Sellers Struggles

House Pricing

I recently had an experience with a seller that every Real Estate Agent is familiar with. It illustrates one of the most difficult parts of our job because we’re confronted with having to potentially upset our clients in order to do our job properly (and make them happy in the long run).

The cause of all this angst is, of course, pricing. Here’s what happened:

I went on a listing appointment for a Seller who had been trying to sell his home for two months already. The property was here in San Diego, in a neighborhood where I have sold numerous properties. I pulled comparable values for the house and determined that the house was worth $560,000 to $570,000. For the past two months, the homeowner had listed the house for $620,000 ($50,000 above the comparable market analysis!). This was undoubtedly part of why his home hadn’t gotten any offers.

After showing the Seller everything I do to market properties, he asked me what I thought the property was worth. It was the start of Spring and I figured the market was still strong, so I recommended we list it at $575,000. Long story short, the Seller asked me to list it for $630,000 instead ($10,000 over his original price). He attempted to convince me that there was more value in the house that I just wasn’t seeing (such as his unpermitted sunroom extension). I didn’t take the listing and the property is still listed as a for sale by owner.

This story isn’t to pick on the homeowner – this is a very common situation that all Agents face. Putting a value on a property is something that Sellers often approach very differently than Agents. The difference is very simple: Sellers value a property at what it’s worth to them (sentimental value), while Agents value a property at what it’s worth to a potential Buyer (market value).

As the saying goes, “Something is only worth what someone is willing to pay for it.” While I often wish that I could list my clients’ properties for what they feel they are worth – I see all the hard work, time and money they’ve put into their homes – their evaluation is frequently far above what we call “market value”. Market value is simply what we can expect a Buyer to be willing to pay given current market conditions. We calculate this through careful analysis of the property and other recent sales (comparables) in the area.

Every Agent has listed a property above what they know is fair market value just because they didn’t want to lose a potential Seller. You may think that this is a good tactic – the house will be on the market for an inflated price for a few weeks, the Seller will eventually realize they need to lower the price, the house will eventually sell and the Agent won’t have lost the listing by pushing to list the house at a lower price. Some Agents will even give an inflated evaluation of a property in an attempt to out-compete any other Agents offering reasonable evaluations.

This, in my opinion, is extremely unprofessional and is ultimately a huge disservice to your Seller. The truth is that after the first two weeks of a property being on the market, any attention its been getting will drop off sharply. By the time the property has been listed for 5 weeks, attention drops to almost zero.

Buyer activity over time

With this in mind, it is always in the Seller’s and Agent’s best interests to price the property well from Day One. That way, all of the potential Buyers won’t get put off by a high price. You are more likely to get good quality offers, and possibly even multiple offers, which can drive up the price!

Remember: As your Agent, I want to get the highest price possible out of the house as well!


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Scott Cheng - Real Estate Broker

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