How Overpricing their Home Led to Bank Repossession (And Why I Won’t Do That Anymore)
You want to save money.
Better yet, both.
I get it. I want that too.
So when it comes time to sell your home, you decide to sell privately in order to save yourself that pesky commission. This sounds sensible and appealing.
It’s interesting what happens in people’s minds when they begin to imagine large amounts of money. Whether they imagine selling for a big price, or envision saving big commissions, it’s almost as if a switch is flipped, and they want more. More. MORE! Their decisions soon follow a predicable downward slope.
Maybe I can save some much-needed money soon becomes, Hey cool, I can determine my own price. That thought quickly becomes, I can determine as high a price as I want because it’s my house and no one can tell me what to do. This mentality quickly descends into My house is worth 50% more than anyone else’s because I changed the carpet ten years ago, and because I’m not willing to sell for less, and that’s the end of it. If they want it, they’re gonna have to pay. Heh heh. (Insert Grinch-like grin and the rubbing together of hands.)
This doesn’t just happen with private sellers. I’ve watched this happen with clients. Despite my highly researched, professional estimate of market value, they demanded I list their home above market value. I did it, and felt uncomfortable for the duration of the listing. I used to think I was treating people with respect by listing their home above market value because they asked me to. I realize now it is not a loving thing to do at all. By agreeing to list the house for more than what it’s worth, I sabotage the deal, and make it nearly impossible to get full market value.
How does overpricing sabotage the selling price? I’m so glad you asked!
I can tell you from experience that an overpriced listing will go through this cycle.
The data shows what market value is. The seller lists tens of thousands of dollars above market value. People look at the property, but no one puts in an offer. After a while, the listing becomes stale. The public begins to assume that there must be something wrong with the house because it has been for sale for so long. The seller begins experiencing anxiety, and lowers the price. Then lowers it again. And again. Eventually, months and months down the road, something has to give. Usually, due to personal deadlines and fear, the seller will give in to an offer that is well below market value.
In one case however, they were not so lucky, and the bank repossessed the house.
As a result there is no return on the investment for the Real Estate Agent who spends their own money(sometimes borrowed money) to advertise the property. I cannot think of any reason why I would want to spend my time and money again on a listing that will not sell.
I have heard some agents argue that an overpriced listing has value for them because they can still pick up buyers from the listing and make money off of the buyer’s. That is in fact true.
However, when I list a property my fiduciary duty is to be loyal to the seller. I desire to get the seller top dollar for their property. I know that if I list it over market value then that simply does not happen.
How to Keep This From Happening to You
Luckily, you can learn from the mistakes of many who have gone before you. I’m all for saving money. But don’t let greed cloud your judgment.
The biggest mistakes these sellers make is completely ignoring the factual data from their trained, professional real estate agent. They were determined to stick to a price simply because they wanted what they wanted. Whether it made sense or not. (I’d like to sprout wings and fly, but all the stubbornness in the world won’t make it a reality.)
Basically, getting rid of the “I’m the king of the castle” mentality will pretty much guarantee success in this and most ventures in life. Because sellers are not the only people or considerations in the equation.
Key points to remember:
- A buyer is not willing to pay more than market value (they research too, by the way)
- A buyer is fully aware that if you’re selling privately, you’re saving the commission – they expect to save that amount too, when they purchase. If you want to slide the commission portion back into the sales price, think again. Buyers can do math too.
- The bank will require an appraisal on a private sale. If the appraisal reveals the value to be less than asking price, they will not approve the mortgage.
I want you to save money and time too – and this is how: keeping the price real, and your greed at bay. It will save you the cost of lost value, and the time of trying to get more than you deserve.
Keep it real.
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