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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Owner of FlyersToYou, Inc. and former Top Realtor - Hemet, CA
Jeff,
OHMYGOSH!!!!!!!!!!!!!!!!!!!!!
See what happens when you recreate a form at 4:00 in the morning with only half a cup of coffee under your belt!!!? LOL!!
Good catch!! Thank you soooo much!
The new version has been uploaded (everyone who downloaded the first one, please make sure you download the new one). It's available at the same link:
http://www.flyerstoyou.com/listingaddendum
I'll be back later to respond to more comments, but my 10-year old daughter just "demanded" that I go on a bike ride with her (my excuse that my dog ate my homework didn't work to get out of that one. I obviously am not always "on my game"). ::: smirk :::
Thanks Jeff!!
Dave
Apr 26, 2009 06:10 AM
Principal Realty Group-Utah - Sandy, UT
Dave,
Awesome post and comments of comments, and thank you for FREE addendum.
Apr 26, 2009 06:10 AM
The Legends of Real Estate, REALTORS® - Jacksonville, FL
Jacksonville Real Estate
Dave,
I agree with you regarding the potential listing I told you about. We will only take this particular listing IF the seller acknowledges that HE WANTS TO SELL. He iwll need to price below market value and it will be a short sale but his alternative is foreclosure. If he is unwilling to price at a point to avoid foreclosure then it would be a waste of everyone's time to list it.
I just went over your form with my wife (business partner), Susan, and we both like it a lot. I will be tweaking it a bit for our market/needs but not much. I think you've provided a wonderful tool for all of us and it is GREATLY APPRECIATED.
This, in my opinion, is what ActiveRain is ALL ABOUT!
Thank you!
Tim
Apr 26, 2009 06:33 AM
HomeSmart - Scottsdale, AZ
Scottsdale AZ and surrounding towns
David, this is one of the most helpful posts I've ever read on AR. Plus, a free download to boot! Brilliant marketing as I am now going to view your products.
I have been wanting to create an addendum for years but just didn't know where to start. I will have my broker review this one and will definitely do some tests to see how sellers react to it, and might make some edits down the road. I, too, have walked away from listings only to see them quickly reduce price and get it sold with the agent that did take their overpriced listing.
I just took a listing that was overpriced by around $10,000. My CMA shows that as fact. But they were also in the same price as the 3 lowest priced listings with their amenities (easy to comp - a condo with many comparables to go by).
We just got a lowball offer and instead of counter-offering at $10,000 under list price, which was the market value, they were offended and countered at only $2,900 off list price, which is too high to begin with. They wouldn't budge and were getting angry at me when I was trying to re-educate them about the current market.
Even though they have a very professional CMA in hand stating the market value, they "forgot" my speech about how appraisers work today and the fact that the market continues to decline and that fact can also be reflected in the appraisal. They told me I should have informed them of that when I presented the CMA. Guess what - I did! But I guess because they didn't want to hear it - it went through one ear and out the other. I need to add another factual written page about appraisals to my CMA so I can guide unrealistic sellers back to it.
If I had something like this to begin with it might have saved the anger. Thanks!
Apr 26, 2009 06:41 AM
www.eHomeReports.com Coldwell Banker Realty - Liberty Township, OH
Realtor Homes for Sale Cincinnati/Dayton Ohio
This is a good post. I have had the "conversations" with my sellers, but I had not put it in writing. This is a good idea that I will take and tweak just a little.
Thank you for the post.
Apr 26, 2009 07:30 AM
Owner of FlyersToYou, Inc. and former Top Realtor - Hemet, CA
Hi all!
Okay, I'm back from my bike ride....and if I can get my legs to stop shaking, I'll try to respond to a few of the comments above. (No, I am NOT kidding about the legs shaking!!) LOLOL!!
Besim,
You are quite welcome! I hope it helps! :)
Angel,
Y'know...that kind of comment sorta makes be blush! I wholeheartedly agree that it's THESE kinds of topics that should be in ALL real estate training manuals...and it's this kind of sharing that epitomizes what a real estate social network CAN and possibly should be all about. It's been wonderful for me personally to read the responses here...and to know that in some way, one "lil ole blog" might save someone some heartache...and earn them a commission. Thank you so vey much for your kind words!! I REALLY appreciate that!
