It’s hard for a good agent to win (a listing) when they are crowded by a thousand competitors whose only means of winning business is to tell the client exactly what they want to hear, truth be damned.
- Brian Boero, 1000 Watt Consulting
Before deciding to list a home, potential sellers often interview a few Realtors to check their recommended listing prices. Many homeowners remember what the neighbor’s home sold for a while back, and some have looked at Trulia, Zillow or Realtor.com. While most people think have a good idea what their home is worth, they want to hear what the “experts” say.
The scenario often plays out like this: a couple of agents suggest lower prices than expected and they ask the seller to do some work before placing the home on the market. Another agent, however, says the home is worth much more and declares nothing needs to be done before entering the market. All three may bring a Comparable Market Analysis (CMA), but the data is not easy to interpret. Some prices are extremely low. The sales data may include bank owned foreclosures, short sales and traditional sales. Some homes may not have had your upgrades or may not have been in great condition. Is your home worth more than these agents realize? Which agent would you pick?
Highest Price Often Wins
If you are like many sellers, you select the Realtor who recommends the highest price. All the agents are pretty much alike, right? The one with the higher price seems to be “on your side” and claims to be able to sell for the price you need, the price you deserve. She listens, she seems excited about your home and she connects with you on the value of your home. She may say things such as: “I believe in your house”, “your home is special” or “it only takes one buyer”. If the price is too high, you can always reduce it later. You are not in a hurry, you are not desperate, what do you have to lose?
Buying a Listing
Chances are, the agent is engaging in an unethical sales tactic called “Buying a Listing”. Many Tampa Bay Realtors have a “get the listing at any price” mentality. Having learned the hard way, many agents understand that the magnitude of the decline in home values is too much for homeowners to accept all at once. Agents are aware of the “10% Rule”; homeowners routinely think their home is worth at least 10% above the actual market value. Realizing this, agents take the path of least resistance on pricing in order to build rapport and obtain the listing. They intentionally over-price the home and wait a few months before pointing to the lack of showings and blaming the market. Padding the listing price by 5%-10% may be designed to make a seller feel good or provide a negotiating allowance, but it is ultimately counterproductive to your bottom line.
Realtor Motivation
Why would a Realtor take an over-priced listing? They wager the seller will eventually realize the price is unrealistic and will reduce the price later. Realtors also need yard signs in the ground to make the phone ring. If they receive a buyer call on your home, they can sell that buyer another home that is more reasonably priced.
Personal Fudge Factor
Do Realtors intentionally set out to lie? It is more likely that agents do a quick cost-vs-benefit analysis and are able to mentally justify fudging the numbers by a small margin. Here is an interesting video clip from Dan Ariely on “Our Buggy Moral Code” at a TED Conference. Ariely makes a case that cheating “by just a little” is endemic, is more prevalent if your peer group does it, and is easier if it is one step removed from immediate money. By telling a seller a home is worth a higher price than reality suggests, Realtors have the potential to eventually earn a decent paycheck if they can present things in a slightly distorted way…consciously or subconsciously.
Reputations Matter
Realtors are a competitive by nature. Honest agents who lose listings (to other agents) because of pricing have long memories. Certain agents develop reputations for over-pricing. As a result, some Realtors may avoid showing listings marketed by listing agents who are known to take over-priced listings.
Trust Factor
If an agent is so quick to suggest a high price without even attempting to truthfully communicate current market conditions, then how can you rely on that agent when it comes time to evaluate showing feedback, plot strategy and eventually review offers? If the agent is unable to negotiate a realistic listing price with you, how can you trust her or him to effectively negotiate a contract on your behalf?
Honesty Matters
What should you do? If you are going to work together successfully with your agent, then you need someone who will be honest and up front with you. You may not like what you hear at times, but you will always know the truth.
Realtors Do Not Set Prices
Choosing an agent based upon a listing price is a bad strategy. Realtors do not determine market values, buyers do. Realtors are not that powerful nor that good. If Realtors could accurately predict how some unknown buyer would value your home at some point in the future compared to the competition, then they would all be investors and not Realtors. The “C” in CMA does not stand for clairvoyant.
Has any other agent ever told you these things? Tampa Bay homeowners deserve to know the truth. You should have all the facts before making a decision. The information may not be what you want to hear, but it may be what you need to hear in order to make an informed decision.
We recommended selecting an honest Realtor who: understands your goals, provides targeted market data, has a track record of success in your market, and who presents a systematic approach to help you realize maximum value in the current market conditions. Contact Annette, Doug or Dale Bohannon at Coldwell Banker Residential Real Estate in Tampa, Florida today for a frank discussion on pricing and sales results.
