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4 Sep 2012
“Why are there some grossly overpriced listings” is a question that clients from as far away as Texas and Florida have asked me. There are three reasons a home may be grossly overpriced. First, the seller and Realtor may not have known how to price it. Second, the seller may want way too much for it, and a weak real estate agent agreed to overprice it. Third, and this may surprise you if you have not been a Realtor yourself for many years, some real estate agents want listings even if overpriced because they can be good lead generators. Let’s talk about this last one.
“Let’s be clear,” as the President likes to say, about what I mean by overpriced in this context. Grossly overpriced listings are homes that are clearly and unquestionably overpriced by a lot, such as $50,000 to $100,000 and in a few cases by as much as $200,000. In the real estate profession, we all know about grossly overpriced listings. Some Realtors have a reputation for listing homes and land at prices substantially above fair market value. People often asked why, and say that it makes no sense, because the agent doesn’t earn a commission if he/she doesn’t sell the property.
Whenever you have trouble explaining why something is happening or why someone is doing something, pause to reflect on this simple statement: Follow the money. In this case, all we have to do is follow the money. Grossly overpriced listings can be wonderful lead generators for the listing agent. He/she gets calls off the sign all the time, and each one of those calls can turn into a buyer for another property. Aha! you say. See how nicely that clause, “follow the money” answers our question?
One listing that is overpriced can generate months of buyer leads from calls off the sign, from the listing in the MLS, and from syndicated Internet sites promoting the listing through the MLS IDX data feed. In other words, a listing agent can sell two or three homes from one grossly overpriced listing. Amazing, isn’t it? This is why some agents have grossly overpriced listings. They’re easy to get, because all you have to do is promise the owner the moon, and then you list it and wait for the leads to pour in.
Why can’t I get grossly overpriced listings? I could, but I wouldn’t be able to sleep at night. I’m such a nincompoop. If I was only willing to play the game, I could make so much more money. Here’s the cold truth about listing presentations. Sellers often don’t want to believe the Realtor who tells them the truth about fair market value. Instead, they most often list with the agent who quotes the highest price, kind of like a bidding process. The highest bidder is the agent who gets the listing who doesn’t sell the property, but who gets leads to other buyers who buy other houses. Follow the money.
Amazing, isn’t it? But now you know another reason why we have some grossly overpriced listings.
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