Great post, I love the comment you added at the end. My experience is that when we check listings that we did not get, they have usually sold for  the price we recommended at our listing appt.

At NO time will you approach the seller about a price drop??  There are times when a price drop might be the best move -- new listings on the market that change the playing field etc.

I agree on buying the listing. There is a Realtor in my market who has price drops at least 8 out of every 10 listings. It is quite shameful.

This is so true, but unfortunately there are agents that see nothing wrong with this and give the ones that are honest a bad name.

Hey Jim: Buying lisitns is the  Kiss of Death in CA where only 12% of listed properties are selling.  When the market turns, and it always does, they will have the reputation as the ones who can't get them sold and us honest guys and gals will prevail. 

(DISCLAIMER) I am not a real estate agent, nore do I play one on TV, however as the owner of a "for sale by owner" (FSBO) service, I have spent a lot of time over the last 8 years educating consumers about the less-than-ethical practice of "buying the listing".  You see,  not only are agents competing with each other on a daily basis, they are also competing with the home seller who may be weighing the expertise of the competing listing agents with that of their own abilities.  Home sellers who wish to use "free" services such as a Comparable Market Analysis, are encouraged by us to make sure that the agent LEAVES them with the report. Many do not, and the home seller is left with hype (overpricing) rather than fact. By mixing "sold" with "currently on the market" data the seller gravites to the higher numbers. We recommend that sellers obtain (and pay for) a professional appraisal of theiir market value.  After all, the appraisal will determine how much the lender is willing to spend.

I agree with what you are saying, however, you didn't mention that often this happens because the seller is unrealistic with their expectations.  If they are a seller that wants to believe, they are going to look to the agent that is giving them the song and dance they want to hear.  Im not saying that was your recent listing appointment, but we all know it happens all the time.  Even in this market when the sellers aren't getting the money they think they should because homes sold for so much more three years ago.  Our jobs are tough!

This is why many properties  don't sell with the first Realtor.  It's usually the second wife and the third Realtor that gets everything.  If I can quote mike Ferry, "Tell people the truth and don't worry about the outcome."

I actually find that often the sellers think that they can fool buyers! In todays market with exposure, it's really doubtful. I find that a one line active of houses between a wide range of homes showing style, bedrooms, baths, garages and square footage within .5 miles, makes even the greedy relook at their numbers. "Mr. Seller, I anticipated that you might want to see what others in your area are priced for with the basic ingrediants. True they are not identical, but a buyer in this price range will see that also. Let's look at what size homes you will be competing with. In our market we actually want to show more value to attract the buyer now. The longer you are on the market, the more the buyer lessens value. "

This is very similar to the grocery line thought. Don't you want to be first in line Mr. Seller?

Overpriced listing eventually will sell but for far less in the market. Personally, I think that's a very expensive proposition with my reputation and costs.

Dear Jim,

I agree.  I get pretty tired of unscrupulous real estate agents giving the sellers pie in the sky ideas about how much their property can sell for BUT sometimes the sellers are adamant about listing their property high no matter what advice we give them.  I have done one of two things in those situations: 1) I just decline the listing politely or 2) I tell them we can try it for a short time and see what happens as long as time is not the essence in getting the home sold.  I don't like it because it costs me more money to market the property if it's overpriced and won't sell.  It's not a great solution, but the sellers make the choice with the understanding that I think their asking price is too high and it's up to them to decide if they are going to drop the price down to get it sold.  Some sellers just have a hard time relinquishing control.  (Even to the point of wanting to write our advertising copy!)  Those are the ones that I release their listings back to them and let them continue to march without me. 

What really makes me mad though is when an agent undervalues the home on a listing, knowing ahead of time that they have a ready, willing and able buyer looking for a deal that they can sell it to.  That is really criminal.  I've seen that happen so many times!!!  In the rural environment, dual agent sales happen quite often and if the agent is patently honest and works to bring the deal together with a fair price for both buyers and sellers, it's a great situation, but if they are not honest, and one party is undermined, it's tragic and an open invitation for a lawsuit against the agent if they are discovered.

I have worked for free on at least one deal just to get that point across to a routinely devious agent and he learned not to mess with me or my clients.  He represented some seriously distressed sellers and tried to represent the buyers too.  The buyers told him that they were working with me.  I was able to write an offer that made it possible for both parties to agree and complete the sale, but the stipulation was that a commission, IF ANY, even if it was 50 cents, would be split evenly between the two brokers. 