Tim,
I understand where you're coming from totally! By the way...I can tell from what you've written that you're genuinely interested in helping this guy out....and that's it's not totally about the commission. I applaud you for that. I'd like to think that's how I approached my real estate business in the past too. Just bear in mind that you're not always gonna be able to save the world.
My recommendation is to outline EVERYTHING that you...in your professional opinion...need to have in place in order to effectively render service from this client. EVERYTHING!! From property preparation, to accomodating showings whenever necessary, to pricing, to marketing, to well, everything. If the property even remotely looks like it's in foreclosure, prospective buyers always seem to have the thought that they'll just keep tabs on it...and buy it later from the bank at a much-reduced price. I feel for your client. I feel for all of the people who have lost their homes, and I wish there was some way that I could have helped them. The funny thing is...I probably COULD have helped many of them...if they had only ALLOWED me to!
I'm glad you and Susan like the form. Hopefully, you'll make good use of it in the future. I think you'll find that sellers respond quite well to it, and I NEVER once had anyone offended by it whatsoever. They usually responded by saying things like "Hmmm...we never thought about the fact that we might be making 4-6 more mortgage payments than we have to."....or, "Maybe we can bring it down a little, just so other agents will still show it.", etc.
It's a very positive tool, and they'll thank you for bringing those items to their attention. They'll also realize you were the only agent who shared those ideas with them...and you'll stand apart from your competition even moreso than you do already!
Best of luck (I'd be interested in knowing what ultimately happens with that deal!) Keep us posted!
Judy,
I have to leave again (that same 10-year old daughter is in the Ramona Pageant, the country's longest running outdoor play) and she has to be there in 10 minutes. I have to run...but will be back later to respond to your's...(and others')...comments.
Dave
Apr 26, 2009 08:28 AM
Hunterdon County Homes - Flemington, NJ
Great post. I haven't gone as far as having them get an appraisal, but have been pretty stern on the time line of how long we would let it remain at the higher price (in my case it was over the holiday season and nothing was selling anyway!). In another case it was a pre-foreclosure and they really wanted to get as much $$ out of the house as they could. When they realized people were not beating down the door to buy and the bills were stacking up, they got pretty aggressive with their listing price.
Apr 26, 2009 11:07 AM
Carpenter Northeast - Indianapolis, IN
Real Estate - Indianapolis, Fishers, Carmel
Coldwell Banker Advantage - Garner, NC
Broker/Realtor, ABR,ASP,CDPE
Dave,
Thank you for yoir post. Sometime's it is very difficult for a seller to come to the conclusion that his home is not worth as much as he thinks that it is. Each one of us realtors needs to figure out how to be listing the property when the seller finally figures it out.
Apr 26, 2009 04:12 PM
Keller Williams Realty - San Diego Metro - San Diego, CA
Realtor, San Diego CA Real Estate
Ed Price & Associates - Trinity, NC
Realtor, SFR - Archdale/Trinity NC Real Estate
Thank you so much for sharing. I'm going to have to use this info right now!!
Apr 27, 2009 07:16 AM
Exit Realty of the South - Greater Nashville TN area - Nashville, TN
As an agent we have a lot of responsibilities, but we do not determine the value of a home -- the market does. That is ready,willing and able buyer and seller. Our job is to steer the seller to a price with market data. It is the Sellers job to determine exactly what price they want to ask. We can then interject our professional opinion. But if we go in saying a price that might be too high, just to get the listing, then we are putting ourselves before the client - ethics breach. If we offer a more realistic price, and don't get the listing as a result, the seller is not our client, therefore we are not in any position to help them anyway. Show them the stats, show them expireds to let them know the threshold at which homes are not selling, even take them out to look at the competition, and let them choose the price. If they ask, "will you take the listing at this price?", absolutely yes, then you can offer the opinion, put into play all the above strategies, so that when it does not sell after 30 to 60 days, you can show them updated market stats, and approach the subject diplomatically and empathetically reminding them that you understand they want to get x dollars, but unfortunately the market is not responding to that price. They cannot realistically blame you for their decision (yeah! yeah! I know! Many will blame you anyway). But as a professional, it is important to put the ball in their court when appropriate. And as you learn from any negotiating or sales course, when you put the ball in their court, leave it there. If then you say something or take it back, YOU lose.
