Underpricing Your House Can Trigger A Bidding War | Rob Giuffria, GMS |Farmington | Prudential Premier Homes

Managing Real Estate Broker with Tea Leaf Realty

by Rob Giuffria, GMS

By SUSAN SCHOENBERGER Special to The Courant

December 13, 2009

When David Chzaszcz put his family's four-bedroom Tolland house up for sale in September, he took his real estate agent's advice and listed it at $449,000, even though he was hoping it would sell for a higher price.

"Our house was listed for, technically, less than a week and a half," Chzaszcz says. "We had eight or nine people come through. ... Four made offers."

After a bidding war that drove the price ever higher, the Chzaszczs closed on their house in November for a final sale price of $470,000.

If it seems like a risky strategy, it's not, according to several real estate agents who have used it recently. What people forget, agents say, is that a seller isn't required to accept an offer, even if it's for the full asking price.

Chzaszcz's agent, Rob Giuffria of Prudential Premier Homes in Farmington, tells clients that pricing slightly below market value will generate the kind of traffic that creates a flurry of interest among buyers in the crucial early days that the house is on the market.

"You have the most amount of leverage as the seller in the first 15 days," he says. "When you have people looking at your house, they have to believe that if they don't buy the house, someone else will."

Too often, Giuffria says, a house is listed at the price the homeowner wants to get, which is usually on the hopeful side. Sometimes, that's the result of real estate agents' telling a homeowner what they want to hear to get the listing.

"If I came in and said your home is worth $500,000, you're going to be pretty receptive," he says. "There's an inherent bias in agents' overpricing homes to get listings."

But an overly optimistic listing price may leave a house languishing on the market, which often results in a drop in price, Giuffria says. That puts the advantage with the buyer and may result in a final sale significantly below the lowered list price.

Reluctant Homeowners

Raymond Romero, who is based in West Hartford and works for William Raveis Real Estate, says that agents have to know the market and how many buyers might be interested in a particular property before they recommend a particular listing price.

"Most people want to know: How long is it going to take to sell?" Romero says. "I tell them, 'I have a price where I can sell it in one hour, one day, one week, one month, one year.' ... You try to find out from an owner's perspective their time frame."

Romero agrees with Giuffria that agents often compete for listings by telling homeowners that their homes can sell for a price that may reflect wishful thinking more than the actual market.

"As an agent, I have to be prepared to walk away from a listing price that I don't believe will sell the property," Romero says.

He also agrees that listing a house below market value can be a great strategy, but one that can be a tough sell to clients, even when it may be in their best interest.

"Once you get people interested in the property, it becomes a pride issue. ... I've noticed that it really does work," Romero says. "But on the listing side, it's a much harder discussion to have: 'How am I going to put it below to get a higher price?'"

Romero says he tells his clients that the lower price will generate more interest in the property and trigger competition among buyers.

"You have to use psychology in this business," he says.

Take It Or Leave It

While Giuffria is sold on the general principle of listing a house at about 98 percent of market value, he says only about 20 percent of his clients will try the strategy.

"Most sellers view agents as just wanting to sell a house at any price," he says. "So you have to have a high degree of trust with the seller and the listing broker."

In the case of a buyer offering full price with no other offers, the seller can choose to take the offer or not.

"Most sellers are under the mistaken belief that if someone offers them list price, they have to sell their home," Giuffria says. "You can just say, 'I don't accept your offer.'"

Romero agrees.

"No one can force you to accept it," he says.

A Long-Term View

Joseph Stafford of Joseph Stafford Associates in West Hartford has been in the real estate business for 42 years.

"I've been up and down this roller coaster a few times," he says.

In this market, Stafford says, it's more important than ever to price competitively. Sellers have a short window to generate interest among the small group of buyers waiting to see whatever comes on the market.

"Once something stays on the market for a couple of months," he says, "no one is going to pay the list price."

Stafford recently listed a house near West Hartford Center, for example, for $369,900 and quickly sold it for $385,000 after a bidding war. If the house had been overpriced, he says, the bidding war never would have happened.

"There's not a lot of competition for good listings," he says. "In the first five or six days, if you're going to have a bidding war, that's usually when it happens."

Stafford also recently listed a house in the Elmwood section of West Hartford for $199,900 and sold it for $204,900. If the sellers had listed it at the price they wanted, he says, the house may have sold for a lot less.

"There's an old saying," Stafford says: "The one that expects the most usually ends up with the least."

Copyright © 2009, The Hartford Courant

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