The pitfalls are many. It's best to remember that honesty really is the best policy and if losing the listing is the result of being honest, be honest anyway.

I like to take the approach that I am educating my prospective clients on all the variables of their pricing, and what happens when they need to adjust their pricing later on. Of course sellers want the highest price, but the aggravation of pricing too 'optimistically' hurts them worse. I love your wording! I think I'll add that to my 'education' of the pricing strategy.

And when my predictions come through with what happens with the agent who bought the listing, I hope that they come back to me. If they don't I don't think I want the listing anyway!

Love the mutual admiration society comments, but if the majority of markets are only selling 12% of the listings, (as noted by the agent from California), that means 78% of the active listings are being "bought" by agents who are employing deceptive practices? Fat Chance. 

Sorry Jim,  but your post is outdated. The agents who are actually "buying listings" are those agents who are listing bank owned properties. Reality is, over 40% of total sales are bank owned properties, properties which are being dumped by listing agents who are too busy to provide accurate BPO's, are unfamiliar with the area they are working in, and are too greedy to turn down their 50th listing because once they say no,  they will get passed over by the bank's asset manager. All of these agents are guilty of "buying listings", in bulk, from one or two institutions. The very same institutions who we are bailing out with over $700B of our tax dollars.   Tim

I agree with you, I have experienced the same deceptive practice at times in my area. Unfortunately in our business some agents forget about the line in Real Estate 101, and Ethics, of ""working in the best interests of our clients" and tend to work in their own best interests!!

Great advice. It is so hard to be the bearer of realistic news to the seller but better to walk away than to buy a listing and disappoint them later.

I totally agree and like your tactic.  But what if you were to end up getting the listing after having this conversation with the sell and then you are expected to put the same verbiage on the listing agreement?  This might get sticky if there is a legitimate reason for you to have to ask the seller to lower the price.  If this was asked of me to put into the contract, I don't know if I would......

Any other ideas to counter this scam?

Hi Jim;

What you are saying is all so true! What these usually 'young agents' meaning new to the business, don't understand is that they are hurting themselves and their new clients. The property takes longer to sell and usually loses popularity before the price gets lowered to fair market value. The result is lost sales,lost time, an upset client and a bad reputation!

Keith Kenner

706-835-5408

Mountain Real Estate for You!

Very true.  I lost a listing a couple years ago to an agent that took advantage of an out-of-state seller and convinced him that his property was worth more than $100k than reality.  It should have been listed for ~$180k.  The seller bought into the crooked agent and further told me that the other agent acused me of being greedy (because I just wanted to sell the property fast).  It's been two years and the guy is still on the market - priced 50k above market now.  The house is in a good location for signage but 100k over!  Really?

I just launched what is now my favorite listing appointment tool (www.updatelane.com).  Having Update Lane separated myself from a few other agents and helped me land the biggest property I've ever had - 4.7 m 10,000SF 46 acre absolutely gorgeous property!  Update Lane helps me educate and stay in constant communication with the seller during the marketing and closing.  They can track my marketing plan that I pitch, showings, read feedback, follow competing properties, and access all documents in one spot. 

Happy selling!

Dan

I've been a full time realtor for 30 years. I've always done my homework and provided the sellers with the most accurate information. Most of the time I would get the listing but occassionally I would lose out to someone who lied to the seller.

Every time I researched what the listing actually finally sold for I found that I was right on the money. Too bad the seller had to take so much extra time through price reductions to finally sell their property.

I sure hope that all realtors will be professional with their dealings with the public and their fellow realtors. Times are tough for all of us but we can't turn against each other because that makes us look bad as a profession.

Keep up the good work!

dont complain, until someone turns them in for ethics violation or someone calls them out, they are going to get away with what they are doing.  You just have to have your A game on and be confident in yourself, and most importantly hope the sellers like you so they will hire you.   I like the post but I dont like people who complain about unethical practices but wont turn anyone in for it.  Its our job to keep us honest. Realtors have had it way to easy, its time to step up and earnt their $$$

I am in agreement. Why waste time and money on a home that will not sell. I have seen some agents promise anything to get the listing that is overpriced and then it just sits there. It makes me wonder wat goes thru their heads? I can not say I have never taken an over priced listing but we also counsel that when no responses happen the price has to be lowered. However some homeowners still shop for the best price. They need to be educated about real pricing.

