Good morning Paula,

You are absolutely operating with the right formula! I always tell my seller the first 2-3 weeks is the time you will get the most showings and get an offer IF you have the home in model perfect condition and priced at market value! 8 days ago I listed a great house staged perfectly and priced at market value. We had 12 showings in the first 3 days, 12 families at our open house last Sunday and an offer that we came to terms with yesterday..8 days and 98.85% of the asking price! Works every time. Great advice and post!!

 You are of course, correct...while managers are not baby sitters...you would think that there would be aheas up or a slap on the ____to agents who consistently overprice and buy listings...until we police our own industry, we must be responsible for a part of the problem.

Dorie: You did a service to the community by staying true to market conditions! I am on a major campaign now to make sure the word gets out---all those people who wanted to buy during the boom years are still here and waiting to step up to the plate...if we don't understand the opportunities that exist now we will miss the boat entirely and as a result we will keep this stagnant market for a very long time---great work on your part--let's go!!!

Sally and David: I have a sales manager who has kept after all of us to price properly---at first I thought "OK, but this homeowner WANTS such and such" I have learned just as everybody needs to learn: over-pricing does not work---especially now!!! Thanks for reading and commenting!

Real estate brokers often adopt the mind set of the seller when pricing a home rather than educating them on the range of inventory any buyer has in the market within 5 miles of their home. Education and information continues to be a key in what many forgot a buyer's market actually means. Good post.

Emily: You got it! I really appreciate it when someone else can see it all so clearly--and you made an EXCELLENT point "Education and information continues to be a key in what many forgot a buyer's market actually means" !!! That says it all doesn't it???

Thank you for your valuable input and maybe you should do a post on buyer's market so we saturate the entire country with this proper pricing thing? Good stuff!

Paula,

I love reading your wonderful posts!

 

My mantra is "price it right and present it well'. Buyers want a house that is priced right that they don't have to put alot of work into. Sellers should make sure that thier homes are decluttered, clean and smell good!!!! The furniture should be placed in a way that enhances the vignette that the Buyer sees as he/she enters a room. Dated wallpaper should be stripped and the rooms painted a warm,neutral color. As much as Sellers may want to resist this, I always explain to them that the Buyer will have the same reaction at the thought of doing this and start talking themselves out if this house. It is a Buyer's market and the Seller really has to make the effort to "price it right and present it well". And it is our job as professionals to advise our Sellers about the reality of the market.

Marianne

I will be sending this blog to a client that I have...it seems in any market cycle sellers just don't get it. Somehow they think that the market doesn't apply to them, and that somehow it is the agents fault when their home doesn't sell. Well I guess it is the agents fault if it is overpriced. I really go into great detail when helping to decide a price range and marketing plan.  It is shocking when a potential client says..thanks but we want to price is high because the offers will come in low.

Marrianne: Thanks for stopping by and commenting; you have the right idea too about the property staging. How many times have we seen a messy house sit on the market??? Too many to mention. Next to proper pricing, staging is the key to moving a property faster!! Thanks again.

Angelica: Thanks for sharing this post with your client---get the word out! That's my goal--no one should have a problem with pricing properly if they are informed, right? We all need to make it priority #1 to anaylze the property, inform the owner and price it properly. Other wise we are not doing our job! Thank you for your comment.

This is so true- I think the good agents understand this, but it never ceases to amaze me when homes go on the market way over priced.  I think this is a big dilemna also with for sale by owners who list their properties themselves at way too high of a price without consulting a professional (or after when they don't like what the agent has to say), and they end up messing things up for themselves before their home even has a chance to get professional exposure. 

Reflecting the market is far easier than chasing it. One of the bigger ironies I see is an overpriced listing with a marketing comment of "make us an offer."

This is so true. I have to confess, I have been guilty of doing this in the past. Would you recommend counseling sellers to wait until they can afford to price it at or below the market?

RJ: There always seems to be a reason for over-pricing when it appears---to me there is no good excuse! It is damaging to the entire community! If we were in a boom right now, I may not feel this with such vehemence; but I see how it is slowing things down, when there are buyers waiting for the right pricing to happen!!! We all have a responsibility to get the word out, even the FSBOS! That would make a good post for you to write---helps to reinforce the issue too!Thanks for reading and commenting.

J. Phillip: You are so right on--"Make us an offer" is the most ludicrous statement to make on an over priced listing! Why not do that in the first place?---you wouldn't have to say that if the price is right! Thanks for your valuable input....

 

I totally agree that it's important to price it right for that initial surge of interest - that said, selling a home is a very emotional process involving a persons largest financial investment. 

Just go read the recent front page post about a Realtor selling their own house and it's easy to see that when the shoe is on the other foot it's not as easy being detached about setting a price.

It's just as important to empathize with the seller and get their buy in.  I typically make a price recommendation but almost every seller is going to want to price it at least slightly higher.

William: I wish I coud tell you that---it is a bit of a trap for sellers that may not have room to price the home so that they can still make a littl emoney--if they are underwater in their home, we have another issue. However, better to bite the bullet now and take a loss if you need to. Correct pricing will make a difference in timing and can prevent foreclosure too. Financial instutions are in a better position right now to help a homeowner in this kind of circumstance. Agents who are properly trained in short sales are in every market and can be very helpful in getting answers to the sellers. Just don't put off what needs to be done. It will only be a bigger trap if the property is over-priced! Thanks for reading and commenting.

Paul, You are "right on"! As a Realtor in your marketing area (Westhampton), I can't tell you howplu many conversations I have had on this subject with by clients as well as fellow realtors. I have had pretty good success with some of my clients, but some of my fellow Realtors in the area and still inflating the prices! 

Bill: I know first hand what you are saying: I have an investment that I have to sell--I priced it at a higher price in the first go-around and it sat for almost a year!  Then I got it! I rented it out and pulled it off the market during the summer last year and then put it back on the market in September '09--at a very sharp price (below market as a matter of fact)..everybody in my office told me they thought it was the best buy in the village and guess what? Another agent brought a buyer who fell in love with it and we close this month--I am very fortunate to have enough to cover all my costs--but not much more. I need to be free of the costs of owning it. What is it they say about a reformed...whatever??? That's why I am such an evangelist for proper pricing! Thanks for your input.

