Why You Shouldn't OverPrice to Sell

By
Real Estate Agent with Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com 0480809
Many sellers like to test the market. When doing this, they overprice their properties in the hopes that an unsuspecting buyer won't look at the neighborhood history and just offer the full asking price. Here is an example:

There is a property in Rowlett, TX. I interviewed for the listing back in March 2006. At the appointment, we discussed many updates to the house that would need to be done in order to warrant top dollar. I told them that if they updated the kitchen, removed the wall paper, a few other things, along with allowing me to stage the property, a reasonable asking price would be $140k. I told them that if they did not do these updates and just listed the house in its present condition, it would sell for $125k tops, and that might be pushing it.

I followed up many times over the next several weeks to see how progress was coming along. Each time I spoke with them, they were very excited about the updates and couldn't wait to get it on the market. In July 2006, I got the call to come list it as they were ready... I walked in the door:
Me: I can't wait to see the kitchen!
Mrs. Seller: Oh, we didn't change the appliances.
Me: Ok, but at least it'll have a cleaner look with the wallpaper gone.
Mrs. Seller: No, we didn't take down the wall paper.
Me: Ohhh... What about the bathroms?
Mrs. Seller: No, we didn't change the flooring or anything there either.
Me: Ok, how about you tell me what you did do before I run through my list that we discussed.
Mr. Seller: (very proudly says) We recaulked the bathtubs!
Me: And?
Mrs Seller: That's it. We figured we could just sell it like this and the new buyer could do what they wanted...
Me: Well, you know that's going to effect the price we ask and how fast it's going to sell, remember?
Mrs. Seller: That's ok. We were thinking about $140-145k.
Me: We discussed $140k if you did the upgrades. We can't list it at $140k in this condition.
Mrs. Seller: But it was a former model home!
Me: But it's not a model home anymore. It has the original everything from early 1980!! $140k is not realistic.

I could go on... what happened here, is that I did finally agree to $140k with a $1500 allowance for the buyer, so that was basicaly $138,500. They also agreed to discuss a price adjustment after a couple of weeks depending on activity.


The sellers declined showings right and left, and refused to lower their price. I did finally get them to list at $137k but with the $1500 allowance removed, so they basically came down to $137k.

Where is that listing now?? Well, a couple of months after I listed it, my brokerage terminated the listing because they kept declining showings, and they also wouldn't allow me to stage it in order to show it to its best potentially, especially since it was overpriced, we needed to show the buyer why it was worth it.

It's now over a year later from my original listing, and it is STILL on the market!! It's with a different brokerage of course. Wanna know their initial starting price? $138k! Yes, they went UP from my last price adjustment. Wanna know what they're listed at now?? $133k with a $1500 allowance, which is basically $131,500.

At this point, even though it's only about $10k over priced, the listing is so stale, not many people are going to look at it. They ruined their chance of selling it because they sabataged their own efforts, and lack there of.

The lesson here, is do NOT overprice your listings just to test the market. Otherwise, you could be sitting there like these folks are, over a year later and no showing activity!!

Remember, I work all of North Dallas County and Collin County including Richardson, Plano, Allen, Frisco, Carrollton, Garland, Rowlett, McKinney, etc... my car will take us anywhere you need to go!!

ARE YOU PACKED YET?!
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Rainmaker
359,133
Mike Russell
Mike Russell & Associates - Overland Park, KS
Overland Park Kansas Real Estate
It is always hard to tow the line on pricing. I have yet to have a seller tell me that my house is not as nice as that one. I wouls suggest reading David Knox or Larry Kendall articles on pricing.
Jul 19, 2007 02:01 PM #12
Rainer
225,598
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC
Seems like I hear this story a lot.  Although, I have to say that our sellers in the Hilton Head and Bluffton, SC area are getting much more realistic with their pricing. 
Jul 19, 2007 03:05 PM #13
Rainmaker
655,782
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

It "used" to be a model home. But "used to" and "now" are 2 different things.

Jul 19, 2007 05:21 PM #14
Rainer
122,117
Christy Powers
Keller Williams Coastal Area Partners - Pooler, GA
Pooler, Savannah Real Estate Agent
I can't believe it took them that long to caulk the bathtubs....what in the world? Oh well, at least you don't have to worry about them anymore.
Jul 19, 2007 06:02 PM #15
Rainmaker
138,006
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Donna!

Another lesson that you didn't mention... SKIP OVER THESE CLIENTS!

Yes it is their fault for not listening to you, but your fault for not listening to yourself and wasting your time.