AMEN! The same scenario occurs in commercial real estate! I see overpriced properties all over the East Bay (San Fran). Loopnet is just a depository for overpriced listings- brokers have lost their ability to predict the probability of a listing making it to close of escrow. Perhaps that is why the attendance at marketing meetings is dwindling. Selling Agent doesn't cut it anymore- you have to be able to discover hidden value add opportunities, make the calculations and be able to explain your numbers! Gone are the days of "looking for a bigger fool", it's time for the professionals to repair the damage done. Continued Success.

Pete Chrzaszcz, www.ConsultPete.com

I guess I'll be the lone voice of a different opinion.  I may take a listing that's overpriced because signs bring signs. If I have a listing, I will get to market around it, have open houses and will in fact meet many other sellers and buyers. And when someone says it's overpriced, I say yes, let's go buy you a house that's priced right. And when other sellers call me, and wonder why it's not selling, I say it's overpriced and the sellers wont be reasonable. And then I take their listing and signs bring signs.

The idea (at least for me) is to get business and to buy and sell homes. Not to be self righteous. Many of the top producers take overpriced listing and then do price reductions, and they have signs all over the neighborhood. They are killing the competion, while many others are saying "I can't take that listing, it's overpriced". I'll take it all day long and laugh as my phone rings off the hook from the people I can meet from it.

I have blogged on the same topic a number of times...it's unethical...it can and has and will take folks into foreclosure...and it has is and will be ignored by the borker/managers because the largest offenders are top producers who "win by attrition".....until, if and when ethics become more important than dollars...this horrid practice will continue.

Jim,

Thank you SO much for posting on this. I just lost a listing for this very reason. I just can't lie and tell a seller their house will sell for $50,000 more than all the other comprables. The seller told me that the other agent was "more positive" about what they could sell for. It has NOTHING to do with being positive. It has to do with data and market stats...period.

Thanks again for posting this and more importantly, doing the RIGHT THING!

So many of you presume to have been at the table when the listing agent secured the listing. So many of you who were the 'flies on the wall' failed to hear the agent describe the market conditions and the likelyhood of the home selling at the homeowners hopeful price. You closed your ears before you heard the agent explain the 5, 10 and 30 strategy for monitioring buyer response and the corresponding corrections. You choose not to hear the agent explain that the home owner and the price they pick is the most likely predictor of when the home will sell. The words were foreign to your ears when the agent explained the home seller is always in control of selling their and and the task of the agent is to give the home exposure and explain the results.

Too many of you see within yourselves the triats that you rant against. Take a pill and chill.

Jim:

Here is a statical fact. Here in San Diego county after the first of the year 2009, we had 1800 expired listings. What does that number indicate? I am sorry and ashamed of the agents that have taken these listings and have done such a disservice to the seller. Too often we are told by our brokers that we must go out and get business at what ever price. I apologize for being a bit cynical about the "WHY" an agent does not honor the code of ethic's that we all had to take at the time we became Realtors. In today's market the very worst thing that an agent can do to a seller is incorrectly price the home. I spoke to an expire the other day that was on the market for 455 days, and they were baffle as to why their home did not sell. Could it have been price? Good post.

Great Post Jim.

You could put a line in the listing agreement stating that the seller agrees to drop the price every few weeks depending on showings and feedback. I explain to sellers that what they want and even what a (uneducated) buyer might pay is not the bottom line-It's what will it appraise for. And for a property to actually sell it needs to be priced according to comps so that there won't be any problems with the appraisal.

Great post! I wish all sellers...and buyers for that matter could read this (and all the responses from ethical  agents) to understand why price is so important...the right price that is.

Thanks for posting something of great relevance!

Nice post.  The worst sellers are also Broker/owner or agent/owner.  They have an emotional attachment to the property and would rather list said property at an unrealistic price, and or take it off the market because they think they are not getting what its worth.  As opposed to lowering the price.  I love the added clause that the Broker should add  "they will not lower the price while they  have the listing".  Since many Brokers list at a higher price just to appease the seller knowing well the property isn't worth it. If they do however get the listing they will then be able to lower it after the fact.  What a waste of time.

Age old problem here, Jim.  Do you take the listing to have another listing, or do you work with the clients best interest at heart and tell them what may be painful for them to hear?

Fly on the wall was correct. 

