Agent Trick: “Buying a Listing” Vs No Recommended List Price
When I say “Buying a Listing,” I’m not referring to the actual act of buying a home. Instead I am referring to industry agent to agent jargon. It refers to an unethical trick where some listing agents will inflate the recommended list price in order to win the deal.
I have referred to my mother several times in my blog. I’ve learned more about real estate from her than anybody else, oftentimes from her mistakes. She was never an agent, but sold several homes over the last 20 years. She would frequently fall for the “Buying a Listing” trick. She would interview 3 agents and inevitably pick the agent that would promise her the highest price. But her homes would sit and drop. Only after being on the inside did I learn that this was a technique used to win business.
So now when I meet a seller, I don’t give a price recommendation! Pretty counterintuitive heah? And you might be thinking, “I thought that was the #1 value you brought to the table. If not that, what the hell are you good for anyway?” This is why I don’t:
- Picking an agent based on their list price recommendation is ultimately the worse choice you can make. I’ve said before, “So they told you $640,000? What if I told you $675,000, would you hire me then?” And the answer is frequently YES!, with a hint of saliva glimmering from the corner of their mouth. Well that is EXACTLY why I won’t tell you a price!
- Many agents will spend only 20 minutes printing out a list of recently sold homes, and they come up with a range. (sidenote: I don’t get ranges. Everyone wants and expects the TOP of that range, right?) But more importantly, it can take upwards of 5 to 10 hours to come up with a price and that is done WITH the client (maybe another post will detail this process). So, I won’t spend several hours on a listing, if I haven’t even been hired yet. You get my full attention… after you hire me.
I also don’t like the agent vs client mentality. It is counterproductive, when it should be more of a collaboration.
Once I went to a “large” real estate company meeting to teach them about blogging. The broker ended the meeting with a pep rally style, “Now go out there and get some price reductions!” Are you kidding me? It shouldn’t be a battle between the agent and the client, but instead the agent fighting to NET the client more. Being a partner in the pro
cess, not a smug know-it-all looking after the agent’s best interest.
If you pick an agent based on the highest recommended list price, be prepared to SIT, DROP and NET less.
Written by FranklyRealty.com Broker Frank Borges LL0SA, and I approved this message.
(please report typos, and follow the comments at blog.FranklyRealty.com)
- 12
- February
- 2008
Great Post! I typically walk from listings that I feel are doomed to overpricing from the beginning….but then I list them the day they expire!
You have an interesting approach to getting a listing, but thanks for making me aware of buying a listing as a trick i didnt know even know.
I’ve never understood why anyone would try to “buy” a listing! Before I got into real estate, I always thought 2 things when I saw a For Sale sign that stayed and stayed and stayed:
1. Seller wants too much
2. Agent must not be very good
My thoughts haven’t changed a whole lot-but the reasons for #2 have been updated as to why!
I’ve told sellers who wanted an unreasonable price for their property that I wasn’t into providing lawn ornaments, I’m into selling their house!
I agree with you.
I’ve lost several possible listings because I did not inflate the price. I am now waiting for the listings to expire so I can go back to them and ask them if they want to REALLY sell now.
Frank, nice breakdown. Price should not be the only factor in choosing a listing agent, especially in this market. Thanks for sharing!
All the best,
Audrey
Hey Kent,
I see this frequently with newer or starving agents. A sign of a good agents is an agent that knows when to walk from a deal. Not just take anything and everything they can get their hand on. So the new agents have nothing better to do than take an overpriced listing and HOPE that maybe 30 or 50% of them close since SOMETHING is better than nothing!
Frank
Well said. In addition, might i add that who are we to asume that the seller is wrong. Likely they are but who are we to deny the possibility of a higher sales price. I’m not talking about some insanely inflated price of $25,000+. More like $5,000. Not a huge amount but enough. Seems to me that all the research in the world doesn’t explain some sales to our occasionally too analytical minds. Sellers have every right to try out any price they want. A week isn’t likely going to make a difference.
I’m going through that right now. A good neighbor–and a close friend–asked me to list their house. I came prepared with all the paperwork filled out (minus the price) and went through the house. I measured and made recommendations on things to do to make it show better. Then we sat down to do the paperwork. I asked him what he expected to sell the house for and he said “At least $200-225,000.” His house is worth about $165-180 tops (with new paint and carpet, and touch-ups). He said “tell me what to do to make it worth at least $200,000”. I told him to get it up to that price, he’d have to spend over $20,000 which doesn’t make sense. Why not just list it for what it’s worth now, with minor fixes? He’s talking finishing the basement, re-doing the kitchen–anything to make it worth what he wants. He wouldn’t sign the paperwork. He said he’d do the carpet/paint and then list. Now I find out he’s going FSBO (at $200,000) because I couldn’t promise him the number. Seriously, $180,000 was TOPS.
