- A small percent of the sellers I work with have realistic ideas about the value of their home.
- The longer the home is on the market, the less likely sellers are to get fair market value.
- Pricing is a huge opportunity to raise the bar for the real estate industry.
A person doesn’t have to search the Internet long before finding articles about bad real estate agents. The idea that real estate agents routinely underprice real estate for a quick sale is a popular one. And this bad pricing — it’s further proof that real estate agents are dishonest and that the bar needs to be raised.
I understand why it’s a popular idea, but those who don’t work with homesellers on daily basis might not. A small percentage of the homesellers I work with have realistic ideas about the resale value of their home. Most of them rarely undervalue the home and almost always want to overprice it.
Handling sellers’ expectations
After I sent one local homeowner some facts and figures and a list of comparable properties with actual sale prices, the email I got back said: “My husband and I would like to list our home for more than the amount that comparable homes in the neighborhood have sold for.”
I don’t have a problem with that as long as they will agree to a price reduction after the home has been on the market for a while so that I can make my quick sale.
It’s possible that I will end up passing on the listing and that some other agent will agree to list it for some ridiculous amount and get a price reduction after a few months.
Or maybe the sellers will just cancel the listing after it has been on the market for six months with no offers, just like they did the last two times they overpriced it on the market.
There are people who want to sell their home quickly, and they want top dollar. There are others who are willing to keep their home on the market until they get their price.
Unfortunately, the longer the home is on the market, the less likely they are to get their price or even the fair market value. When I talk to some of these homeowners, they talk as though the house owes them something, and they want to make it pay.
Am I only interested in underpricing real estate for quick sales, or do I have some experience and some data to back up my price opinion?
Underpricing in a seller’s market
I would love to see some data on which is more common, homeowners who overprice their homes or real estate agents who underprice them.
Determining the value of a home isn’t an easy thing to do, and in the end, it’s the buyer who will decide how much the home is worth.
When I represent homebuyers, I always do my best to make sure that they pay as little as possible when they buy a home. I just hate making offers that are at the asking price, especially when the buyers have a baby or one on the way.
Right now in the metro area where I work, we are in a strong seller’s market, and there is a shortage of homes for sale. If a home is priced correctly, it can sell in a day and receive multiple offers.
When homes sell fast, the homeowners wonder if they should have asked for more or if I did everything I could to get them the best offer. If it goes too smoothly, they seem to feel that my commission was too much.
It’s possible to get multiple offers on a home and have each offer be for an amount that is below the asking price. Seriously, this has happened, and when it does, the sellers still wonder if they could have gotten more for their property.
I have read advice written for homeowners who want to sell without using the services of a real estate agent. Typically, the advice is that they should ask a few agents for a price opinion, so that when they do sell their own home, it will be priced correctly.
There is also advice for homeowners that suggests real estate agents cannot be trusted when it comes to pricing a home correctly and that homeowners should do their own research and never trust real estate agents because we want to price it low for a quick sale.
There are real estate agents who will agree with the homeowner and overprice the home. Some will even “buy listings” by suggesting a price that is higher than the market value. There are homeowners who will list their home with the agent who will price it the highest.
Homeowners can now look up their home on Zillow and see the Zestimate. For some reason, they don’t take the Zestimate seriously, probably because the values are not high enough. Buyers take Zestimates a lot more seriously than homeowners do.
It is common for sellers to want to overprice their homes. It’s also common for real estate agents to come up with a price that is less than the homeowner had in mind.
It could be that we just want to make a quick sale, or it could be that a good real estate agent knows how to price a home correctly and that homeowners tend to overreach.
The whole pricing thing creates more opportunities for the bar to be raised. Let’s work together and stop those unethical agents from underpricing real estate.
I can’t think of any better way to speak to homeowner’s worst fears about real estate agents than to suggest that we like to underprice their most expensive and valuable asset.
In fact, just thinking about it makes me angry because I am a homeowner, too, and I know my old place is worth a small fortune.
I see a huge opportunity for the legions of real estate industry good guys, consultants and industry experts to roll up their sleeves and stop bad agents from taking advantage of homeowners by underpricing their real estate. Pricing is indeed an opportunity to raise the bar.