Robert---This is the market where over-pricing was invented! We got away with it for so long! Maybe it was because of the fact we were in a sellers market; maybe because we typically have a well-heeled buyer; makes no difference now, does it? THE GREAT EQUALIZER is what I call this recession--no one is exempt! Thanks for your comment

Paula,

You've got a good formula going.  I'm ready for this mess to end.

Mike in Tucson

We had a house in Woodmere,N.Y. that was over priced.

The asking price was $679,000.

After 10 months on the market it was sold for $468,000.

How about that?

I do agree with you 100%

 

Paula, you are a breath of fresh air. Keep on taking the bullets for the team. I am in your corner 100%.

Overpriced homes are a fact of life in our industry. By June 10% of all American homeowners will have values that are 25% under their mortgage balance. 2010 I believe will set a record for foreclosures. The end is not near. 

Paula, 

Great post.  I am walking away from more listings that I am taking these days because they don't like my suggested pricing.  I say it respectfully, but the price points they want are not a realistic price point I can SELL the home for.  

While it's tough to do that, it feels a lot less stressful than "going for the higher price I can't get in today's market." 

All the best, Michelle

Your passion about this topic suits you well.  Very good series and significant points in favor of property pricing.  Good job.

Here in the city despite everything in the papers, we are having bidding wars for some properties.  Now that doesn't necessarily mean that the price is getting bid up 100's of Thousands but what it shows is that when the property is priced really well at the beginning the buyers are out there waiting for it.

   As a collective group, are Realtors going to stand firm and not take over-priced listings ?  And who decides what's overpriced ?

It's very admirable, Paula, to decide on a mission of importance,as you have- acknowledging the strain of what this market is doing to sellers simply must be at the forefront!

Great points.  In any market, the homes that are priced right and in great condition and the homes that are priced too high will sit.

Mike: So glad you popped in to comment. --I am sure that it will end but when is the big question--I personally feel that if the proper pricing thing is taken on nationwide, we will see the end sooner than later...

YES YES YES!  We must not over-price.  If that is the only way to take the listing, you owe it to yourself to walk away.

Law of unintended consequences: Your 1 overpriced PERFECT listing in a neighborhood causes those priced at the lower end of the range to sell thereby further decreasing the perceived (or appraised) value of your listing to drop even further.

Selling a beautiful, well-priced home helps the whole neighborhood!

Paul, great article. I agree with Mike 100%.

You are very correct with this overpricing will get the home stagnet in such a short period of time especially because an REO will be popping up very soon in a neighborhood near your listing.

Paula, Nice post. Can't stress enough about importance of correct pricing, but there will always be agents out there who take them and I have lost listings to them. That's OK! Property is with a second or third listing agent and still sitting. It has now been branded as overpriced and buyers have lost interest. Glad it is not my sign with my name in the yard. 

Paula -- I agree with you, but don't get your hopes up too high about remedying this perrenial problem for Realtors. It is human nature to behave in the ways that you lament.

Not every market is in a housing crisis. Rural small town prices are a bargain year in and out. Over priced property helping sell other fairly priced listings is nothing new. There has always been two reasons property did not sell...not priced realistically, not marketed correctly. It's that simple.

Joshua: That is the thing here--why don't we all learn from these things and make the decision to price properly? Thanks for your valuable input.

Tim: Thanks for your support! ...and commenting

Joe: The end will come sooner if we all get on the bandwagon and inform our sellers, our fellow agents and our clients that correct pricing is key to ending this stagnant market. Over-pricing is not a fact of this industry--it is the one thing that will keep us from recovery, though. Hopefully everyone will get the message and start to price homes correctly, even if it means that they have to short sell--at least get rid of the debt.

Michelle: you are right at just walking away--let the next guy hopefully tell them the same thing; I think what happens a lot is that the seller who wants a price tht is too high will end up with the least professional agent to list the house and then watch as the house sits there and becomes really stale.

It is a  sad state of affairs, this over-pricing thing---makes our businesss more difficult. Thanks for commenting. 

Charita: Thank you so much for the compliment and you input.

Morgan: I know that in the city as well as out here in the Hamtpons, we have a "pent-up" roster of buyers. I am sure it is not so different in most RE markets throughout the country. We can all take a hint from you  comment that properely pricing a listing is the Key to getting the market on a roll again. Thanks for commenting!

Linda:The market determines the correct price---comps and recent "in-contracts" will show you what you need to know to be able to price properly. Thanks for your questions...and hope you join the group of real estate pros who want to leave a positive mark on the entire real estate market!

This is a tough one as always. Another AR'er just posted about listing their own home for sale and the struggle to price it well against making the most money from it.

It is so hard for sellers to price the home according to current market conditions.  Luckily, in our area inventory is shockingly low and that has stabilized prices in many areas. 

I agree!  Do your reasearch then your sellers will not be disappointed when it is priced to high and buyers keep coming with low offers, when in reality they are closer to were the house should be priced at.

I agree with you 100% Paula but one of the real problems is desperate Realtors who "Buy the Listing".

How many times have we all walked into a listing appointment with a well researched CMA only to have the listing go to another agent who will price the property at whatever the property owner wants?

In my case I've lost 3 in the last 8 months to this and 2 of them eventually sold within $10,000 of my CMA. They lingered on the market, suffered price reductions and I'm sure anxiety on the owner's part because they were priced on dreams rather than reality. (The other one is still on the market).

 

 

 

 

Great post.  I couldn't agree more.  Pricing can be a real challenge and a difficult thing to tell owners, but honesty is the best policy.  The truth may be tough to take, but it will be appreciated.  I tell people that I list their property to get it sold at the best financial benefit to them because that is why they are hiring me.  I don't under-price but do everything possible to price it right the first time.  Not an easy thing these days as many find.  

Its always a tough situation.  You do need to tell them the truth and depending on the area they are in they need to be below the market.

Great post Paula!  Thanks for the valuable info!

Laurie: Thanks for reading and commenting --this is a passion of mine now because once you see the connection to recovery, there is no greater need than to get the word out there..you can padd on the message too--it all helps! Thanks again.

Jim: you are right--the properly priced homes will sell first. Then the other ones sit and get stale and the sellers get desperate---but I am repeating myself...Thanks for commenting.

Jenna: I love your "law of unintended consequences"!!! How right you are; look at the repercussions from an over-priced listing--it is shocking when you really think it through--Thank you for commenting and for your valuable input!

