With Labour Day behind us now, the fall real estate market has officially begun!
Just like last year, and the years before that, we're going to see a ton of new listings hit the market this week. And inevitably, some of those listings are going to be overpriced.
There are a handful of reasons why a seller chooses to overprice their home. In this post I want to focus on just one of those reasons: The listing agent lied to the sellers about the true market value of the property.
The Sunshine Approach
The manager at the brokerage where I started my real estate career referred to this as "The Sunshine Approach"; the idea being that the listing agent is "blowing sunshine" up the seller's arse by deliberately overvaluing the home in order to get the listing.
I see it happen all the time. A seller interviews two or three realtors, and ultimately chooses the one who suggests the highest list price. The seller gets stars in their eyes, and is fooled into thinking that the ridiculous list price is actually achievable.
The listing agent's plan is simple: continually work on the seller for price reductions until the home finally sells (almost always for less than market value).
Isn't The Seller Partially To Blame?
Yes, the seller is often partially to blame here. Especially when the other two realtors they interviewed suggested lower list prices (which were no doubt backed-up by tangible market data and past sale prices in the neighbourhood).
Instead, the seller chose to list with the one who came up with the highest number, in spite of what the market data showed.
The seller in this situation sometimes knows, in their gut, that it's too good to be true. But flattery and the promise of an unprecedented sale price get the better of them.
Have I ever taken an overpriced listing?
Yes, of course I have taken an overpriced listing.
The difference being, the sellers knew from the beginning where I stood on the value of the home.
I made it clear to them that the list price they were choosing was too high, that there were risks involved with overpricing, and that a price reduction would eventually be needed.
It's certainly not the best way to sell a home, but sometimes a seller is determined to "try their price first", even if doing so is going to potentially have a negative impact on the final outcome.
In the end, a seller needs to be realistic and question any advice that sounds too optimistic.
If you're interviewing more than one realtor, be cautious if one of them values your home significantly higher than the others.
A little sunshine is good for your health, but too much will leave you burned.
If you're thinking of making a move and would like an honest valuation of your home, feel free to contact us for more info.