Why Overprice Property Just a Little? Go for it!

By
Education & Training with -- www.matthewferrara.com

Saying a home is just a "little" overpriced is like saying you're just a "little" pregnant. Sellers who do it should insist on the full benefit of overpricing. And it's in their agent's best interest to help.

Every day, homeowners decide to list their homes at prices the market supposedly considers "over priced." Even with the benefit of the internet, showing what other homes nearby recently sold for, they do it anyway. Despite years of industry and media attention, overpricing remains the norm, in every market, every price range. Truth be told, nobody really tries to stop them from doing it either. Few and far between are the agents who refuse to list overpriced properties, or managers who reject the responsibility and cost of advertising them.

 

What I've never really understood, however, is why both owners and agents do overpricing so badly. Once you make the decision not to put the home on the market - which is what overpricing effectively does - and just list it for the benefit of wasting time, money and further messing up the MLS data - adding "just a little" extra onto the market-indicated price seems counterintuitive.

By overpricing their homes, owners are indicating they believe there's someone "dumb enough" to pay more for their home than others in the market. Why look for the "marginally dumb" consumer by tacking on a mere $20,000, when you can look for the "truly idiotic" buyer who will throw an extra $100,000 on the table? Isn't there a "certifiably insane" consumer out there just waiting to pay an extra million for your home?

As for the real estate industry, once a seller expresses an interest in overpricing their home, their agent should insist on gross overpricing. It's the only logical way to compensate for the amount of lost time, advertising money and negative public perception they will incur for listing an unsellable commodity. Since they get paid by commission, agents and brokers will need that extra money - should the truly idiotic or certifiably insane buyer come along - to cover their damages, er, expenses in listing a home not for sale for months.

There are other logical conclusions in defense of gross rather than marginal overpricing. Imagine all the time the real estate industry will save not having to sit through training classes on how to properly price commodities in a marketplace. Consider the millions of dollars saved in newsletters, training tools and marketing materials trying to educate the consumer against something they clearly have little or no interest in doing. Most of all, think about all of the money saved in stress-relief medication once we stop asking agents to argue with sellers about the negative effects of overpricing.

It will be joy, joy, joy for everyone once we all agree to overprice homes with gusto!

In fact, I think there is an opportunity here for a company to secure a new niche segment of the market. Since nobody has taken the opportunity in the last two decades to secure the "we only take good business" niche, we can only assume it's because market research shows the sellers have no interest whatsoever in proper pricing. In fact, every shred of evidence shows they expect overpricing: Why else would they insist on getting overprice for their own home, then underprice their own offer to buy their next home?

This means there's a niche opportunity to position a company squarely within customer expectations. Imagine the marketing possibilities. An infinite number of tag lines are possible:

"Supply and demand be damned!"

"Pick your price! We'll find you an idiot!"

"You're gonna do it anyway - so let's go for it!"

"Why sell it, when listing it is so much more fun?"

Maybe the real estate industry has been going about this whole pricing thing the wrong way for years. How much more fun will it be to list homes without the fear of the pricing discussion during the listing presentation? How much happier will sellers be when they find an agent who encourages them to get $100,000 or $200,000 more than their neighbor did? How much less stress will managers have, once they give up entirely on bringing homes to market, when they can go around town bragging about having the most listings worth the most in the MLS!

I think every agent should call their clients right away, and have the converstion everyone's been waiting for: "Good morning, Mr Owner! I've been thinking... I know we overpriced your home when we listed it, but heck, I don't think it's overpriced enough. What do you think if we bump it up to just under a million?"

It's not like anybody - especially buyers - is even going to notice.

 

Comments (29)

Elizabeth Cooper-Golden
Huntsville Alabama Real Estate, (@ Homes Realty Group) - Huntsville, AL
Huntsville AL MLS

Matthew, This is one of the best articles I've read about over-pricing.  LOVE it!  I do walk from listings if they aren't reasonable.  My time is worth more than the headaches that come with over-pricing.  

I continually hear the same stories from agents. "Why not list it, maybe they'll become realistic in the future".  Yeah, with the NEXT agent!  I can't wait to read the comments that are heading your way...this should be great!

Sep 16, 2010 10:23 AM
Bruce Swedal
Denver, CO
Denver Real Estate

Hahaha Mathew that was funny. I am going to memorize it as a script for pricing objections.....  ;)

Sep 16, 2010 10:29 AM
Matthew Ferrara
-- www.matthewferrara.com - Boston, MA
Matthew Ferrara & Company

Thanks to everyone for their comments. If you are a MFLN subscriber, you can also get the video clip of me doing this blog - might be a fun thing to play for some clients! :> 

Sep 16, 2010 10:48 AM
Virginia OnullConnor
Realtor®, Photographer, Artist - Temecula, CA
Realtor - Temecula, Anza, SoCal

Now this time I'm with you all the way! I laughed so hard!I just posted about this same thing this morning! But your post was ever so much funnier than mine! Guess that's why you get the big bucks! Keep up the good work.

