I was recently talking with a top agent about market conditions. She was telling me about a listing presentation that she recently went to. In the market analysis was EVERYTHING that was either on the market, under contract, or sold in this area of town, and based on that information and her knowledge of the market, she came up with a price that she thought the house was worth in today's market. As she was meeting with the owners and going over what asking price she thought they should go with, she noticed a change in the owners face and tone. They were very disappointed at the price the agent came up with, as they thought that their house was worth almost double of what this agent suggested, and they were not going to list their house below what they thought the house was worth.
This agent now faces the same dilemma that many agents face today...should the agent take the listing knowing that it will not sell at the price they are asking, or should the agent walk away from the listing.
WHAT!?! A Real Estate agent walk away from a listing?? The one thing we are told about the industry from our first training session is that listings are the key to a successful Real Estate career. Now we have to think about whether or not take a listing from owners who want to list with us?
Yes we do!
There are actually a lot of reasons that the right move in this scenario is to walk away from the listing. Lets say that you take the listing at the owners price instead of the price that the numbers and your experience tells you. You have now taken a listing at a price above what you think the value is, and that you know will not sell at that price. Now you come across as an agent who wants the listing no matter what and will do anything to get it. You came up with a price that you believe the house will sell at based on facts and statistics, and because it does not mesh with what the sellers THINK the home is worth, you abandon the statistics and your experience and take the listing at the owners price.
Then you spend the next month marketing this listing though all of the channels that are available. You broadcast it all over the internet, to the neighbors, and to your sphere of influence. You have all the agents in your office caravan the listing. You hold a Broker's Open House to present it to agents in other agencies. You place it in the local Inter-Office Caravan, another chance to let agents from other offices preview the home. With all of these activities, you make sure you get feedback from the agents about the house...conditions, suggestions, price opinions, etc, all of which you report back to the owner. However, in the first month, there has been little activity. Showings are scarce and online activity has slowed down. You now do what every prudent agent should do, you sit down with the owner and go over what has happened in the last month, and make suggestions on drumming up activity, including making a price reduction. If the sellers are sticking to their guns, and want you to continue to advertise at the current price, even though you told them you think the price should be reduced, you have created an adversarial relationship with the owner. You will now be at odds for the remainder of the listing period and will ultimately part on unfavorable terms if the listing does not sell.
Now the listing has not sold after the listing period. They end up listing it with your competitor up the street and at a reduced price! All of the time and resources it took to get the house ready to put on the market and to implement your marketing plan, was for nothing. You have just parted ways with an unhappy owner, who then went to your competitor to do the job that you failed to do. All because you accepted the listing at the owners price, not yours, because listings are so important to your success.
I don't think there are too many people out there who would classify this as a success.
The market value of a home is determined by what a buyer is willing to pay for it. Today's buyers are a lot more knowledgeable than in the past. They do their research on the market, and are always looking for a deal. Most work with an agent, and go over market stats with their agent so they can go into the buying process prepared. They know if an asking price is too high, and will either not look at it or submit a low-ball offer in hopes that the seller becomes more realistic. Neither of these option is ideal for you or the seller.
Two of your main duties as listing agent to the seller, is to try to obtain the highest possible selling price, and to act in the owners best interest in obtaining that price. Are you trying to obtain the highest possible price for this listing by setting it at a price that will attract very few offers, and the ones you do get will most likely be low-ball offers below the true market value? Are you working with your seller's best interest by taking the listing, knowing full well that it will not sell at their asking price? It can be argued that an agent is not fulfilling these duties when they take a listing that is overpriced.
This exact scenario doesn't happen all of the time, but it happens enough. There are certainly circumstances in which the right move is to take the listing, for example if the sellers is a referral, friend or family member, you probably should take the listing. However, if you do, you must explain to them the drawbacks of overpricing their house. Bottom line is that agents really should think long and hard before they go against facts, experience and knowledge to take a listing that is priced above the market.