I take the same approach for commission. What commission do you charge? How many of you actually answer that with a number. Again, you lose. I tell them its negotiable and depends on how aggressively they want to market their home. And now in a down market, that commission is very important in being aggressive. So far the lowest commission anyone has chosen is 7%. One even chose 9%. Knowing that, why would I say 6% and leave money on the table. By the way, I am not the one taking that money. I usually take 3 and offer the rest to the buyers broker -- remember -- aggressive! The seller then knows that I am looking out for their interest above my own.
Apr 27, 2009 08:05 AM
Florida Homes Realty & Mortgage, LLC - Saint Augustine, FL
It's not about me...It's all about you!
Great Post! I walked away from some listings last year myself that I should not have. I felt that I would not be doing the seller a good service by allowing them to push me into doing something that I felt was not in their best interest. After reading your post, I am definitely going to take some of your advice and forge ahead. It will be much better than losing that end commission!
Apr 27, 2009 10:28 AM
Re/Max Ultimate Realty Inc. Brokerage - Toronto, ON
Realtor - Mississauga - Toronto Real Estate
Exit Real Estate Consultants - Columbia, SC
RE Agent - Columbia South Carolina Real Estate
"This is absolute genius I tell you" is the famous marketing slogan I would attach to this process you've shared. Thank you very much for spreading the active rain.
Mark
Apr 27, 2009 03:05 PM
Re/Max Plus - Rochester, NY
CBR
David, thanks so much for sharing this great idea! It's something I had never thought of but makes SO much sense!!
Apr 28, 2009 07:43 AM
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
REALTOR® - Charlottesville Virginia Homes / Horse
Dave - I like the idea of the form for the seller to sign. Very professional and it would help make everything very dlear to them.
Apr 29, 2009 01:01 AM
Arizona Luxury & Lifestyle Living - Cave Creek, AZ
Arizona Homes For Sale
What a smart cookie you are! I had actually been thinking of doing something similar as I have a potential listing client right now asking me what the harm would be to list their home higher than where I suggested. This after I already took the time to explain the impact of a declining market, chasing the market, etc. etc. etc.
I have recently been taking a hard stance with my clients at getting it right the first time out (with great success, I might add) but with my listing inventory low now, I am considering... Mind if I steal some of your stuff? :)
Jun 23, 2009 06:03 AM
Seasons Realty Group of Atlanta Communities - Atlanta, GA
Realtor -Homes For Sale, Atlanta, GA
Great info. thanks. I was taught to ALWAYS TAKE THE LISTING...because the seller will get realistic on the price or you will pull in other clients through the process. However, I agree with you that you have to lay the ground work first. Many don't realize how much effort goes into marketing a property. Love your ideas.
Thanks.
Jul 02, 2009 03:28 AM
Keller Williams Realty - Charlotte, NC
I really appreciate all the comments regarding Dave's post. There are a slew of golden nuggets all through this chain! New agents (some of you posted comments) would be very wise to heed this advice eventhough it may seem scary to talk this way to "sellers." Remember... a "seller" is someone who actually "sells" their home... not just "lists" it! So, if they won't sign the agreement then maybe they are not really "sellers" at all! Don't be scared to be BOLD.
As many of you noted, we aren't the god's of pricing. An acceptable price could fit into a range. So, as long as the seller's are willing to sign the agreement and move to the range that you have defined if their price doesn't work then I believe we are doing our fiduciary responsibility. If they won't sign the agreement and we take the listing anyway then maybe we are not meeting our fiduciary responsibility. That's what I tell my sellers... and then I start packing up to leave. Believe it or not, sometimes they will ask you to stay and will sign the agreement. If they don't then you are better off being at home with family anyway!!!
Thanks to all... especially you Dave!
Mark
Nov 20, 2009 07:32 AM
Comments(96)