Ted and Clason: Thank you both for your comments---It's good to know that you ae on the dame page!

Dave: But just think what that does to the neighborhood--and the next neighborhood---repercussions are that the whole place has a less than desirable appeal. So, this brings in the bottom feeders who  will not pay anywhere near what the houses are really worth--it's like rot: you can't just remove the rot, you must remove the whole wall to get clear of it....not a happy thought!

Merrill: The ways that I lament are just what this post is about--we are responsible people as real estate professionals, we have an obligation to try to remedy the issue of over-pricing at any time, not just now. Believe me, if we don't do it, there will be a Google or some other monstrous new company who will develop a product to put us all out of business: Google Goggles may do just that; the idea is to be able to hold your cell phone up to a property and be able to get all the pertinent information regarding the property, including comps!!! Does that not scare you into wanting to do something to protect our industry??? That's where human beings come in--we can do it with charm, not on an itty bitty cell phone screen! HA!

Andrew:...and just read the response I wrote to Merill above here^....that should scare you too--complacency is deadly---a "oh well, nothing we can do about THAT situation!" is not a good response---we MUST do something and it is within our power to remedy the problem. Perhaps the only reason you are not seeing a problem in the smaller communities is because they don't get caught up in the same kind of "BIG" ideas about the worth of the houses there...only a thought. Thanks for responding.

I agree, if your seller is serious about moving his/her home in this type of market, they must agree to price it at a level that attracts the limited supply of serious and qualified buyers.  Thanks for the post.

James: I fall into the same category--I am selling my house at a really low price just to move it so I don't have another mortage to pay (it is an investment property) Homeowners need the truth because you don't know what has precipitated the wish to sell and they won't always tell you. If you however, put the price that is real out to them it may be a relief to know that they will sell sooner rather than later. I know people who HAD to sell and because an agent came along and did not tell them the truth--the property sat for a a year! Then when i spoke to them I told them why it did not sell and the wife almost cried. The husband looked away, took a deep breath and said: "Please do not tell us anything but the real price---we won't survie another 6 months if we don't sell now." We priced it properly and they sold it within 3 months!

Yevette: You are so lucky that the inventory is low--that still means you need to be careful with pricing otherwise it will turn around and you will have too much...it can happen very quickly too. Thanks for your comment.

Sajy: You are so right! Half of the battle is won if the seller truly understands the market and the proper price of their home. Thanks for commenting.

John: that is why I am making such an issue out of this whole pricing thing---not only will inventory start to move--the whole brokerage community will improve because it is hard work to do the due diligence to get a listing at the right price. There will be less and less room for the agent who just wants to list properties...and takes them at any cost! Thanks for your input.

Kathleen: Thank goodness you can see the reality of over-pricing...thanks for commenting too.

Chuck: Thanks for your comment--keep up the good work.

Ed and Todd: thanks to you both for stopping by and readingmy post.

I agree and you could not have been more clear.  I hope we can all step up to the plate as an industry to do the right thing.

kp

Hi Paula, I couldn't agree with you more therefore I am going to reblog your post because you said it so well. Thank you.

We have this problem in our offce, where a few agents just can't seem to talk their sellers into reasonable prices, so the houses sit...and sit...and sit. Before I became a Realtor, I was always willing to listen to my sales agent. I figured he or she knew the market a lot better than I did, even if I might have been disappointed at the suggested sales figure. And once, the agent recommended a price about $150,000 higher than I had expected (and it sold for very near full listing price).

Thanks for your excellent post and reminder! I wish more sellers would listen to their agents, and more agents would hold firm on pricing.

I am just having more fun with one of my Buyer now will be a seller in another 20 days to sell his current home.

He is in contract to buy on a sweet deal with more than $30K worth of upgrades in it which is left by the sellers.

Whereas, every inch of is low quality finish on his existing home as to be accounted for in his existing home listing. What a joke.

I am glad I just changed the listing pattern to fee for service model as one of the option which my broker offers.

 

 

 

 

Karen: Than k you Karen for reading and commenting---the sooner we all realize this, the faster we can get a healthy market back in place.

Teral: Thanks for re-blogging--I hope this is helpful to all you who are working so hard to get a healthy market back!

Sonsie: Very well put. It's a lot like gamblng isn't it?  Once you win at a gaming table, it is more and more difficult to quit---once you got a (too) high price on a listing, it makes it very hard to stop doing that.....See? Thanks for you valuable input.

 

Paula - As a new agent I took on several overpriced listings with the theory that after 30 days we can review activity and adjust price accordingly.  WRONG.  Sellers did not want to budge on price and I was stuck with these overpriced listings and having to explain to my customers why I could not get any showings or bring them any offers.  I looked very unprofessional and have learned my lesson.  What kills me- loosing listings to agents who promise sellers they can get them a better return by overpricing their home AND THEN agents offer to cut their commissions on top of that.  Sellers are under the delusion they can net $5,000 to $10,000 more with other agent.  More times than not. these sellers end up chasing the market for months and selling the home for less then if they priced the home correctly to begin with.

Good post Paula.  When will they get it? How many times do we have to preach it?  Sellers would listen to us if unscrupulous agents would stop promising the moon just to get the listing.

 

When I started 15 years ago, the mantra was "Location, Location, Location."  I think now it should be "Price it right, Price it right, Price it right."  I think I'll put PIR on a bumper sticker.

Coming from a woman of integrity, and obvious intelligence.  I totally agree with your call to action. I only hope alot of agents agree just the same and practice such. 

Great Post.

Kari: Very wise words for a fairly new agent! It is a bit like a dog chasing his tail---if you over-price you will never catch up! There is an unbelievable number of agents who are still chasing those over-priced listings and they are doing damage every day that they continue; it is my goal to put a stop to it but I am seeing how hard that is to do. I am still getting comments from agents who talk about how "I take listings at any price and as long as the seller says they will lower the price in 30 days or so" ....and blah, blah, blah. They are obviously not reading the post; maybe just reading the title? I don't get it. Thanks you so much fo being a part of this campaign in your own way!

As a potential buyer who has been waiting to buy since 2006, it is refreshing to hear agents talk about the importance of proper pricing.  I sympathize with your challenge.  I can also tell you that buyers today have more information at their fingertips and many understand that they have the leverage and the luxury of time -- at least in my market. 

