Real Estate’s Dirty Little Secret And Why It’s Costing You Money!

Home sellers ask me all the time why real estate agents take overpriced listings!

What could possibly be in it for those agents to knowingly get involved in marketing a property that’s overpriced?

“There sure isn’t a home buyer out there who’s going to pay those kind of prices, am I right?”

So, why do they?

It just goes against all common sense and logic!

And that’s exactly why it’s considered to be one of real estate’s dirty little secrets!

In this article, I will discuss in more detail why real estate agents behave that way and why they’re so keen on taking those overpriced listings:

Desperation rules!

Unfortunately, a lot of real estate agents lack the basic integrity, lack negotiation skills, or are so desperate for new business, that they will agree to any price the home seller proposes!

The home seller may have heard via the most recent neighbourhood gathering that ‘the one down the road from him’ has his property on the market for at least 25% above the average selling price in the street!

“Honey, listen to this – guess how much Raymond a few houses down is asking for his house?! I’m 200% convinced now we can ask AT LEAST as much, if not more for ours! I’ll make sure to tell it to those agents tomorrow!”

The ‘weaker’ agent might right there and then already know that he’s dealing with an overpriced listing, yet agrees to market the property at that price anyway!?

Why would anyone in his right mind enter into a proposition like this?

To someone not active in the real estate business, this might look like the silliest move on part of the real estate agent! (to put it mildly!)

As mentioned in the introduction, this counter-intuitive move is exactly what is considered to be real estate’s dirty little secret!

While the majority of us might be baffled as to why an agent would want to do this, as the veil gets lifted every so slightly, you’ll realize how dirty this little secret really is!

Keep in mind that this very competitive real estate business is a commission-based one, where the agent who walks away empty-handed from the interview, will likely be the one not making any money on this transaction.

Wasn’t it Heinz Guderian who said that, “There are no desperate situations; there are only desperate people“?

A reputable real estate agent will actually face the reality music and inform the home seller the truth regarding his price, hereby of course potentially losing out on getting the mandate to sell the property!

Check mate the competition!

Even though most real estate agents are independent contractors, quite a few do have to report their ‘busy numbers’ to their brokers: how many open houses this past week or month, how many contracts closed, how many pending deals in mid-negotiations… and how many new listings on the books!

How’s the latter for an extra incentive to make sure some of those overpriced listings get onto the books?!

Not only that, at the same time, you’re making sure via signing the mandate that you’re the listing agent.

Yet another property the competition doesn’t have on their books!

Eventually, the home seller will start to realize over the weeks/months of low-to-no activity that something needs to be done in order to sell his property!

Yet another reason why the real estate agent who took on the overpriced listing is now rubbing his hands together! Price reduction – woo hoo!

Advantages for real estate agents!

Of course, there will always be real estate agents who will be more than happy to take on overpriced listings!

Next step in their ‘ingenious marketing plan’ will undoubtedly be to make sure to put up a ‘For Sale‘ sign outside the property, get it onto the property portals (or MLS) asap, and start organizing the first open houses!

After all, all these free advertising tools will lead to more clients (buyer and sellers) contacting them, who would like to view other houses or want the agent to stop by to do a valuation.

And if this strategy is one where they take on any and every overpriced listing in that particular suburb, guess who will be all over the place with their signs?

More exposure = more business! (or at least, that’s what they hope will happen!)

These agents might not necessarily sell the overpriced properties they have on their books, but they sure will get some solid leads off of them, which will result in some commission somewhere coming in!

In other words, these overpriced listings will be used as springboards to help sell other properties!

Disadvantages for home seller!

Time is not your friend!

Every day, every week, every month that passes, and your property hasn’t sold, it means your chances of getting a market-related price are seriously dropping!

Period!

As a home seller, you need to realize that the longer your property is on the market, the more damaging it will be for your final closing price!

That’s assuming your house has been correctly priced, which is especially important if you’re trying to sell your home in a buyer’s market!

In the event of it being an overpriced listing, you’re pretty much guaranteed from the get-go to be sitting on the market for a looooong time!

You want to test the market and see if you get anyone interested at those overpriced levels?

Sure, why not!

Make sure you then remember who decided to market the property at those inflated prices!

Humans are known to get greedy: if you ask anyone whether they want more money or less money for their house, what do you think the majority will answer?

Point in case: was it Agent A, who gave you a correct market value; or Agent B, who was slightly overpriced? Either one would have been able to save your now.

However, if you opted to go with Agent C, who came in with a valuation WAY off mark, and clearly stood apart from his fellow agents with his higher price, let’s hope you remember WHY you decided to choose him! There are plenty of home seller mistakes to make when choosing a real estate agent to represent you!

Let me ask you this:

Do you know what the #1 question home buyers ask when they meet the real estate agent doing a viewing of the house?

“And how long has it been on the market for?”

Whereas many years ago, the agent might try to avoid answering the question, nowadays, most educated home buyers can find out for themselves when the marketing of the property started!

“Ooh, it’s been on the market for more than two months?!”

“Jeez, what’s wrong with it?”

“These home sellers must really be desperate now to see any offers. Let’s try to go in low and see what happens!”

That’s the reality!

I kid you NOT!

Having an overpriced listing is a kiss of death when trying to sell your home!

Adjusting your price lower after all that time on the market will only raise even more questions from the few interested buyers left!

“If I wait another few weeks, I’m sure they’ll drop the price even more! We must not hurry with this one!”

As statistics have clearly proven time-and-time again, overpriced listings do eventually sell, but at prices below they would have if the property had only been marketed at the correct market price from the start!

Closing thoughts

By now, you must have a good idea how bad things can get when you decide to work with a real estate agent who was eager to tell you whatever price in order to get your business!

Sure – those type of agents will slowly but surely develop a reputation in town of taking on any listing, regardless of price!

Some real estate agents even hope that those particular agents will get the mandates first, so by the time they expire (and they definitely will!), they can then swoop in and guide the home seller towards a successful home sale!

At a realistic level!

So, is it the chicken or the egg? 

Is it the real estate agents who are pushing those listing prices higher and higher?

Or are the home sellers getting more and more greedy, only feeding off those other high prices?

Bottom line: home sellers should be doing more homework prior to placing their property on the market:

How to interview a real estate agent when selling your home? What are the consequences of being an overpriced listing in the market? What would be your reasons for overpricing your home?

And more agents should try to take the ethical approach of actually telling the home sellers the truth when it comes to pricing!

Over the long run, they’re not only damaging home sellers one overpriced listing at a time, they’re actually hurting their own reputation! (plus they’re creating quite the headaches for those agents trying to do a correct job)

I guess until then, every local property market will be faced with its fair share of overpriced listings.

And consequently, its fair share of disappointed home sellers!

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About the author: The above article “Real Estate’s Dirty Little Secret And Why It’s Costing You Money!” was written by Xavier De Buck, your top-producing Johannesburg real estate agent. Xavier has been nationally recognized and awarded for providing service excellence, exceptional property sales, whilst exhibiting the highest level of professionalism. With over 15 years combined experience as a real estate agent and real estate investor, if you’re thinking of buying or selling a home in Johannesburg, Xavier would love to share his property knowledge and expertise.

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