I give my agents a goal to fire (or not getting hired) a client every 3-6 months. Nothing feels better than telling a client NO to an overpriced listing and see that listing sit, sit, sit and sit with a few other agents.

Now, ideally we  would be able to explain the pitfalls, but if they won't listen, we must respect our own time and not waste it on these "just in case" the client comes to their senses and drops to a normal price. I just wrote an hour ago a blog where half of it could be replaced with "don't overprice": Reject THROW-UP listings. Do it "RIGHT," Not "RIGHT NOW!"

Jul 19, 2007 07:09 PM #16
Ambassador
919,603
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Donna, I have a listing here that is the SAME situation. Former model, lot of wallpaper. I asked them to remove it pre-list. They didn't want to. However, they did do all the other things I suggested.

Two months later, 20 showings and 98% of  the feedback is TOO much wallpaper. They still won't remove it.

I am considering letting it go. Stubborn, stubborn. Mr. seller is already in CA. She is here with his mom and baby. Have you ever ??????????

Jul 19, 2007 11:53 PM #17
Rainmaker
431,666
Anne Hensel
South Beaches Real Estate Professionals - Saint Petersburg, FL
Realtor - Broker - St. Pete Beach, Treasure Island

Some sellers still do not get the picture

I give my seller 3 different prices when I get the listing

one --- if you really ant to sell now

two --- if you are not sure and you have 6 to 12 month time

three --- if you do not want to sell at all

and i constantly update them about solds in the area and compare their price to it

 

Jul 20, 2007 12:16 AM #18
Rainmaker
92,660
Pamela STETSON
Berkshire Hathaway HomeServices Abbott Realtors - Mahwah, NJ
I would love to help you buy or sell your home!
Thanks Donna --- great post! I have had a similar experience except the home was drop dead gorgeous! Why is that similiar you might ask? Because the seller has a fixed price point in their minds and since they are merely testing the market...they are not motivated to sell. See my blog, Top Ten Ways Not to Sell Your home. ( I would provide a link here but...I don't know how! ). More lessons learned....thanks! And, good luck this season... Happy Selling. Pamela
Jul 20, 2007 12:54 AM #19
Rainmaker
1,458,186
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Jeff,  Thank you!

Becky, Yeah, I laughed quite a bit at that one because she mentioned it several times.  Even when I sent her the listing details with the description, she asked why I didn't mention it wasn't a formal model... I told her because it wasn't in model condition right now, and that we didn't want to disappoint buyers as soon as they walked in the door.

Michael, Thank you.

Diane, Yes, that's happening all over Dallas too, but most realize their mistake fairly quickly.

Bob & Carolin, I completely agree!

Christy, I don't "worry" about them,  but I check up on the listing for a good laugh every now and then and also report back to my friend that it still hasn't sold.  My friend whom she knew, listed her house, did everything I asked her to do, and it sold in 28 days!!  Boy did she ever glote to this other seller, and it still didn't light a fire under her!

Frank, But, I couldn't really say no since it was a friend of a friend.  I almost felt obligated as I didn't want to offend.  In the end, I see that I should have walked away.  It took me a little longer to fire her as I did when they kept declining showings.

Missy, I hate Wallpaper!! I had a listing a couple of years ago where I suggested removing the wallpaper. She was offended because she custom ordered that wallpaper and loved it.  She kept it up.  30 days later, with all the feedback we were getting about how there was too much work to remove wallpaper and repaint so much, she called and asked if she should remove the wallpaper.  I said, "You already know my answer."  The wallpaper was removed, fresh paint went up, and the house sold a week later!!

Anne, I don't give multiple prices like that, mainly because if they have 6-12 months, then they shouldn't be putting the house on the market right now, and when they're ready, we can list at the "sell right now" price.  Why would they want strangers walking through their house for so long.  That would be annoying.

Jul 20, 2007 01:03 AM #20
Rainmaker
1,458,186
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator
Pamela, Thank you!  Fixed prices are not smart as it always sets you up for disappointment...
Jul 20, 2007 01:15 AM #21
Rainmaker
193,754
Mary Strang
Viroqua, WI

Yes this is the reality of over pricing, good post. We have all have had these types of Sellers who think a buyer would be willing to do the maintenance and updating work for a too high price and for too little of an allowance. Fiction is really stranger than the truth... On a listing I took 2 years ago, they wanted $279000 I told them they would not see $200,000. Surprise, that really made them mad at me, I cancelled the listing because they were not ready to hear the truth.  I did not want to own the problem. It was then listed with another for $239000 for one year, no sale. It is now listed with a 3rd agent for $184,900 and still not sold going into the 3rd year. Now the market is down here, so their final selling price won't be pretty. Plus, they have built a new home and moved. The old home is empty and it has an immediately available rider on the sign. It is listed with an out of the area broker who is not close enough to properly service it, those sellers are my new neighbors and I avoid talking with them about their listing...LOL... but my evil side is vindicated.