I admit, it is frustrating to see a house that would be perfect for my family, only to have the agent at the open house try to justify to me why it is priced 25% above the 2007 purchase price, without any upgrades or improvements.  It is disingenous for the agent to portray the home as an equity sale, when it has clearly been priced at a level that would pay off the 1st lien, the tapped-out HELOC and the 5% commissions -- a self-serving price that is not based on reality.  And it is deceitful to try to convince me that I need to offer full price if I want to get a chance to buy the home because of all the "offer activity" that is going on behind the scenes.  Guess what, with all the information available to me, I know that your listing has been on the market for more than 90 days with multiple price reductions. I know what comps are and what your client paid at the peak of the market.  And I know that your client has received a NOD and NTS on the property.  If you can't convince your buyer to sell the home to me at market price, I'll buy it for half price at the foreclosure auction.

Good luck, reasonable agents.  You need all the help you can get. 

Marian: Great idea---make them ask questions...I can hear it now: "what doea PIR stand for???" Do you realize that most retail outlets get it!....no one is going to over-pay for anything anymore!...especially the home they want to buy. Go into a grocery and things are 2 for $5.00.(That is a good deal here!!!) and CVS is always running specials. I am sure if I still shopped at Saks I would find very special "deals" on designer clothing too---everything is being examined with a question of value before someone buys it. It is a condition of the economy and those who don't know that are doomed---well at least the market is! Thanks for your valuable input--and good luck with your bumper sticker...I think you should do it!

Now obviously, a seller has the right to overprice their own home, it is their prerogative.  Our right is to decide if we want to take the listing or not.  That being said, an agent that doesn't properly inform their seller client of the current conditions and risks of an overpriced listing could be viewed as trying to "Buy" the listing with an inflated list price, which is a violation of The Code.   These are the agents that worry me the most in our market, as it makes us all look bad. 

Potential Buyer (#62) Thanks for stopping by and reading this post---not often do we get the public to participate in our dialogue so I am very thankful you decided to add to this very important conversation. I hope it is revealing to you and whomever else in the public eye who is reading this post, that we are a knarly bunch who have your best interests in mind. We all try very hard to meet the needs of the public but we need to understand as a brokerage community that the buyer today is more informed than ever before and because of that we need to step it up as well...otherwise, who needs us? Thanks again for your important input!

Raine: Thank you so much for your compliments....sounds like you already know how to handle the seller who needs guidance....and by your response I can tell you are on the same wave-length in terms of over-pricing..thanks for your support!

AJ and Jodee: You are so right---it is always a reflection on the whole community when an agent acts in a less than ethical manner. I hope that we can overcome those other agents; there ae still an awful lot of them left over from the "Boom" times. Thanks for your comment.

Great point, Paula. Taking an over priced listing is like your favorite store inflating the price just to have a sale. Another key to remember is that you don't want to have your average days sold high as a listing agent.

Paula, this is a great post. It has taken me a long time, but I'm finally getting the courage to walk away from those high-priced listings. I think it is so important to just be upfront with the sellers from the beginning. I'm learning to say I'd rather walk away now than disappoint them six months from now. 

Mike: You got it! You bring up a great point about average days on the market---you know, real estate agents can take a page from the book of retail sales: aged merchandise is the bane of a good buying plan---if it's old, mark it down; otherwise you will sit there with nothing new to move the sales ahead and aged merchadise gumming up the flow of new goods. Better yet, don't ever over-price a garment because it will hang there and look dated and your open to-buy-dollars will be non-existant...same thing applies here! Thanks for offering your good sense here.

Peggy: You know what? If they hear that from all of us, there would never be an "aged" property out there and the flow of inventory can be always fesh and desirable to the buyers who want to buy. Makes sense doesn't it? Thanks for your comment.

It's very funny these days...often sellers will indicate that yes, they do finally understand that the market has changed...but not my property. 

Another interesting phenonema is that agents, in a misguided way, will often feel that they are somehow protecting their client by agreeing to a higher listing price.  They feel that they are giving them room to negotiate and they can always reduce the price later.  The key word here is "misguided". 

You're formula (OVER-PRICED HOMES = HIGH INVENTORY +  MORE DAYS ON MARKET + LESS SALES + DESPERATE SELLERS = CONTINUED HOUSING CRISIS) is an elegant description of what is happening out there.

Let's stop being enablers!!!

Howard and Susan: You are right on the money! We are enablers when we fail to follow good market data and current in-contracts and still over-price a listing! We are NOT doing anyone a favor when we fall victim to the temptation to price a house too high. It is a "misguided" (as you put it so well!) attempt to appease the seller to make him/her think you are "mighty-man" or what ever you want to call it---it is still misguided!! Thanks for your valuable insight!   

Thanks for the post. I to use the example of the One dollar bill and ask my sellers how successful would I be it I took the dollar to the local coffee shop and tried to sell it for $1.50. Most get the point. I may be good at what I do, but I'm not a miracle worker!

Paula,

Came from the reblog by Eric. Unfortunately I am in a rush and do not have time to read the comments, but I will come back later.

You are very passionate about this issue. However, I truly believe that we affect the market the same way as Al Gore affects the global warming.

Agents do now pretty much the same they did before, but the inventory is decreasing. of course, it has nothing to do with the way we price. We are only advising buyers and sellers but we are not setting the prices, no matter how much we would pretend we do. The market is a sum of forces that are much more than what one or all real estate agents do. That's why it is called a market. It is a state of affairs that can't be easily manipulated. Thus objective. And it spirals not because of the stupid of genius agents.

But nice thinking that we are that powerful

Hi Jon: I know you didn't read the entire post, nor did you read the initial post that I wrote last week (that was featured too) but the reason for this one is that the responses I was getting from my first one, "What do you do when your seller wants you to over-price their home???" were blowing me away in that almost all the agents were saying they were over-pricing--"but only for a month or 2" (Sorry but my print size just leaped to this big print--I am really not yelling!) Meanwhile, the best selling time period is the first 2-3 weeks that the house comes on the market and once you miss that fresh offering, the house is like a used car coming off a lot!!! Anyway, please read the whole thing and then give me your take on it--please? Or-Please read both posts and tell me then what you think--OK Thanks Jon

Paula;  I think it's great that you've again raised the issue of over-pricing.  It's simply one of the biggest problems in our industry.  The more often agents hear about it, think about it,  and decide against it the better off everyone will be.  Here's a question to ponder:  how many agents take over-priced listings simply to be the victor in the competition to win over the seller?  Hmmmmmm.  Any thoughts on this?