Sep 16, 2010 10:55 AM
Kathy Kenney
Keller Williams, Princeton, NJ - Robbinsville, NJ
Realtor - Princeton & Central NJ Homes for Sale

Right on!  I also have to second Rob (#8).  I get asked all the time to advertise in the New York Times, because people up there will think that the house in Central NJ is a real deal.  Sure, they might, but that doesn't mean they want to live there!  I can think of lots of places that are less expensive to live than Central NJ, but I'm not moving there!  It is what it is, people!

Great post!

Sep 16, 2010 11:21 AM
John Zappia
Maine Custom Realty - Portland, ME
Maine Custom Realty

Hey Matt...I might just hand this out as a flyer to my potential selling clients...I PDF'd it in case I have to...great spoof on "seller's equity"...and they always do low-ball when they buy...from some reason, nobody has a house worth as much as theirs.

Sep 16, 2010 11:46 AM
Brian Morgenweck
Power Realty Group, LLC Bergen County, NJ - Hackensack, NJ
Broker/Owner, GRI, CRS, ABR, SRS

That is HYSTERICAL & dead on!

...Then, we just make sure the appraiser from Dumb-Dumb-Ville shows up & appraises way too high & we're home free!

Where's that subscribe button?!

Sep 16, 2010 12:00 PM
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Matthew -- Genius!  I'm calling all my sellers and recommending a 100% increase in asking price so in case the market keeps trending downwards, they won't have to worry about under-pricing their homes!

That old saying: Don't do anything half-baked -- definitely applies here. Perhaps a new "reverse auction" website could even be developed with listing brokers bidding on setting the asking price with the highest bidder wins.

Sep 16, 2010 12:32 PM
Anonymous
Consumer

Why are you assuming it's always the seller who insists on overpricing? Having been through this, I can assure you, not all agents know how to pull the right comps for a CMA and recommend the right price. One potential listing agent pulled all his comps from outside my neighborhood and came up with a price 10% higher than the other agents. I laughed at him but also felt like a fool for wasting my time interviewing an incompetent.

Sep 16, 2010 12:53 PM
#18
Keith Bochner
Coldwell Banker Residential Brokerage - Parsippany-Troy Hills, NJ
MorrisCountyRE.com

I've got one now, I might just have to 'go for it' with them ... we are about 25% overpriced (and this is after getting them to drop the initial asking price by $25,000 off of what they wanted to list at).  If it wasn't a friend I wouldn't have taken the listing .. he promised me however that he will drop after we 'give it a shot'.  So far, 2 weeks and not one 'idiot' has appeared to take a look.  Go figure! 

Sep 16, 2010 01:36 PM
Cheryl Ritchie
RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD
Southern Maryland 301-980-7566

This point of view can help make the point about overpricing make sense to Sellers who cannot get it. I like the little bit pregnant concept.

Sep 16, 2010 02:26 PM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

This is just too darned funny.  It's the existing logic anyway (only you put it in print).

Sep 16, 2010 02:56 PM
Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island

I try to refrain from being sarcastic with a client, but there are times when it's tempting..

Sep 16, 2010 03:13 PM
Pat Laracy Baker
Realty Executives Boston West - Holliston, MA
Pat Baker Dream Home Maker

Yes, Matt the reason a house doesn't sell is the price.  You are a master at what you do.  Thank you for humor and wisdom

Sep 16, 2010 04:08 PM
Anonymous
Karen Steed

You have made me feel so much better about the overpricing discussion I am having tomorrow..."Mr. Seller, land is worth so much more when there is no survey!  Since you have no access road, we should really raise the price! Ha, Ha, Ha,...I'm laughing all the way to the bank...

 

Sep 16, 2010 05:50 PM
#24
Irene Kennedy Realtor® in Northwestern NJ
Weichert - Lopatcong, NJ

Matt,

Zillow's Make me Move offerings are made for this scenario.

Sep 17, 2010 12:46 AM
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Thanks for the humerous read today. I enjoyed it.

Patricia

Sep 17, 2010 03:27 AM
Susan Laxson CRS
Palm Properties - La Quinta, CA
Realtor in San Diego, CA & Naples, FL

I too laughed through this post - your sense of humor is wonderful!  Thanks!

Sep 17, 2010 04:23 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

My client has a piece of acreage  that is priced at least $30K over market.  Thanks to your inspiring blog, I'm gonna call him and suggest we crank the price up another $30K.  Maybe he will get the point!

Sep 17, 2010 04:33 AM
Bryan Robertson
Los Altos, CA

Great post!  I'll never understand why otherwise intelligent sellers feel a need to complicate the process of selling their home by overpricing.

Sep 17, 2010 08:29 AM