How can one agent sell my house for more than another one?
Simple. He can’t.
The market determines final sales prices. Not the agent. Not the seller. Not the neighbors. Not your relatives. The market.
Yes, I understand one of the agents claimed he could get more for your house than the other agents you interviewed. This is a fairly common, although unethical, practice in the real estate industry. It’s often called “buying the listing.”
The agent’s strategy is to get you to list your property with him by telling you he can sell it for a higher price than any other agent. The price is not supported by the comparable sales in the area (red flag #1). The agent will usually talk about how his marketing will draw more traffic and get you more offers on your property (possible red flag #2). If you’re lucky, you might even get into a multiple bid situation and further inflate the final sales price (red flag #3 – nobody knows how many offers will arrive or when, although the opposite approach of under- pricing this listing makes this much more likely than marketing).
That’s music to a seller’s ears. Too bad it doesn’t work that way.
Pay close attention to the following statement:
There is no amount of marketing that will make a buyer overpay for a property.
Let’s say your neighborhood grocery store was selling Oreo cookies for $3 per package. At the same time, the neighborhood gas station was selling identical packages of Oreo cookies for $10 per package. Where would you buy the Oreos? At the grocery store, of course.
Take this one step further. Let’s say the gas station has the $10 Oreo cookies in a glass display case in the middle of the store, there are 100 black and white balloons attached to the outside of the store, there’s a big banner advertising the $10 Oreos, and there are even dancing models in bikinis in the store telling you about the $10 Oreos.
Now where are you going to buy your Oreos? The grocery store, for $3, of course.
The same principle applies to real estate. Buyers are not stupid. And the banks loaning money to the buyers are not stupid either (anymore).
The agents who use this strategy are getting you to sign a long-term listing agreement. This gives time for you to see how many people are interested in overpaying for your property. Surprise, surprise…no buyers are making offers.
“Well,” says the agent, “I guess you should lower the price.”
And that’s how it works. Once you’re in the long-term listing agreement, you’re stuck. The agent knew that would happen from the beginning and has removed your ability to choose another agent.
There may be some concern that a low list price will cause the seller to lose money. “If I price it so low, there won’t be room to negotiate.” This is a common concern, but the free-market system solves that problem. If a property is priced too low, all the buyers will be interested in it and will bid the price back up to market value. It operates like an auction at that point.
You’re in a much better position if you price your home at market value and reject offers that don’t meet your price or terms. If you price it too high, you won’t get any offers at all. I see this happen every day, from weak agents who do a poor job of educating their sellers. You can’t afford to make mistakes like this in any market, especially in today’s market.