Now a 2nd neighbor calls me, and he has a house worth about $260-280,000. He wants $350,000 or he’s not signing. He says he’s going to redo the kitchen and add granite, etc to make it worth what he wants. At $350,000 his house is priced $100,000 higher than the immediate neighbor that just sold for $248,000 and is a very similar home. Hello!
What’s in the water around here?
Frank, you are SO right! In this market you cannot overprice. Otherwise it sits, and then you have to drop the price, followed by lowball offers. Sellers only have the power in the first 2-3 weeks when current buyers in the market view the property. After that you are waiting on new buyers to enter the market.
I turned down a listing where the Seller wanted to price his place at $720k when others were selling around $660k. I turned down the listing and then the next month I had a buyer who bought an exact unit which I negotiated down to $634k. The Overpricer’s property had several price drops down $50k, but withdrew his property after 175 days. I also nturned down a $1.5 Million because he wanted to overprice it, which has now been on the market almost 300 days and many price drops.
Sellers will NET less if they overprice too much. Another great blog Frank.
Frank, you are SO right! In this market you cannot overprice. Otherwise it sits, and then you have to drop the price, followed by lowball offers. Sellers only have the power in the first 2-3 weeks when current buyers in the market view the property. After that you are waiting on new buyers to enter the market.
I turned down a listing whose Seller wanted to list at $720k when others were selling for $660k. He listed with an Agent that agreed to that price. The next month I had a buyer who purchased the exact model across the street; I negotiated down to $630k. After several price drops totalling $50k and 175 days on the market, that other Seller withdrew his listing. Whew, glad I turned that one down.
I also declined a $1.5M listing. I told him how overpriced it was and he chose another agent. It still hasn’t sold almost 200+ days later. But he did choose me for his next investment property, and I got 3 contracts in the first weekend (staging was a big factor too). I’m working on his next listing now. :-)
Sellers will NET less if they overprice too much. Another great blog Frank.
Frank, this is a great illustration of information that public should have. Listing agents should go into listings ready to explain why a “professional” CMA may and usually will come in lower than someone who is desperate for a listing(why would you be desperate in this market?)
Aside from the legal and ethical aspects of this practice of “buying” the listing, the agent is simply asking to get a black eye when the house doesn’t sell and they’ve put money, time and stress into it.
It’s the difference between listing a house and SELLING a house.
I took 2 listings when I first started that were wayyyy upside down (consequently the buyers needed way too much to pay off the mortgage because of course they didn’t have ten cents to bring to the table) – I kept thinking, well maybe if we get lucky – that was a big waste of time – and a tough way to learn a very good lesson.
Now my attitude is, it’s a waste of a good sign (not to mention everything else obviously).
I figure if I walk away from one of those listings how am I worse off than I was the day before? I’m not!
In fact I’m better off for not taking it because I have time to pursue a better listing that will actually sell!
Great blog Frank-
So many people don’t know the “real story” about short sales. I see one person rated it a 5 out of 5. It’s nice that at least your mom, or girl friend reads it.
Ha ha no really, I look forward to your comments. Next thing coming up is the new loan limits and we are waiting to find out the strings attached that may make these loans just as expensive as jumbo loans are now! Rumor is that the new conforming + FHA loan limit will be around $600,000 which is 125% of the DC Metro SMA median price $480,000.
What do you think about the up coming auction in DC in March? Minimum bid prices are really low. Just like we saw with Parkside.
Sincerely,
Kevin E. Connelly
BB&T Mortgage Vice President
703-855-7403 :cell
Awesome Blog. Just found it today from a Patrick.net post.
Aren’t you the pot calling the kettle black? You have a 1 bedroom listing in Clarendon 1021 listed for $439K for the standard 750 square foot unit that is priced at least $20K above any other similar one bedroom in the building. Seems it has been sitting for a while.
Hey Pink!
Actually you are confused.
I do not have a listing in 1021 right now.
See why you were confused:
blog.franklyrealty.com/2007/01/mls.html
or
http://www.tinyurl.com/2ex7vy
It explains how you can tell who the listing agent is.