Paula,

It's great that you bring this up because it is vitally important today, as you say. Even if the over-priced property somehow got an offer, then it won't appraise and the deal is most likely dead.

thank you! now can we PLEASE get this memo out to all the banks and MAKE them understand that they MUST price their foreclosures right because they are affecting the market tremendously. they sit on the market forever and then end of settling for less anyway. why not just price it right in the first place? no overpriced listings! anywhere....i've had this convo a few times. just price it right.

Paula, everyone says how important correct pricing is but I like how you gave the impact with the formula.

Great post Paula.  There are still too many agents in my area who cannot stand up to their sellers and pricing the homes Pre-2007 prices.  Then when they get an offer at fair market price(which is usually tens of thousands less), they lose their mind.  The days of starting out "high" on a house is over.  Price it right from the get go!

Kirsten: Thanks for reading--again. I don't mean to be redundant but I keep seeing responses from agents and it appears many are still over-pricing, thinking they are doing a favor for the seller!!! So, I agree that in most cases it is a competition and the victor is the one who gives the highest price---they are the "Biggest Losers" as far as Ican tell...... Nothing worse than doing something over and over again and NOT getting the results needed! It is the worst thing anyone can do in this fragile market.....Thanks again for commenting

Esko: You are right, and then the seller is left to figure out what to do--because when an agent over-prices a listing, do you think they go back and apologize? We can only hope that the agent has the decency to re-negotiate the price, explaining that they over-priced the property in the first place. It would also be decent if the agent attempts to make the seller whole by cutting the commission (if that helps). Thanks for your input..

Dee: Wouldn't that be something if that would work??I would send that baby out so fast their heads would spin....if only it would do the job. I really think the over-pricing thing is an anomaly in this market because of the bad practices that took place during the housing boom of the early 2000's don't you? How else could a "boom" happen unless the prices were pushed to the outer limits? It happened and we have to admit it and move on--meanwhile, re-training the brokerage community as a whole to price properly! After hearing so many comments where agents STILL think it is OK to price a property thousands and even hundreds of thousands of dollars over what they KNOW is the right price, I think it is time to add this into the basic training of all new agents and also add it to continuing Ed classes!! What say you ? 

Gary: This formula came to me after the first post on the subject, which I wrote 10 days ago---it became clear that the jibber jabber was not going to do it---there IS a formula that works and that one needs to be brought to the forefront of everyones mind---thus this post. Thanks for your input.

Jennifer: It sounds so simple does it not? unfortunately I think we may need to re-train agents and brokers to put a stop to this irrational way of getting  listings. We actually have "trained" the sellers to expect more for their homes than the market will bear--so now we need to take on the challenge and make sure no one is using this dangerous tool to get a listing. Thanks for your comment.

Paula, I did not read all the comments and I am a lender, I am reblogging your post because I believe it is something all realtors and home sellers should read. 

Paula, thanks for posting such a good blog. In NY many seasoned agents do not understand this. They will take listings with 07 prices what the sellers demands . I have turned down several listings due to this and I know other agents took it with high prices and was in the market for more than 6 months and sold it less than what I offered it . I wish and hope every agent understand the point of correct pricing. Thanks again.

I agree... it is really tough to get sellers to be realistic.  They all love their homes so much.  I'd love to see the price reduction form you get your clients to sign at listing... how do you set the price reduction prices... ?  Etc.  Thanks for your info.

Paula, great post and I say AMEN to your formula!  In our market, homes that show well and priced well, are garnering multiple offers again.  Waiting 30 days to do a price reduction is definitely not a good strategy in today's market. The shelf life of listings is pretty short in today's market.  Buyers will see a listing as going stale by that time and have already moved onto the newer listings on the market who have used your listing as a basis for right pricing theirs!  Lately, I've had the experience where the seller(s) have a need to sell but are afraid to "right price" their homes for fear that with a potential price reduction, they could fall into a short-sale situation.  How have you handled this?

Price it to sell quick or refer the listing to a Realtor who specializes in over-priced listings!

You just have to be armed heavily with facts to back up your lower price.  Typically they are basing their price on something.  Use things like tax rolls, Zillow, MLS comps or something and be ready to answer objections as to why the Jones down the street got 20K higher for their house price.  Also bring in lots of negative news articles stating facts about the market, about the tax credit deadline approaching on April 30, etc.

What a great confidence builder. Located on the front page of my 2010 business plan are the words "I will NOT take another over priced listing". I have created a short power point presentation to educate my prospective sellers on how the real estate market actually works. Up against three very experienced agents this past week, I did in fact win the listing despite the lowest recommended starting price. According to my new clients I was the only agent that actually took the time to explain how the market works and why my price would be appropriate for the current market. Thank you for your post. The timing for me could not have been more perfect!

Paula - Proper pricing is key !  Those first two to three weeks are critical for sure !  After a month or two, the seller loses a lot of leverage.  Further, in a declining market, overpricing can be devastating and costly... or just a waste of time when the listing expires.

Hi Paula, I don't know about in your neck of the woods, but here in Florida we are in an REO/Short Sale driven market that is continuing to decline in most areas. A private individual is competing with banks for "how low can you go".  REO Agents instructions are to price the properties to move in 30 days- this means that it is deeply discounted already. Your "Civilian" seller is in for a lot of heartache and disappointment and the agent will only become the whipping post, who takes on an over priced listing under such conditions.

My former Broker once said that there will always be REALTORS because folks always need somebody to blame....let this not be one of the reasons for it. Know the market....hold firm on the pricing...walk away from the listing and retain your dignity and reputation for integrity first.

Janet Fetterman, Broker Associate/Owner

Concord Real Estate 386-299-6393

See Our Bank Inventory Live at: http://concordtopteam.com/Public/inventory.aspx

Change your perspective from seeing it as a pricing problem, to seeing it as a motivation problem. A doctor attempting to get patients to lose weight gets no where by continuing to prove they're overweight. We must spend ALL of our energy first establishing the motivation to move. PLEASURE: what is to be gained by moving to the next home?. PAIN: what are the consequences of staying?

