Chances are you’re not going to like this article.
What I am about to write flies in the face of the vast majority of real estate agents in North America today.
That is, the number one thing that contributes to the sale of a home, in any market, is the price of the property. That’s it.
Location, features, benefits…all of those have a price tag. What that means is, if I had a dump of a house in a dump of a location, it would sell if the price was low enough.
That being said, what’s low enough for a buyer to want to buy may not, in fact, be low enough for a seller to want to, or be able to sell. Yes, that was simple economics at it’s best and it lends to explaining much of what has gone on the last few years…the price a seller would/could sell a house for far exceeded the price a buyer would (and sometimes could) pay for the house.
Now, let’s get back to the reason you, and most agents, might not like this article.
Both when practicing real estate (May 1998-Dec 2006, top ten percent in my market 2001-2006), and more recently as a coach, I’ve heard the arguments against price being the number one reason homes sell. Most of those reasons center around an agent’s ego and/or the huge misconception as to what their job actually entails, as well as some sort of misplaced loyalty to the seller and the price they say they want. (Before I go any further, I’m not in any way advocating that you shouldn’t be loyal to your sellers. I’m saying defending a random price a seller tells you they want, ignoring comps and any sense of reality, is misplaced loyalty.)
Some of the arguments from agents:
“If price is the only thing that matters, then we real estate agents aren’t needed.” – Guess what? That’s actually kind of true. If you’ve ever heard of a FSBO selling on their own, then you automatically realize selling a house can be done without a real estate agent. The good news is that the vast majority of FSBO’s do not sell without the help of an agent (even if only on the buyer side – but most end up listing). And, unfortunately for the FSBO seller, they get a very low list to sale price ratio as compared with when listed by an agent (both stats are published by NAR). So, on some level, my fine fellow agent, you are definitely needed…so breathe a little easier.
“All you want to do is lower the price as far as you can, darn the seller, and take your quick commissions!” – A buyer will not buy something they don’t feel is priced correctly; plain and simple. I’ll explain more about that later in this article. In the meantime, I can only go on statistics/facts. My personal statistics in my former real estate practice showed my listings selling for an average of 4-9% more and up to twice as fast my market’s average, depending on the year. Simply put, I was getting my sellers more money, and selling their homes much faster than the market average. So how was I harming the seller? I don’t know many sellers that want their home to sit on the market for a long time, do you? Do you know of any seller’s who want LESS money for their home? I sure don’t.
And where does this false sense of loyalty to the seller’s price come from? I’m sorry, but it’s so misplaced. I always wanted to get as much money as possible for my sellers, and did my absolute best to make that happen. But just because a seller WANTS a certain price doesn’t mean they’ll get it, or, in most cases, that it’s even realistic. I’m sorry if the seller paid $400,000 and owes $350,000. If the comps say it’s worth $275,000 then that’s what it’s worth. Listing it at $400,000 so the seller can feel like they broke even does NOT mean the home is WORTH $400,000. Nor does it mean they will get anywhere near that. In fact, in my example, with it being so far overpriced, if there isn’t a significant price reduction, the house likely won’t sell at all. How is that protecting the seller?
I don’t want to digress too much, however in a previous article I wrote on negotiating, I discussed the issue of many listing agents being egotistical about the price they set on their listings. If a buyer comes in low, the listing agent scoffs and postures to the buyers agent about how the home is worth every penny of what it was listed for, etc. Please. The only true test of what a home is worth is what a ready, willing, and ABLE buyer is willing to pay…not what the listing agent or the seller thinks its worth.
“It’s not price, it’s marketing. Staging, open houses, broker opens and advertising are all where it’s at.” – This is the reason for the big chasm between the average agent (selling between 2-5 houses a year, on average, according to NAR) and the higher producers (over 25 homes a year). Agents who sell a lot of homes know how to SELL, and know that their job is to SELL the home for the most money possible. Agents who don’t sell a lot of homes typically aren’t good salespeople, don’t actively prospect for buyers and sellers and think their job is not as a real estate SALESperson, but rather a real estate MARKETINGperson.
Simply put, you can market a house to the hilt, but it will NOT sell if the buying public thinks it’s overpriced. In fact, today’s shrewd buyer who combs the internet and does their homework, won’t even look at home that they feel is overpriced; unless they think they can get a tremendous low-ball deal. And, if you want to take a notorious low-ball buyer around so he/she can throw offers up on a wall and see what sticks, have at it. You’ll end up doing a lot more work and probably be very frustrated.