Or you can see it here:
http://www.franklymls.com/AR6588810.html
If you ever do see a listing of mine that is overpriced, I would love to be called out on it.
Frank
Buyers point of view here. I recently bought a $350K home in Harrisonburg for $50K below the original asking price. The story is simple, both seller & agent wanted top money -especially agent. After careful research (i.e. all houses sold in that neighborhood in previous months, previous price paid, etc.) inspection and appraisal, I offered $349.9K. Seller’s agent said that would be “an insult” to seller. So I walked away. Needless to say, days later the seller asked me to offer again (The house had been seven months on the market before I bought it). Sooooo…. “not only seller wants too much” as I read here, sometimes “agent wants too much” –and sellers just want to sell. Peace.
Hey Justin,
Were you using a Buyer’s Agent? Then you were probably played.
The chances that the agent wanted more, is next to zero. Non-Realtors think that the motivation in going after that last $10,000 is the few hundred dollar higher commission. That couldn’t be further from the truth in 99.9% of the cases. Most Realtors would rather take the barely lower commission and get the deal done fast, so they can move onto the next deal.
As for my fighting for the last $10,000, I do whatever my client wants. Frequently saying “I’ll go for it, but don’t blame me if it doesn’t work out (ie the other side walks)”
Also this blog post was more about figuring out the list price in order to win the listing agreement, and less about the actual end game negotiation.
I am not a realtor, but I really enjoy reading this site, so here’s a post with a seller’s perspective. A few months ago, I sold my house in Florida, in an area hit hard by the crash. We had a contract on it in 3 1/2 weeks, after rejecting 3 previous offers.
How did we do it? It wasn’t our realtor selection.
1) Sweat Effort: We made sure it was in immaculate shape before listing it, and we kept it that way while it was on the market. That meant painting the outside, updating appliances and replacing even small things like switch covers- then driving several hours, a few times a week, after work, to handle seemingly unimportant stuff like dusting, weeding, mowing, and cleaning. I was constantly amazed at how inconsiderate people were about things like tracking mud over the wood floors, locking the doors, etc. Sellers, keep an eye on your investment when it’s on the market!
2) Pricing: We had it appraised two days before we listed it and agreed to take the first offer within 15% of that amount. We told the appraisor we wanted an accurate and conservative number, for our use alone. We did not rely on a realtor to set our price. Our house was not a short sale, so we were better able than some people to set a reasonable price- a price we had figured out before we even met with the realtor. If you have reasonable expectations and are willing to work for it, you can sell your house. If you price it like it’s not a stripper house but refuse to invest a few grand in nice shiny kitchen appliances or new fans, then let weeds grow in the sidewalk cracks while you complain, you’ll be stuck with it.
[…] buyers). Many agents will tell the sellers, “I can get you top dolla‘ “ (or they BUY a listing) and then turn around and tell buyers “this is a great […]
I sorry but you are saying you spend 5 to 10 hours with a prospective client coming up with a price for their house???? based on what unless its a cash deal the appraiser will reference the MLS to coming up with the value of the house anyway, which is what the buyers are willing to pay at the moment in time??? and if it does compare to the recent sales the buyer will not get their loan, so what crystal ball do you look into for 10 hours to come up with a price this is just a gimmick! sorry agent trick.
Hey Catherine,
I appreciate your comment. I always like a good debate. Your thoughts are typical actually, and that is great. The more people that think like you, the better it is for my buyers. I love when my buyers find a home that is poorly marketed and a clueless agent that will actually fold when an appraisal comes in. Yeah right.
Fire all the Realtors, and give appraisers MLS access. Great solution.
The last home my buyers bought had three appraisals, each 5% different then the next. A 15% spread. And you would rely on that to sell your home? Heck, who cares about 15%, at least you saved 1% or 2%.
Frank
> three appraisals, each 5% different then the next. A 15% spread.
Wait … 3 appraisals each 5% different from the next gives a 10% spread. How did you get the 15% spread?
What gives?
You are right! Thanks for the correction of my math.
Great article, my wife and I got conned by an agent who bought our listing. We moved towns and went with the person who promised us the best price. The house set on the market for over a year. Over that time the two house payment nearly sunk us finically and almost destroyed our marriage. We finally sold it to someone who could tell that we were desperate by that point. We unloaded the house, but it was for 20k lower than the original listing and we ended up paying their closing. Lessons learned: your house is not worth as much as you think it is, find an honest agent, price it reasonably (people aren’t stupid when making the biggest purchase of their life) and if it sounds too good to be true it probably is!