See my other blog: http://activerain.com/blogs/davidknox

Hi Paula

I agree with you totally unfortunately most realtors are competing with other agents that will agree with whatever the seller wants just to get the listing. I wish most sellers had the same foresight that you do, unfortunately they choose a realtor for the wrong reasons  

Tim: Thank you for re-blogging my post--when you have time to read all the comments please do. It is very helpful to see where the other agents are coming from--very enlightening! Thank you for commenting too.

Linu: Thank you so much for reading and commenting. You are so right about New York--I thought it was particularly New York that is like that with pricing but it is all over the country--hopefully we can get the message out and it will stop....

Lexie: Thanks for commenting and for your input. I really don't do anything special in terms of pricing--I discuss the recent comps (no more than 1 month old) and in-contracts then if they agree, I have the seller sign a listing agreement and that contains the price--I don't go any further than that, no price reduction needed if it is priced right. In my experience, if they don't listen to me in my pitch regarding the price that tells me everything. I don't take it any further and I tell them why---it works because I do not want an over-priced listing no matter how good it looks and regardless of the location.

I'm not certain how you can decide exactly what the proper price for a home is and then have all of the homes magically sell at that price.   If everyone just kept undercutting their neighbor, prices would keep falling.  I think a good market needs a mix of over and under priced homes.

Let's say that the past ten homes in a neighborhod sold for $400,000.  Now there are 5 homes on the market that are exactly the same.  Will they all sell for $400,000 if they are listed at that price?  I bet it will take $350,000 to get the first one sold. But what if four of them were priced at $500,000 and one was at $410,000?  I bet that one would probably sell at $400,000 and would sell quickly.

A market really needs a mixture of people with various motivations to work effectively.

Let's say that all five sellers in my example sold at $350,000 and it clears the inventory and depletes the supply.  Now the next seller  might be able to get more because now there is limited supply.  He can now maybe hold out for $375,000.  Now how's that going to make your sellers feel who just took your advice to sell at $350,000 in order to get us all out of the housing crisis?

Let's be grateful for the sellers who aren't panicing and selling at distressed prices.

By several posts I've seen in the past few months, I think the market might be turning. A few years ago there were many posts that ridiculed buyers for making low ball offers.    Now it seems like sellers are being ridiculed for holding out for more.  That's a good contrary indicator.

Alice: I look at this way: If you I have done my homework and really ferreted out the correct price for this house, I won't discuss price reductions..that tells me I am not at the right price if I am already thinking of a reduction; sounds rather simplistic but it seems to work. It is a problem only if I have a seller who insists on talking about over-pricing.

Once I explain to them that I won't over-price a listing and why, they go with me, they stop resisting. I tell them I won't over-price their property because when I do I completely miss the chance to sell it for them when it is a brand new listing--the best time to sell a property that is priced accurately.  I  have yet to have the seller say no to that...it makes sense to them. That bit of information AND the comps and anything else in the data of surrounding properties is all the ammunition I need....And I must admit, you have to be very convincing in selling them on the idea, but that is what this business is all about!

Joe: What a great idea--then when he/she finally get the price down to where it should have been in the  first place--you get a referral fee!...brilliant!

Rob: you are right on the mark--the ammunition should include ALL the news about the surrounding properties; right now that is the most compelling information because that is where you can show them the over-priced listings taht DID NOT sell and why. Good Job.

Chad: This comment makes me want to cry; this is what I am talking about! This is how the very idea of over-pricing is the easy way out. The average homeowner is in such need of good and right guidance---they are not stupid or greedy and in most cases they just want a fair chance to sell their home quickly and at a fair price!

What you said when you stated that you were the only agent that took the time to carefully explain the way the market works, in good times and in bad, is nothing less than perfect! We have our work cut out for us; and it is crucial that each and everyone of us do the hard work; anyone can get an over-priced listing!   Thank you for sharing, with excitement and enthusiasm, your success!

Christopher and Stephanie: Right you are! That 2-3 week time period is the "sweet" spot of selling real estate (at the right price!) Thank you for taking the time to comment.

Janet: Good luck to you in your painful market! Hopefully we will not have to face the same thing here. One of the reasons I am up on my soapbox is because of the threat that this could happen for us here as well if we don't move quickly to get the sales that are needed for a faster recovery. Thanks for sharing the news and giving us your kind words of wisdom!

David: What a great thought and suggestion for those who want to take the high road--get out of the trenches and look to the lighter side---that may work; I will give it a try! "Look! Look over here!"...and then you slip the correct price in and no one is the wiser! Meanwhile the sellers are drooling over their new house possibilities and thinking: "The prices are finally what we can afford!"

I realize I'm out of the norm here....but I take them. I take them all the time. And I sell them....and market value. Sometimes sellers need to see for themselves. I do a full comp sheet for them and put in writing my recommendation of list price based on these comps. This is incorporated in the listing agreement. I also offer a marketing package for them, which they pay for up front if they would like advertising. This includes flyers. When the home sells, this is credited back at closing. So the risk is theirs. I see nothing wrong with this....it's about a learning curve. And you know that sometimes it does sell at the higher amount.

Our market is very active and prices are going up because of it....it's just as bad to keep prices artificially low as to keep them artificially high.

Very difficult in this market when sellers are wanting to price their homes out of emotion not reality.  I got a call about listing this week and turned it down.  Another agent had it listed months ago.  When I told the sellerwhat I would list it for she didn't want to list at all because she would have had to contribute funds.  That's the market we face.  But I agree we aren't doing sellers any favors by overpricing property.  I don't know if it hurts the market overall though, it sure makes it easy to spot the "right seller."

I agree Paula.  These days I'm trying to be more selective of the listings I take on.  If a seller thinks they don't need to reduce price, I'm probably not the agent for them.

Joan: Well those agents won't last long...because if you read the comments just above yours you will see what wonderful new ideas are coming forward in this challenging market--all it takes is an agent (maybe you!) to adopt some of these tactics and before you know it, ALL agents worth their salt will be doing the same thing....over-pricing is "out" and correct-pricing is "in"! Thanks for your input

Tim: Interesting "take" on the whole affair of over-pricing. Each market has it's own idiosyncrasies; that is one of the reasons that the saying "All real estate is local" came about...I am sure that the agent who is running his/her business with the idea of not over-pricing listings has the ability to pick up on a house that has been renovated and sees that it has the advantage of a house in original condition. Not all houses are created equally---some may not be clean and shiny! That is another factor for pricing it under the renovated one...and on and on. It is not all cut-and-dried as you imply in your comments. Good luck in your area; sounds like you are starting a recovery there....please just remember the last 10 years and the "boom" in the real estate market that brought us all to the brink in 2008--let us all remember!