So, let’s investigate some of these marketing ideas:
Staging – I’m always amazed at how someone comes up with something for agents that doesn’t sell homes, yet agents buy into it in droves. Text “MOVE” to 12345 and receive no obligation information on this listing. That worked for about a minute until buyers realized they would get called back from agents they didn’t want to talk to. Now, it’s no better than a regular sign with a regular phone number or website. Or, how about the private radio station that drive-by buyers can tune into and hear all about the house? Way to go! You just bought something that assures you of never hearing from your buyer leads! They won’t need to call you to find out information because you gave it to them on their car stereo.
Staging is one of those tools that doesn’t sell a house. Yes, the house should always look its best. And, yes, if you stage a house, it will look better than the competition. BUT…staging only works better to sell your house versus the competition if the home is priced competitively. Let’s say you’re in a development, and two identical houses on the same street are for sale. One is for $350,000 and NOT staged. The other is for $425,000 and is staged. The seller or agent who paid for staging of the $425,000 house doesn’t know anything about sales or economics and wasted their money. No amount of staging in the world can trick a buyer into grossly overpaying for a house.
Open houses – This is the biggest real estate scam ever perpetuated on sellers. And the funny thing is, many sellers will fight tooth and nail for the right to leave their house for multiple weekends in a row so that you can park yourself there for 4-6 hours at a time and put balloons out front.
NAR itself puts out a report every year that shows a very small percentage of buyers buy the home they saw open. It’s usually around 1%. That is an astonishingly low rate of return on your marketing efforts.
Open houses do provide buyer leads for the AGENT, not the seller. All listing agreements should come with a disclaimer showing the past year’s NAR percentage of homes actually bought due to the open house.
Low producing agents love open houses because they haven’t been taught, or are too afraid, to prospect for business. So, the idea of sitting in a home and having potential buyers come to them seems good. Never mind that most people are just looking, and the percentage of leads converted to actual buyers (and the time it takes to convert them) is no better than a call in on a sign or website. And let’s not mention the fact that you may sit all day at a house and have NO traffic. God forbid if it’s a rainy weekend.
Broker opens – These have a small chance of helping you sell the home because it can get you exposure to agents who missed it in the myriad of listings on the MLS. However, it’s usually not worth doing a broker open until well into the listing term, and is most effective to get a price reduction for the seller by having the agents write their pricing opinions on a survey card (darn, there’s that pricing thing again). And here’s the fundamental flaw – top agents, you know the one’s doing 90% of the business, are typically too busy to stop at broker opens. So you’re exposing the property to a handful of agents who have nothing better to do than to eat your free lunch. Look, I know I’m sounding harsh, but my big concern is that many agents think their job duties entail hosting and going to things like broker open houses and working on making a pretty brochure…things that DON’T help sell a home.
Advertising – Here’s another scam on the seller. NAR reports a very small percentage of homes are sold as a result of being advertised. I will admit they also report a slightly higher percentage of homes are sold as a result of the buyer calling in on a different home, so advertising can help (but the home still has to be priced right). For the sake of this article however, I want to stick to the specific house you have listed, and I’m talking about advertising over and above the norm. I mean the type of advertising where the agent thinks it’s the solution to why the home hasn’t sold in the last 90 days. We all know that every agent does some form of advertising, whether it’s the MLS itself, the various websites that agents/companies have, the websites that pick up listings from the MLS, or the newspaper ads your company provides.
Here’s the flaw: If your local grocery store paid for circular ads in your town’s Sunday paper, and advertised premium, no-filler, turkey lunchmeat at $50 a pound, how many people would buy it? The answer is nobody. Two things would happen. People might still visit that store, but they would buy another brand of turkey lunchmeat (congratulations, you’re overpriced turkey ad sold the competition), or people will go to another store all together to buy that brand at its normal price. In any case, the store could have spent millions of dollars on ads all over the place and it wouldn’t matter a lick in regards to the sale of that brand of turkey.
Yet sellers and agents all think that more advertising will equal a sold home.
The bottom line is that your job as agent is to educate the seller and list the house at a price that will cause the home to sell. Stop kowtowing to the seller who wants to overprice the home. Stop with the false sense of loyalty to a pie-in-the-sky price, against all reasonable economic sense as evidenced by the comps. Stick to your guns, be professional and price it right. Or, horrors, be willing to say “no” to the seller, and walk away from listing the home if they insist on overpricing it.
You’ll be doing yourself a huge favor, I promise you. Even if another agent lists the property, don’t worry. It’s not going to sell. Look at your market. Look at any market. Overpriced listings don’t sell. Why do you think there are so many expireds? Oh, right, I forgot. The agents all must not have staged those homes. Yeah, that’s it.