Top Four Reasons Agents take Severely overpriced listings

At the start of every year, we know there will be at least two to three instances where we will lose a listing because our opinion of value is substantially lower that of the agent who was given the listing.  A 10% spread between the highest and lowest broker opinions of value is not that unusual for true custom homes and we are usually right in there when sellers are interviewing other agents and us.  But when our opinion of value is 20% to 30% lower than where the home ends up being listed with another agent, we know something is wrong. 

Although we are always surprised when this happens, we are never offended.  We wish the seller the best of luck, and sincerely hope they get every penny they are asking for.  We trust our judgment on pricing our homes so we have no regrets.  We are on to the next deal, but we also keep an eye on those listings to see if we really misread the value of the home so badly.  And without fail, that property ends up selling right in the ballpark of our original estimate of value.  It just might take a year or so and several big price drops for the other agent to get it done.

When an agent walks into a home, has nothing but glowing positives to say about it, and then suggests a big listing price, the seller is going to like what they hear.  In their mind, this agent really believes in their home.  They can tell the agent is excited about the listing opportunity and might believe this person is their best shot of getting top, top dollar.  I'm talking an "off the chart" sale price.

We walk into the home the next day.   While pointing out the positive selling features of the home, we might also point out some of the challenges the other agent failed to bring up.  We know what buyers are looking for in every price point, so if we don't see them, we know those are going to be buyer objections.  We might give the seller a substantially lower suggested listing price, so right off the bat, the seller might think we are "beating them up" trying to sell the home quickly and at their expense.  You can see who the seller is going to warm up to.  All we can do is hope the sellers are astute enough to see the big picture.

It's easy enough to understand why a seller would want to list their home with the agent who gives them a phenomenal pricing suggestion on their home.  But that doesn't explain why any agent would ever want to take the listing on a home that is so severely overpriced, they know they can't sell it. 

There are still a lot of mysteries about real estate I haven't figured out, but this isn't one of them.  I've had 7 years to think about this one, so I'll share my thoughts here.

Reason Number One

The Agent Plans On Outlasting The Seller

The agent knows going in no buyer in their right mind is going to purchase the home at anywhere near the listed price.  Nor will the home appraise if the home even went under contract.  So why do it?  They are hoping they still have the home listed when the seller finally reaches their breaking point.  They know the seller will eventually become frustrated with the lack of activity and showings (not to mention offers).  The seller will eventually lower the price to the point where the agent can sell it.  That's when the agent says "Well, I guess I made an honest mistake and just overpriced your home.  But the market has definitely spoken and you need to lower the price"  But only one of those two statements would be true. 

We have never done this and never will!  We may not sell every home we list (no Realtor ever has), but we will stand behind the pricing of every one of our homes and be able to justify it to a buyer, their agent, or an appraiser.

Reason Number Two

The Agent Doesn't Have Much Invested In The Home and doesn't really care If It Sells or not?

An inexpensive real estate sign costs about $50 and can be used over and over again.  The agent can pull one out of the pile.  Inexpensive flyers might cost $40 over the entire life of the listing.  The agent is probably already a member of the MLS and Realtor.com so there is no additional cost there.  You can see how it isn't going to hurt the listing agent if the home doesn't sell, so why not take it anyway knowing it won't sell.  They get 6 months of really, really inexpensive advertising at the seller's expense.

In comparison, we are hurt if a home doesn't sell; and I'm not just talking about the $500 we spend on every listing we take.  It isn't just the money we have lost.  We have lost the 20 to 30 hours of time we invested in that home to get it ready for the market.  We will never get that time back.  And more than that, our name has been on the sign in front of a home we failed to sell.  We understand that is a reflection on us, whether deserved or not.    We have way too much invested in our listings to be so cavalier as to take a severely overpriced home. 

Reason Number Three

The Agent Is Taking The Listing For Defensive Purposes

The rationale here is "If I take the listing and cannot sell it, no big deal.  I won't have much invested in it, so why not?  And that's still better than my competition listing it allowing them to further strengthen their market presence". 

We can afford to be selective about the properties we list.  We don't need to take listings we cannot sell.

Reason Number Four

The Agent Doesn't want the home to sell

Although this seems to make absolutely no sense on the surface, you have to look a little deeper.  Remember, as long as that home is sitting there with the agent's real estate sign on it, and as long as it is listed on the MLS and Realtor.com, there is a chance the home might attract a buyer the agent would never know about otherwise. 

Think of a builder's model home.  We all know model homes are always the last to sell in the subdivision because the builder needs them to attract buyers.  Once that model home sells, the builder has nothing else to show the buyers.  Same thing with agents.  If they don't have an effective marketing plan that will attract buyers (and the great majority don't), they are totally reliant on having listings ... whether they can sell them or not.

Even though the listing agent knows they cannot sell a severely overpriced home, they are hoping it will bring them new business.  They can take the buyer who calls on the home to a more reasonably priced home which is priced right and make a sale.  And if you don't believe this happens, I will tell you a true story. 

I was once offered the listing opportunity on a home which just didn't meet our criteria.  I referred the seller to an agent/friend who was less "emotionally attached" to the listings he took on.  After the listing period was over, I called him and kind of ribbed him about not being able to sell the home.  I said I was sorry he had wasted his time on the home.  He replied very empathically "Are you kidding me?  I made three sales off that home.  I wish I still had it!"

If the seller doesn't mind their severely overpriced home being used as "bait" by the listing agent to capture buyers for other homes, there is no harm done.  But I'll bet dollars to donuts the listing agent won't ever tell the seller about the deals he made by taking those buyer prospects to more reasonably priced homes.  Although it is perfectly legal and above board to do so, I don't think many sellers would take kindly to hearing about it.

We carry hundreds of thousands of dollars of inventory depending on the time of year.  We don't have to take overpriced listings we know we can't sell for the sole purpose of fishing for buyers!  Our website averages around 500 hits per week.  The buyers will find us.  We want homes we know we can sell and sellers who are ready to sell!