Saying a home is just a “little” overpriced is like saying you’re just a “little” pregnant. Sellers who do it should insist on the full benefit of overpricing. And it’s in their agent’s best interest to help.
Every day, homeowners decide to list their homes at prices the market supposedly considers “over priced.” Even with the benefit of the internet, showing what other homes nearby recently sold for, they do it anyway. Despite years of industry and media attention, overpricing remains the norm, in every market, every price range. Truth be told, nobody really tries to stop them from doing it either. Few and far between are the agents who refuse to list overpriced properties, or managers who reject the responsibility and cost of advertising them.
What I’ve never really understood, however, is why both owners and agents do overpricing so badly. Once you make the decision not to put the home on the market – which is what overpricing effectively does – and just list it for the benefit of wasting time, money and further messing up the MLS data – adding “just a little” extra onto the market-indicated price seems counterintuitive.
By overpricing their homes, owners are indicating they believe there’s someone “dumb enough” to pay more for their home than others in the market. Why look for the “marginally dumb” consumer by tacking on a mere $20,000, when you can look for the “truly idiotic” buyer who will throw an extra $100,000 on the table? Isn’t there a “certifiably insane” consumer out there just waiting to pay an extra million for your home?
As for the real estate industry, once a seller expresses an interest in overpricing their home, their agent should insist on gross overpricing. It’s the only logical way to compensate for the amount of lost time, advertising money and negative public perception they will incur for listing an unsellable commodity. Since they get paid by commission, agents and brokers will need that extra money – should the truly idiotic or certifiably insane buyer come along – to cover their damages, er, expenses in listing a home not for sale for months.
There are other logical conclusions in defense of gross rather than marginal overpricing. Imagine all the time the real estate industry will save not having to sit through training classes on how to properly price commodities in a marketplace. Consider the millions of dollars saved in newsletters, training tools and marketing materials trying to educate the consumer against something they clearly have little or no interest in doing. Most of all, think about all of the money saved in stress-relief medication once we stop asking agents to argue with sellers about the negative effects of overpricing.
It will be joy, joy, joy for everyone once we all agree to overprice homes with gusto!
In fact, I think there is an opportunity here for a company to secure a new niche segment of the market. Since nobody has taken the opportunity in the last two decades to secure the “we only take good business” niche, we can only assume it’s because market research shows the sellers have no interest whatsoever in proper pricing. In fact, every shred of evidence shows they expect overpricing: Why else would they insist on getting overprice for their own home, then underprice their own offer to buy their next home?
This means there’s a niche opportunity to position a company squarely within customer expectations. Imagine the marketing possibilities. An infinite number of tag lines are possible:
“Supply and demand be damned!”
“Pick your price! We’ll find you an idiot!”
“You’re gonna do it anyway – so let’s go for it!”
“Why sell it, when listing it is so much more fun?”
Maybe the real estate industry has been going about this whole pricing thing the wrong way for years. How much more fun will it be to list homes without the fear of the pricing discussion during the listing presentation? How much happier will sellers be when they find an agent who encourages them to get $100,000 or $200,000 more than their neighbor did? How much less stress will managers have, once they give up entirely on bringing homes to market, when they can go around town bragging about having the most listings worth the most in the MLS!
I think every agent should call their clients right away, and have the converstion everyone’s been waiting for: “Good morning, Mr Owner! I’ve been thinking… I know we overpriced your home when we listed it, but heck, I don’t think it’s overpriced enough. What do you think if we bump it up to just under a million?”
It’s not like anybody – especially buyers – is even going to notice.