You all jump on your self righteous positions so quickly that you can't fathom the possibility that the client chooses the price of their own sale. Why do you assume that the agent is "tricking" them into anything. I have many time told a client that the price is too high, and they look at me and say to "try it" anyway. In my mind I'm saying "try what?" but, I can't again stress the importance of how signs bring signs. Good listing or bad listing all bring calls which lead to more deals. Is it really unethical to do what the client is hiring you to do? It's their house, their money, their deal. Were just helping them make their deal happen.

I am actually one of the most ethical / honest agents any of you would ever have the pleasure of working with. And what cracks me up is that everyone on this post thinks so highly of themselves that people that take listings must be unethical or "tricking" people into something. I have done neither, but I have had overpriced listings, and I'll continue to take them.  SIGNS BRING SIGNS. (at least where I work).

I work with crappy agents all the time, but I guess their not on this site patting Jim on the back.

I gotta run to a listing thats overpriced, but I need to go refill the flyer box for the 3rd time. I've already had 2 other listing appointments from my "overpriced" house.  

Have fun sitting there until the "perfect" deal comes along. I'll be happy to take the rest.

I teach absorption rates to agents at Keller Williams Greater Portland, Maine. They have found it to be very successful for both Buyers and Sellers. However, in my smaller resort market, where traditionally the top agents have always bought the listing, and continue to do so, I find these agents telling sellers that I always sell short.  I am now including education about Absorption Rates in my Adult Ed classes.

Another thought,

Why is everyone using the words,  dishonest, unethical, lieing, greed, scam etc. etc.

I look at it kind of like having a consignment lot or a car lot. If I fill my lot with cars or sofas I will get a lot of business. (some cars may be overpriced, some sofas may be overpriced etc) but, I will also get many buyers and sellers that are reasonable in their pricing and I will ultimately make them happy.

It's not my house, my car or my sofa. It's my job to put buyers and sellers together. If I keep my lot empty until the perfectly price car / sofa comes along then it's going to be a long winter.

Unless the people are pure ass'es, I'll take the deal to help fill my lot.  SIGNS BRING SIGNS. (both good and bad).

And seriously, I'm none of the words that everyone is throwing out here so freely. It's not dishonest, or a scam, it's called business. 

People, your NOT THAT IMPORTANT.  We are selling something that someone else ownes, they worked hard to buy it, and they can try to sell it at whatever price they want. It's their house, their money, their life.  Try to keep your wants and needs out if it. It's not about you.

We are here to put buyers and sellers together. No more no less.

Great Post. I love your suggested verbiage for the listing agreement.

I totally agree with what you posted!  Listings should be priced right, this happens in my area too!

The part about your house sold in 30 days or I will buy it.... and the small print is so small the are not aware of what "buy it" really means......

Hi Jim,

You nailed it! Thanks for the article! I find that even if I price it right and get the listing, that we are in a declining market and I still may have to go back to the seller for a price redcution.

Excellent.  This is too common I think.  Look at all the overpriced listings in MLS that sit there & sit there before they ever get a price reduction.  I have read that statistics show that a house properly priced from day 1 not only sell faster, but often for more money than the one that has sat there for who knows how long with price reductions. This is especially true in a declining market.  An extra month or 2 in a declining market can cost the seller thousands of dollars.  I think I would also sugest to the seller that if the other agent is so confident that their inflated price is the right price that the seller only give them a 30 day listing.  If they get multiple showings & good traffic, they can extend the llisting, but if it sits there w/o any showings, they can relist with me at the right price.  Or you could even offer to match the other agents list price for the 1st 2 weeks or so, and have a price reduction written, signed, post dated  the day you take the listing.  Nothing is worse than letting a seller talk you into a higher list price than you think will sell with the verbal agreement that they will reduce it if the house doesn't get any showings, only to have the seller change their mind later & not reduce the price. Been there done that when I was green.

Thanks for the great blog - this is after all the point of active rain, to help each other out! I recently read that in CA at least, it is against the law to over-promise or over-inflate the price, esp on a bank owned BPO - I hear about this a lot - the agent performing the BPO hopes to get the listing and over-inflates the price! Bad news - and banks are typically getting 2 or 3 appraisals to also help them with values. Banks are our new sellers and as such it definitely doesnt pay to buy the listing.

HEY Jim , NICE POST, THIS HAS BEEN GOING ON IN NJ FOR 20 YEARS! It never ceases to amaze me that homeowners still don't get it ! I am aways the lowest,most realistic and correct value when i price a home.Numerous times the sellers go for the highest just because its what they wanted to hear!!

  they all pay the price later, the owner,the agent etc.!!