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Ask any broker today what his “number one” problem with the market conditions, and he’ll tell you either there’s too much inventory or it’s all overpriced. Granted, if sellers want to put their homes on the market, nothing can stop them, with so many “for sale by owner” options out there. But that still leaves the issue of the overpriced homes that are represented by brokers. And that begs the question:

Why are brokers hiring sellers to sell their own homes?

For more than a year, I’ve been asking agents over and over: Why are there so many overpriced listings on the market? And every time, they hem and haw, look at their navels and mumble something about “It’s the seller’s fault.” I’m sure that agents have “tried everything” to “convince” the seller to choose a more reasonable price, but when they still leave the appointment with the sellers-established price, there’s no other way to describe the outcome:

Brokers are willing to let their sellers be the boss, not their agents.

As brokers continue to hold inventory longer and longer, they are learning the iron law of pricing: you can’t sell a commodity for more than the market price. Bear Stearns, Lehman and AIG couldn’t. So what makes brokers think they can do it? Because homes are “special”?

What is the agent’s job, if not to determine the market pricing for the property? Like a stock analyst or the price-manager at a computer vendor, an agent’s analysis of the recent sales (not the competitive or comparative offers) should clearly establish the pricing of the property. Why bother doing a market analysis before going to listing presentations already know what the “comps” say the house should price for – according to the buyers in the marketplace? Why even have a MLS at all, if the critical data – the price of homes – is being set by the sellers, not the professionals?

If agents return to the office with a different price from the market data then it’s clear who is actually selling the home: The Seller. The agent isn’t in control of the listing. If he’s not in control of the price, then he’s likely not in control of the marketing (which is why they kowtow to sellers and run useless newspaper ads). He’s certainly not in control of the offer process, since reasonable offers may still come in, but won’t possibly meet the seller’s “expectations.” If it takes weeks to correct the price – to “lower” it – to market levels, then the agent isn’t in control of the expense-management portion of the transaction.

At every level, the seller is calling the shots. There’s a new boss in town – and he’s not interested in your complaints. Just price it like he’s telling you – and shut up if you can’t make a profit!

If someone other than you – with supposedly less knowledge, training, experience and skills – is in control of your business, they why would you be surprised that your company is taking a nose dive? Does the defendant tell the lawyer how to beat the case? Does the patient tell the doctor how to conduct surgery? If the consumer was “such an expert” then why aren’t they more successful on their own? If 88% of all For-Sale-By-Owner properties ultimately list with a REALTOR (or sell for 16% less on average than REALTOR-represented properties) then why do so many brokers let the consumer take charge?

Lots of reasons, I’m sure. The old cliche that you have to “list to live” is another nail in the coffin of “death by cliche” for the industry. Or “the customer is always right” which would be accurate – IF brokers realized that the CUSTOMER is the BUYER, not the seller. If buyers say the price should be lower (evidenced by recent similar sales), he IS right. Except that sellers don’t listen to buyers, because they’re the boss, right?

Maybe it’s some sort of crazy service-altruism strategy where brokers  believe they exist to “serve” the seller, ultimately at their own expense. Every shred of evidence indicates that brokers KNOW better than what they are doing today – yet they continue to do it, to sacrifice themselves, their profits, the companies they built, because some “seller” tells them to price it above the market.

Selling commodities isn’t magic. One party offers a product; the other party indicates its desire and tolerance for purchasing the product (by making a price offer). By watching buyers, and managing available inventory, commodity brokers try to create a balance point where the most number of units sell for the greatest average price. Brokers who have excess listings in their OWN inventory that are a) similar in features and b) competing with each other on price are creating their own sales problem. It’s one thing to price properly against a competing broker’s listings; it’s another when it’s your own sellers who are creating a self-defeating pricing model with your potential buyers.

The bottom line is this. Brokers aren’t selling homes today because they aren’t in charge of the process. NOT because of a credit crunch or falling equity prices. Those are consumer problems that brokers have adopted into their business models. There’s no reason why a broker can’t find and select those sellers who are willing to properly price their inventory to sell – other than the fact that they aren’t in charge of the decision. When a seller calls, agents and brokers jump. You want to overprice it, Mr Seller? Sure! You want newspaper ads? OK!  You want me to advertise it for weeks, push it on the web, show the rest of the marketplace how bad we are at pricing and offering good products for sale – of course!

You’re the seller. You’re the boss.

..M