Karen: Your market may be similar to the one here: we have a high net worth,  New York City, second home buyers and all driven by Wall Street...so there is talk that we are out of the depths of the housing recession---I don't think so! Until we can, as professionals, say that the number of houses sold are increasing at a rate in keeping with where we were in 2007, I think we have a long way to go to get there.

Prices should not be going up yet---they should, if anything be holding at a level commensurate with the inventory--until we lower the inventory through sales, prices need to be kept at a sustainable level. It would be a very dangerous thing to think the prices should go up simply because houses are selling at a good rate. If, on the other hand your number of houses on hand is way under your rate of sale, prices will go up naturally. It is my firm belief that the whole process is a natural one--with one exception: OVER-PRICING for the sake of getting a listing!!!

Mint: I did not see your name so I will use Mint (Nice sound!) It sounds like your client needs to consider a short sale if the right price is so low, or go ahead and contribute funds--if that doesn't work than the idea of a forclosure can't be too far behind, unfortunately. If she priced it right however, she may  find that she gets multiple offers and maybe even more than her asking price--that has been known to happen. Thanks for your comment.

Great post.

 

There is a real effect on all of us when we don't do the right thing and try to list homes at prices, that in our opinion, should sell. We as professionals and our service to sellers all get better. We afterall, all are wanting a win/win situation.

This thread is *perfectly* timed.  I've been working with a seller for the last two months that really needed (and desired) to understand the market dynamics of what gets a house SOLD!  I had to laugh that the first person to comment was Dorie, an agent in my office who is my role model (Dorie - did you know that??) for how to sell a house.  I saw one of her listings in Westlake a few weeks ago and the hair on the back of my neck stood up - it was a great house and priced exactly right!   My gut was right - it was under contract in two weeks.  Dorie knows how to get houses SOLD!

I've spent the last week with my seller from the first paragraph and we have extensively reviewed market conditions and determined what we need to do to get his house sold. I am very pleased and confident that with the updates he's made (paint, very clean, replacing the most dated elements of the property), plus some good staging, we have a winner on our hands.

Thank you SO much for letting me know I'm not the only evangelist on this topic out there!!

Paula,

you are correct. I see that this is a second one, and I did not read the first one, so i reacted to the post, and I also did not read the comments, which I usually do, but we are moving today, and when I was hurriedly typing, my poor wife that is overwhelmed with the whole packing thing, was standing in the kitchen with a big knife and the look on her face was far from friendly (LOL).

I did not mean to be rude, and I will come back and read and comment, just when I feel a bit safer around our new place.

Good thread indeed as I was looking for properties for my clients and did see the higher price trend happening against short sale and foreclosed properties in the same area. With the market conditions as they are now, sellers are confused and some agents are not being realistic to market conditions. It feels like an artificial market is being created again. I don't agree with the low inventory in my market and I feel that those so called stabilizing prices is just a prelude to the real problem that banks will be facing when they do have to release inventory, when they no longer can afford to sit on these properties. My clients scored a great deal on a lender owned property and not a offer priced home in the same area.

Thanks so much for your great post Paula.  It's better to tell Sellers what they need to hear regarding the price than what you think they may want to hear.  It's a business decision.  Sooner or later they will come back to you when their home doesn't sell.  Thanks again.

Selling the listing has been the mantra since the beginning of time!  The more compettive the market place is to get listings the higher the listing price.  I don't think a post on active rain is going to change that fact.  As a Exclusive Buyer Agent and Investor, I would also bet that a few (or more) commenting here have listings that are over priced.  Not necessarily because the seller insisted but because the agent didn't list the property to sell. When talking with the Seller-consider the fact that prices peaked in 2006.  Most markets throughout the US at that point (according to my data),  became over valued, say 40%, here in Ca.  If the market fell 30% since 2006, that still leaves a 10% premium over market value today. Bargins are not defined by recent peak value.  Rather, they are defined by how far below CURRENT market value you can buy it.  If you use that pitch, and understand it yourself, Chances are you will never again over price a listing.  That is, of course, unless you just want to play the numbers game and put a sign in the yard, hope for the best.  

 

Kim: I know; a lot of agents are now doing that--Good luck and thans for commenting.

Daniel: You are so right--we all do want a win/win situation; hopefully the word is out now and pricing is the focus---correct pricing that is! Thanks for commenting

Alison: Good to hear the timing was right for you to read. Thanks for commenting

Emily - I cannot agree with you more!!  Thanks for your insight and ability to make the problem clear. I am going to share your 'formula' with future sellers. It is difficult for them not to see their home as more valuable than the others in their neighborhood :-)

Jon: Feel free to read all the comments when you have time---I would not want to be responsible for domestic unrest!!! Happy moving!

Francisco: It is our responsibility as a collective brokerage community to make sure that we don't go right back into a market with artifically high prices!! That would be the end of a seemingly healthy market trying to re-establish itself---another reason we need to price houses properly! Thanks for your valuable input.

Mary ANN: Thanks for stopping in and commenting. 

Matt: Thanks for your comments Matt; if you have been keeping up with the dialogue on this post and the other post I wrote last week, you would see that the whole point is to awaken the entire country to what I view as pricing houses "just to play the numbers game, put a sign in the yard" and hope for the best---we have all had enough of that; time to do the hard work and make sure that the prices reflect true value that the buyer can SEE and BUY without feeling ripped off in the end. This is also the only way our industry will survive--it takes no genius to over-price a listing and it takes no business acumen to stand by and watch as the over-priced listings sit and become stale in the first 30 days of exposure....at exhorbitant prices!

I have been watching our inventory growing and growing over the last couple of years and thinking exactly the same thing.  At one time I felt it was fine to take the overpriced listing ,  but I have been walking  away from listings for the last few months.  Not only will the overpriced listing sit there forever,  if you are fortunate enough to put a contract together,  there's an excellent chance the appraiser will kill it.  I agree comploetely that it is the Realtor's job to bring reality back to the market. 

I agree with you and do not like to take them over priced.  However, I have seen two homes sell recently that I made listing presentations on.  They listed with another agent higher than I suggested and sold much later lower than I suggested.  The seller may have got what they deserved, but the other agent got the commission and I got nothing!  I always give people and honest opinion of the home value.