Jul 20, 2007 02:01 AM #22
Rainmaker
1,073,833
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Nice post Donna, over pricing is a deal killer and when the property is in poor condition too that is a death sentence.  Lucky you bailed early....the advertising and maintenance just wastes time with unrealistic clients.
Jul 20, 2007 02:16 AM #23
Rainmaker
1,458,186
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Mary, I had a property like that 2 years ago!!  I was the third agent and they had already tried selling for over a year already.  They originally wanted $439k!!  I told them it was worth about $315-320k.  Since I already sold them a new house and had that money in my pocket, and again, they PROMISED they would reduce their price after 30 days, I listed it high for them at $389k.  I did get them to lower it after 30 days, but not like they promised.  They went only to $385k.  I said good bye and good luck.  Agent #4 comes in and lists at $366k... then $350k... after 14 more months on the market, it sold at $309k!!!  It would have easily sold for $315-320k if they didn't have it on the market for almost 3 years and showing buyers they would be desperate for an offer.  So frustrating...

Gary, I completely agree, thank you.  Plus, houses sell themselves, we're just there to help instigate the situation and bring buyers and sellers together. If the house isn't going to sell itself, I can't force someone to buy it.

Jul 20, 2007 02:58 AM #24
Rainer
44,523
Sondra Sheckler Realtor,ABR,SRES,Historic Home Specialst
Coldwell Banker, Award Of Excellence & Million $$ Producer - Knoxville, TN
I currently have a seller that listed their home for $159900, I knew this was overpriced and they agreed that if we didn't have at least one offer after 30 days and 2 showings per week that they would lower it to 154,900 so those 30 days passed with NO showing, which naturally led to ZERO offers.  So, we lowered it and again the previous agreement 30 days, then down to $149900, a few showings, 1 offer that would have netted her 139k, she walked away from it.  SO, 30 days later ANOTHER offer and this one we tried to work with and came to an agreed price of 148k (with around 3k for updating), she would net around $138 after all was said and done.  Well, the appraisal came back at 140k and NOW she is netting $133k after all is said and done giving nothing for any repair allowances (the buyer is taking it "as is").  SO, moral of the story, overpricing doesn't work, buyers will make offers based on the market -- a house is worth what a buyer will pay for it.
Jul 20, 2007 03:53 AM #25
Rainer
13,814
Cristy Smith
mmm - Austin, TX
I know what you mean and I agree. It really wastes everyone's time.
Jul 20, 2007 03:58 AM #26
Rainer
188,704
Laurie Manny
Long Beach CA Real Estate - Long Beach, CA
Overpricing here is the kiss of death right out of the gate!
Jul 20, 2007 06:56 AM #27
Rainmaker
1,458,186
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Sondra, I blogged about a situation like that a couple of weeks ago... asking $249k, under contract for $243k, appraised for $232k...  Seller thought he lost a lot, but there was never enough value there to be his to lose.

Cristy, Thanks!

Laurie, Yes, I agree.

Jul 20, 2007 07:46 AM #28
Rainer
5,071
St S
Mou - Pleasant Grove, UT
I think that a valuable lesson is learned here, never list an over priced turkey!  You don't need to waste your time with unreasonable sellers.
Jul 25, 2007 04:30 PM #29
Rainmaker
305,500
Karen Otto
Home Star Staging - Plano, TX
Plano Home Staging, Dallas Home Staging, www.homes

Great post Donna. 

I can just see you having this conversation with the sellers and how frustrated you must have been.  But obviously you were right and now a year later the house still sits.  Sellers have to take control and be pro active if they are serious about selling.  Maybe they could afford to sit? 

In Miami where I lived, there was a house on the end of my block that had a for sale sign on it when we moved in.  I remained there for almost 3 years!  Why? The owner waaayyyy overpriced it "just to see what I could get" and wasn't really serious about selling.  It was crazy! But, he wasn't a serious seller.

Jul 27, 2007 02:03 AM #30
Rainmaker
1,458,186
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

I wanted to post an update to this so I blogged about it here.  It's two years later, and the house is STILL on the market!

May 29, 2008 05:19 AM #31
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Rainmaker
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Donna Harris

Realtor,Mediator,Ombudsman,Property Tax Arbitrator
Are you Packed for Austin? I can help!!
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