Matthew Ferrara, Philosopher
 

Why Overprice Property Just a Little? Go for it!

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 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 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 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 – is even going to notice.

  • This is wonderful! Sellers don't realize that even a small mistake in pricing can effectively render them invisible to buyers. People don't drive around looking for signs – they tend to have a maximum number that they can play with and if theirs is $225,000, your home that you prices at $235,000 with $10,000 worth of “wiggle room” will be screened right out of their search.

  • That is a terrific article and SO true. Sellers simply do not realize what they are doing when the property is overpriced. Buyers are pretty astute at what the “market” price should be. Well written!

  • Anne Webster

    love your style!

  • Great post….I am going to do some screen shots of this and include it in my listing presentation material…I would love to just whip this out the next time I am told ” let's just try this price for a little while”

  • Go for it! :>

  • Interiorsbymarianne

    Mathew,
    I LOVE your humor!!!!! Any halfway intelligent person knows that price and condition SELLS houses!

  • Interiorsbymarianne

    Mathew,
    I LOVE your humor!!!!! Any halfway intelligent person knows that price and condition SELLS houses!

  • Dbehrens

    Matthew, Well, LOL this one takes the cake.

  • Tricia

    That's fantastic. I love the new strategy. I'm going to use this at my next listing appointment- I can't wait to the reaction- I'll let you know how it goes !

  • Bdlasky

    My other favorite from Sellers is when you tell them the price they want to list their home for is overpriced and they say “just have them bring an offer!”

  • The problem seems to be that most seller's would be doing short sales if their homes were priced appropriately.

  • This is so funny! The truth is, overpricing takes your home out of the eyes of potential buyers, and many sellers don't realize that from their seller's point of view (even though they do the same thing when it is their turn to buy a home for themselves). Maybe the solution is to use some psychology on these clients, reminding them of how THEY personally think when they are in the reverse role, looking to buy a home

  • Ron Deval

    Cute article, but not really useful. Sarcasm just doesn't work with sellers who are unrealistic. I just say, “I don't mind hanging my sign in your yard… it will generate calls.. but you are not likely to sell your house at that price. Why don't we have it appraised and see who is right.”

  • Phil Anibal

    If the truth is that it is a short sale, lying to your self and everybody else by over pricing the property when taking the listing only prolongs the agony of dealing with the ultimate truth. Better to deal with it sooner than later. .. Phil

  • Gayle Roffis

    Thank you so much…I can't wait to sbring out you piece at my next listing presentation!

  • Well, your post is sarcastic and comical BUT it hits the point straight across. Their is NOT measurable benefit to overpricing. It just wastes time and when the price is adjusted the WHOLE marketing program needs to be repeated. Sometimes that in itself can be embarrassing.

  • ha, ha — wouldn't it be so much better if agents just learned how to say NO to overpriced listings to begin with?!
    Maybe we can start a niche to dovetail with the overpriced one for sellers who refuse to fix, clean, de-clutter, replace old carpeting, take down wallpaper, or repaint! That automatically makes any home overpriced; if they also way overprice it, won't it be fun to see buyers' reactions when they walk through?

  • TerryWard

    This is funny and I enjoyed reading it. The unfortunate reality is that soooooooo many of the sellers I talk with owe more on their mortgage than the property is worth in today's market. So, they either overprice the property or hold the property off the market until prices “return to normal”. I think agents need to learn to gracefully turn down overpriced listings.

  • Matthew, I loved this post. I had a potential seller who wanted to do that exactly. A property which is worth about $3.8m on a good day in Malibu and he wanted to list it at $5.9m he found one agent and they listed it at $5.5m. (not with me:)))

  • Thanks John! I do think we need to consider the psychology of the seller, to help them understand it's not about THEM.. :>

  • Exactly, Phil – but this applies to short or normal sale, IMHO… thanks for commenting!

  • Sometimes, you have to just GO FOR IT! What else do you have to lose? Certainly not a sale-able listing … GRIN!

  • Embarrassing… plus time consuming, damaging to profits, undermines our reputation as professionals… I'm sure we could come up with quite a list! Thanks for your comments, Jim!

  • Well, if they can't say no, at least they can have a good chuckle at themselves… :>

  • Definitely – sometimes the best sale is the one we put off until later… or at least the time is right!

  • Well, you can take some comfort in the fact that you have passed along the burden to another agent, and in the meantime you can focus on good business. After that agent runs out of money trying to sell if for a couple of months, you can always pick it up as an Expired and get the seller's proper attention then… :>

  • Diane

    I feel I must print this article and bring it with me to my listing appointment tomorrow. Thanks for the fuel. Let's see if my potential seller gets it, or thinks your thinking is perfect!!

  • I’d be pleased if this helps make the point at your next presentation, Diane!

  • I'd be pleased if this helps make the point at your next presentation, Diane!

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  • Barbaramiller

    We DO have to laugh at ourselves sometimes! This is a lot more fun to read than a dry, economically-laced blog of bad news for the housing market. Shows there’s more than one way to get out the message. I am actually going to use this in my next meeting with one of my sellers..why not? It’s not selling now! Thanks for another tool to use and for a good laugh! Barbara Miller, Realtor, Wellesley MA

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  • James Daniel

    LOL! There should be a new term for this strategy…long sale!