I agree 110%.  I'm offering to have a NC Licensed Appraiser do an appraisal on a home that the seller feels is right, but I know is overpriced.  For $350, it convinces and I'm off the hook.  Anything that works...

 

Joe: The appraiser is very valuable right now; in fact the appraiser may hold the key to what is happening in the housing market at the moment---always has been a value to us but not as he/she is today! Thanks for your comment.

Gene: Unfortunately, this has always been the case---you pitch and do a great job--and the other guy gets the listing!!! The BIG difference right now is that if the other guy gets it at a higher price--I wish him a lot of luck getting past the appraiser at closing if he sells it at the high; and I wish him even more luck with the costs of holding onto the listing until he gets the "low-ball" offer that will surely come, eventually, maybe....Do you see where this is going? It is a dead end street in terms of running a business---the good old days in real estate are long gone! Gone with the idea that prices always go up! We are in a holding pattern in case you haven't noticed.....best to be the loser in this one because the "Bigger Loser" is the hot shot agent who has loaded himself up with over-priced inventory that doesn't move very fast, if at all! That will keep him busy with inventory that clutters up his days and keeps him off track while you are out there pursuing the REAL listings that move! Thnks for contributing

I like Joe Jackson's (response #86) sarcastic take!  At least if you referred the listing to one of the "agents specializing in over-priced listings" you could get a referral commission!

The root of the "illness" is greed!  These agents are greedy for a few more dollars, the sellers are greedy for a few thousand dollars and the market suffers even longer.  We are in real estate to earn a living but the transactions are not about money they are about education and counsel.  With the proper education and counsel the commissions will come on their own.

Paula, unfortunately overpriced sellers will find starving sales people to list their home

Ty

The "good ole days" in real estate is gone - buyers have all the info they need to determine whether or not a property is overpriced and unlike days gone by, it does an agent no good to list overpriced homes.    I feel like the percentage of listing appointments where I get the listing is pretty low at only 50% but I genuinely believe it is in large part because so many agents in our market are willing to indulge the delusional seller in hopes of getting a price reduction.     I just listed one and told the seller that if he had hired me in the first place he would have been out of this house two years ago.   He listed with another agent about $50K higher than I was recommending.

Now, there is no telling how long it will take to sell this really gorgeous home because the only thing selling in volume right now is under $150K.  

You can lead a horse to water, but you can't make him drink.  Same with thick headed realtors who are blindsighted by the thought of a commission rather than what is best for the seller client.  There are many ways to get a seller to "see the light" and still get the listing.  You just have to work a bit harder up front.  And if you find that the seller is stuck on a higher price, it's your reputation on the line, don't sell your sole to the devil.  No commission is worth your reputation.

Thanks to all of you for your valuable contributions--this has been a very interesting blog post and I can see it is still tweeking the interest of alot of you---thanks to those of you who re-bloged this material as well and don't forget to check out the first post on the same subject matter: HOW ARE YOU HANDLING  SELLERS WHO WANT YOU TO OVER-PRICE THEIR HOME???

Good post Paula. You are thinking macro economics and most agents can't get past micro economics.

In counseling sellers today, we need to remember that the inventory in competing with foreclosures head on in every single price point and in most markets.  To overprice a property is expensive and ludicrous.  And what commission?  If the property does not sell, 0% of nothing is 0!   We wish every property would sell upwards of $1,000,000 as our commission is a percentage of what we get for the seller.  But the sad reality is that 0% of nothing is still 0.  And , guess who gets to spend their money marketing the overpriced property??  Why not suggest a price and if the seller does not agree, have him write a check for your marketing proposal.  If he is so sure that you can get the inflated price, then he should have no problem bearing the expense.  The crime is to take the listing and then because it is overpriced, slam it into the already overburdened MLS and do nothing and spend nothing.  Even that takes time.  Your time.  Isn't that all we really have?/  Good grief.

We had an agent in our office that was going on a listing appointment and when he got back I asked how it went, he said "Great, I didn't take the listing" That confused me until he explained they wanted about $30,000 more than it was worth and he wasn't willing to list a property because it was over priced.

He said he would wait until it expired.

YOU ARE RIGHT. PERIOD.

I've been saying this. I keep saying if every other agent (see i'm not being greedy and saying every agent) go to their overpriced listings and demand a new price that's correct or withdraw the listing the market will be on much more stable grounds.

We study the market and explain why we price a home where we do. If we  are too far from the seller, we don't take it anymore.

PERIOD>

I agree that it's important not to overprice, it's also a very fine line to walk as well. It's not our job to JUST sell the house.  It's also not a race to see how fast we can get our commission in our pocket.  We are trying to get our sellers as much money as possible in the current marketplace.  Any idiot can just get a seller to price it under value and get it to sell.  We need to price it right AND market it effectively.  An extremely aggressive marketing plan creates a lot of exposure for clients, which can in turn reap them more for the home.  If our only consideration is list price, we may not be doing our job.

Paula - I've been on this soapbox for the last year in our market. We still have several agents who will take a listing at any price. This is such a disservice to the sellers. I believe the sellers turn to us for our knowledge and expertise. It is our duty to explain how the market works and recommend the best possible selling price they can expect in the current market. I also know agents who will take the listing with an agreement to reduce the price in 30 days - in most cases that is too late. Overpriced homes end up chasing the market downward and usually sell for less than market value due to the length of time on the market and numerous price reductions. Great post. Congratulations on the feature.

Wayne: Thanks for your support--we all need to get it when it comes to proper pricing!

Bev: Thanks for taking a stand! It is so improtant that we realize how powerful we are in the eyes of the seller---we do not have to bow down and say "whatever you say Mr. or Mrs. Seller, I will do as you say"...we are here to counsel them in the big decision to list their home!

Matt: That is why it is so important to do the research before we talk to a seller---we have to know the proper pricing or we should not be in the business---what could be more important as an agent than pricing to sell? Thanks for commenting.

Kathie:That 30 days includes the KEY selling time! Why not price it properly at the beginning and then raise the price---makes just as much sense doesn't it--only in that case you may have it sold the first go around!! Thanks for reading and commenting.

 

Great post. If you can't get it at the correct price, wait and the listing will come to you after the overprice listing expires.