By Sara Huebener
At first glance, the title of this article initially appears to ask whom will purchase your home once it hits the market. And to a seller, that is the most important component - getting a home sold for the highest price possible, especially in this market, where we have seen declines in property values.
The title of this article is actually referring to a common and unethical sales tactic among some agents in the industry. The tactic is called "buying the listing" and refers to the situation when an agent intentionally overprices a home in an effort to secure the listing contract with the seller. In such cases, the agent most likely knows the property will not sell for list price, and plans to rely on market time and price reductions from the seller to eventually get the home sold. In a market where property values are down and fewer sellers are in a positive equity position, this practice is becoming more commonplace as agents compete for listings.
Here is a common scenario that plays out: Mr. and Mrs. Seller are aware that the housing market has cooled. Regardless, they must get their home sold, and they need to take a certain amount of money from the sale. Mr. and Mrs. Seller interview agents A, B and C. Agents A and B come in with comparable market analyses that provide sales data on comparable properties in the area. Unfortunately, the market price provided by Agents A and B is not the price Mr. and Mrs. Seller were hoping to sell their home for. They are disappointed. It will not provide them with the balance they need to clear from the sale. Agent C comes in with a price more in line with what Mr. and Mrs. Seller were hoping. They are excited that an agent says he will list their home for a price they are glad to hear about. They sign the listing contract with Agent C. Agent C has just "bought the listing".
The first two weeks of market time should be busy with showings - if the home is appropriately priced. Many agents who know the market and have active buyers will preview new listings to stay abreast of inventories and preview for buyers. If an agent knows a property is overpriced, she will often forego the preview - the home is priced far out of line for the market and a buyer will not be willing to pay asking price.
After the first few weeks, the lack of activity from overpricing will be the perfect tool for Agent C to utilize when asking Mr. and Mrs. Seller to reduce the price. By the time Mr. and Mrs. Seller have reduced the price low enough to where the property should have been originally listed, the property will have accummulated market time that is harmful to their negotiating situation. Rarely does a home with high market time ever receive a full-price offer. Now, Mr. and Mrs. Seller are in an even more difficult position.
Sellers who live in neighborhoods with a limited number of floor plans are among the most likely to fall into this scenario. Suppose Mr. and Mrs. Seller reside in a development has 6 floor plans. These homes prove to be excellent comps, yet Mr. and Mrs. Seller feel their home is worth much more than the home down the street, even though the house is in the same neighborhood, with the same (or similar) floor plan, and built by the same builder. Of course, upgrades such as a basement, deck, or granite countertops have an effect on price, and in scenarios where such upgrades exist, sellers may price accordingly, and must still be realistic.
Any agent can list any home for any price. (If I wanted to list my home with an agent tomorrow for $800,000, I could. But it would not sell!) If Agent C suggests a list price that cannot be supported with current and local sales data from comparable properties when such data is otherwise available, and instead ignores the comps or offers "promises" based on data not current or comparable, then Agent C is attempting to buy the listing. And for that, sellers must be wary.