One of the most important jobs that a Real Estate Agent does when putting a house on the market is determining the appropriate listing price for the property. This is a vital step in the process. A good agent studies the market daily, and keeps tabs on current trends. Overpricing a house will cause it to become aged inventory and cost the seller money in the long run. Underpricing can leave money on the table.
It is really easy for an agent to just tell the seller what they want to hear. “Yes, your house is special and will bring a lot more money than all the other similar houses”. The truth is that it’s probably not special and it will only bring what the market determines it will bring. You see, an agent doesn’t set the market, they just interpret it. Any agent that tells you they can get you WAY more money than what the market suggests is probably a weak agent. Make sure they can show you exactly why they are pricing your house the way they are.
The Danger of Over Pricing
Let’s learn from a real example of pricing a house in Belgrade, MT.
It started with a phone call that every Real Estate Agent dreams of. “Come list my house!”. These are the best kind of phone calls and they never get old. The only problem was, we didn’t agree on the price of the house.
I ran the comps and put together a report which determined the listing price of the house should be around the $300,000 mark. There was some flexibility in the price but, that’s where the market was suggesting it will sale at. The owner did not agree, and wanted to list higher. At this point I decided to walk away from the listing, as I knew I would be doing them a disservice by taking the listing at the higher price.
A little while later, another agent agreed to list the house at $325,000. A lot of agents will either avoid the hard conversations or they do not have the experience to know better. Either way, this will often lead to a disaster. After 32 days on market, the seller fired the agent due to lack of activity, and hired yet another agent that was happy to list the property at $325,000.
After another 60 days on market (median days on market for this neighborhood is only 10) the house finally gets an offer at $315,000. She wasn’t happy, but agreed to move forward with the sale. Over the coming weeks there is an inspection and the appraiser comes by to begin their valuation. At this point both parties are starting to pack up their homes to move.
Finally, a few days before the scheduled closing, the appraisers report comes into the bank. The valuation came in at $305,000. This price is well below what the seller was willing to take, and the buyers were not able to make up the difference in price in order the buy the house. The transaction fell apart, and both the buyer and seller were left in a state of frustration and disappointment. On top of not getting the house, the buyers we out approximately $1,300 from the cost of the inspection and appraisal. The seller was out time and effort and was not able to move like they wanted.
This could have all been avoided if the other listing agents were willing to have hard conversations and not just put a sign in the yard. Often times, if a Real Estate Agent is telling you something that you don’t want to hear, it’s because they are telling you the truth. Weak agents are typically more likeable because they just agree with whatever you want to hear. When hiring an agent, it is really important to know they have your best interest in mind and will not just say yes to you.
If you are curious about the value of your house or are ready to put your house on the market, please contact me today.