a strategy that I would like to be known for. That being said a healthy schedule of reductions sounds like a good compromise.

Tony and Darcy, that's what interests (and impresses) me the most- whatever REALISTIC presentation he offers ends up with a sold property. I can't imagine that the sellers were surprised or unhappy- he simply timed the process right for the sellers mind set.

Peggy, I'm not sure that he leaves the decision up to the sellers- it appears to be a well timed schedule. If the reduction isn't in 30 days, I haven't seen it (of his listings). Going beyond that, well, we've ALL done that, and it's not fun for anyone. It provoked thought.

BB, you're IN IT BIG TIME- NY is just a toe in the water (except, it's a bigger toe now). Whatever this guy did, he achieved a better price for the sellers than they'd get today. Hat's off, and "spy seller" with a tape recorder inviting him to a listing presentation is the next step. Except, that stuff doesn't work for me-six years in NY...maybe it does...(I wouldn't do that to him, but would love to be a fly on the wall)

Ellie, in this market there's little to be known for except helping out those that want to sell...hard for me to criticize a method that got it done in fairly short order. Except, I stumbled when the seller's expectation was offered. He didn't.

It's their property to do as they please. Its up to us to manage those expectations.

If properly presented, its not misleading.

Laurie, If they're listing with you, hopefully they are listening to you....if you explain to them that if their property doesn't sell in their expected price and they agree to drop it, I'd certainly take the listing. I don't think until you have a house on the market that you realize how difficult it is to sell right now.

Hi Laurie...This topic is of interest to me as I'm meeting a seller tomorrow about a house that he would like to put on the market above what the CMA suggested. I may see if he will be agreeable to a plan such as this one.

As tough as it is for us, we always have to remember that it is their property which means it is their money.

Kate

DEC

Hi Laurie, depends on the seller. If a seller is resaonsable and understands what is going on but wants to test the market none the less I will take the listing. It is the seller who is unreasonable, believes his property is worth the higher price and doesn't "get it" that I won't take. If they work with you, incremental price reductions, why not ---- I do this all the time. Once blogged about it on this site and got beat up by the "never take an overpriced listing" crowd.

Mike, "properly presented" is key- thanks!

Carole, I think that many of us (ourselves included) sought other ways to manage in this market without going the listing route on overpriced homes- I'm pretty expressive, and find it very difficult to enter into a situation that will surely net them 100k less. As you mention, however, there's much value on the sellers side to really "getting" just how it is out there right now, and it might just take more flexibility on our part.

Kate, I'd love to hear how it goes- keep me posted!

Miriam, you're ahead of the curve. Having seen many houses that just sit, this particular agent caught my eye because the reductions were organized- and clearly the sellers understood. That they wanted so much more spooked me out of the gate, but the places sold in a matter of months (unlike the rest that just sit and sit)...while our focus has been on buyers, making some of these listing opportunities work is what we need to focus on when they present themselves. I agree- no in writing price reductions, no listing. Been there, done that!

DEC

While taking an overpriced listing is not to anyone's benefit, I'll frequently sign a listing agreement that specifically states that if we don't get "X" amount of showings or an offer within a clearly specified time frame, we'll lower the price to the more realistic comp price.

DEC

I have successfully done this with the same result several times. It takes alot of communication and extra time educating the seller. I don't feel it's misleading...I clearly put in writing where I think the home should be listed what the most probable sale price is...and I have the seller sign it. We 'try' their price for a short time and I have been able to get them to see the need for a price adjustment by showing them the traffic reports for their home (so they know exposure is not the problem) and advising them of all activity in the area immediately. It is their home and their money. I feel it's really teamwork and a partnership to get the home sold...I think they respond better when they don't feel as though they are being dictated to.

DEC

Craig, my initial reaction has been, "it won't work", but in hindsight, it doesn't seem realistic to expect sellers to simply say, "OK" to an amount less than they'd anticipated- hearing THEM seems to be part of an equation in which I've missed out (unintentionally).

Wendy, you've figured out how to approach it with the compassion/comprehension on the seller side that some haven't- it was never about ignoring an expectation, but about offering reality and an honest assessment. Lost in the translation, however, is the fact that many aren't as tuned into the reality of the market as we'd assume (through no fault of their own)- a solid agreement with mutual respect is what you're doing.

There is the human side of listing and sometimes you have to work with a seller to find out what they need. Sounds like the agent may be very good at consultations with the seller to over time get them to follow his advise... thereby price reductions when the seller could accept the truth of the price of his home. In the end being right on price is great, but earning a commission is even better.

You know, Laurie, I believe as you do... that a home is better off priced correctly fresh out of the gate. But I have run into sellers, many times, who don't agree with my pricing. And they want to try a higher price.

As long as you're upfront with them about the realistic expectation of being able to sell at that price... and set up a schedule of reductions (obviously private... not available to the public)... which tells the clients... "We'll try your pricing for X number of days/weeks.... and then we'll reduce by X number of dollars at these intervals, until we've reached the price that the "market" agrees with..."

That allows the seller to feel as though they had their chance at their price... and we weren't just lowballing the listing price to make our job easier. I do believe, however (and tell the client so)... that this could cause them to end up with less money in hand, than if they'd price it right at the start. But if they don't believe you about the price... they're not going to believe that either.

DEC

Mary, so many seem to either acquiesce to a fattened price, without the prep work that must go into his presentations, or do the opposite- decline an opportunity that was exactly that, because the sellers were likely in need of a 30 day reality check (and deserving of that respect, if they also acknowledge the possible loss over that time frame of equity). It was a fine line in 2008, to be sure!

Alan, that's it: finding a way to be realistic without feeling like a dart to a balloon. Maintaining our own integrity wasn't difficult in 2008; making it work for SELLERS, and ultimately, ourselves, with a straightforward presentation permitting flexibility was accomplished quite well by some- good for their sellers, and good for them!!

JAN

I think the key differentiators between "buying a listing", or just listing it too high initially, is the CMA. Some sellers have a subjectively high opinion of their home that they don't believe the CMA and insist on at least trying to market the home at "their" price. As long as they are willing to adjust the price within a realistic range, that's okay. You can only hope the agent pointed out to them that lost time and price reductions might hurt them.

Sandy

Sandy, thanks- for me personally, that's been the catch. It's difficult not to offer kudos to someone that has mastered the tightrope- just working on how to master another element in this crazy market, knowing that exactly what you've pointed out is the big negative to this approach. I have to assume, due to the relatively fast turn around, that all aspects were presented to the seller, with a successful conclusion- but if it's not done just right...

FEB

If I can get on the same page as the seller, and if we reach an understanding that they will become more competitive on a regular basis, I will take it, but only after determining if they are "truely" motivated to sell. Sometimes, a buyer may pay a bit more, usually not, but no opinion is 100%. I also try to explain the inverse relationship between the final net and how high they start initially, letting them know they will usually end up with more $$$ if they are realistic from day 1.

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