Don’t hire an agent who lets you shoot yourself in the foot
ARDELL on 07 20, 2007
Mini-rant. Was just checking my email and saw a new listing priced at $300,500. That should be a $299,999 listing. We all know that, don’t we? Or, the step below that $300,000 for double hits, but at the $100,000 increment of value, better to have the 2 on the front.
What would possess someone to list a property at $300,500? Anyone looking on the internet at property, and putting in $275,000 to $300,000, will miss seeing it by $500! Talk about shooting yourself in the foot! The people who will find you are those looking from $300,000 to $325,000, or worse yet from $300,000 to $350,000, putting you at the worst on the list of possibles.
It also said totally remodeled, granite counters, blah blah. The ad might as well have said, “we sunk a ton of dough into this and we are idiots”.
Sorry. But please. Hire an agent who hands you that $501 as a commission discount, and refuses to list it at $300,500. An agent’s most important job is to not let the client be their own worst enemy. Sure, maybe it will sell anyway. But clearly you would have more eyes on the listing, and likely more offers, at $299,999 than at $300,500. It ain’t worth the extra $501, and asking ain’t getting. So take off $501 and price that puppy at $299,999.
Straight up pricing is double-hits. $300,000 will give you the people looking from $275,000 to $300,000 AND the people looking from $300,000 to $325,000. But most people end up buying at the top of their range, not the bottom. So when you can decrease the first number by one…DO IT, and go for the $299,999 single hit count out the gate.
A price reduction will NEVER have the impact of an opening price. The first 10 days on market are your most important days. Don’t waste them playing stupid games…you can NEVER get those 10 days back. Never.
About the Author: Ardell DellaLoggia
- Author's website: http://www.realtown.com/ardell/blog
- More posts by ARDELL
- email the author
30 Responses to “Don’t hire an agent who lets you shoot yourself in the foot”
Leave a Reply
Live Comment Preview
Popular Posts
Recent Posts
Recent Comments
- Rhonda Porter: Some of the fine tun
- Rhonda Porter: you must be so excit
- Jerry Gropp Architect AIA: Hi Rhonda- Good to s
- Chris Cliff: I am glad to see the
- Leanne Finlay: Tim, eventually I'll
Is there any chance that the agent is merely trying to undercut the higher priced listings? Without seeing the property itself, it’s hard to say whether it’s more comparable with the other $299K listings or the $325K listings.
Well said. Great insight about being at the worst position on the list. Most listing results show up price descending. This means that this home will be on the very last page of the search results (300K-350K). If priced at $299,999 it would be the very first listing in the results (250K-300K search)! That’s a huge difference in exposure!
I thought the same thing but in reverse when I heard about “drama pricing” the other day. Some people are pricing their properties down a couple of notches with the hope of getting people excited about the deal, but some people who could afford the final price might miss it because they’re not at properties that are so cheap.
Brad – true! I hadn’t even thought of that.
It’s sort of annoying that most sites sort properties descending by price – it’s like the subtle pressure to buy more than you can afford is there from the get-go.
There’s still a lot of debate about the value of days on market, but that’s how professionals (real estate agents) often do their searching.
Whether they show in descending is not the point. Most sites will permit you to reverse the order.
What is important is that buyers most often buy “up from” and those that spend $300,000 started lower and say “but I’m not looking over $300,000, still hoping to pay less than $300,000. They will not open the $300,000 to $325,000 window, if they started at $250,000. So $500 over just makes you invisible to them. Non-existent. Not worth it for $500 or $1,500 for sure.
If it were $389,950 vs. $341,500, it wouldn’t matter.
Galen,
Days on market does matter. What an agent can see is the date of a price change.
So 45 days on market with a $50,000 price change two days ago is different than 45 days on market with no price change since day one. It’s not just days on market.
Often the best time to make an offer is the day before that $50,000 price change, when the seller is mentally there, but there is no competition in the marketplace yet driven by the price actually changing.
Point 5 – absolutely true. Funny enough I talked to a 4 time buyer about his most recent purchase this morning. He watched some homes for two months waiting for the price to drop and I sat there waiting for him to say that he put in an offer after a certain number of days, but actually he was just waiting for the seller! Talk about opportunities missed!
The $300,500 price is worse though.
[...] Ardell… I think I can just call her Ardell sans last name, like “Madonna”… Don’t hire an agent who lets you shoot yourself in the foot. Great pricing advice. In the Monty Python version, a guy in a suit of armor slaps you across the face with a rubber chicken. [...]
[...] Ardell… I think I can just call her Ardell sans last name, like “Madonna”… Don’t hire an agent who lets you shoot yourself in the foot. Great pricing advice. In the Monty Python version, a guy in a suit of armor slaps you across the face with a rubber chicken. [...]
Ardell, stupidity in the other direction:
Last week I listed a condo for $187,500. Thirty six hours later there was an offer from an investor: $169,900. Now: Why not the somewhat more palatable $170,000? Have no idea, but the seller took it – rightly – as an offer with an attitude.
Had a verbal in less than fifteen seconds: No, and no counter.
Jeff,
$187,500 means $180,000 or better. If you felt the seller should have considered an offer of $170,000, then the asking price should have been no higher than $179,900. If you felt the $100 dollars would have made a huge difference, you should have discussed that with the buyer or the buyer’s agent and tried to get it up that $100 before it was presented. Between the buyer and the two agents, I think you could have found $33.33 apiece.
It’s a little harsh, but it seems you felt one or the other of the consumers in that scenario were “stupid”. I’m not a big fan of calling consumers stupid.
If you don’t feel your client has a snowball’s chance in hell of getting better than $180,000, it shouldn’t be listed at $187,500. If you think the seller would have responded better at $170,000 vs. $169,900, you should have somehow impressed on him to treat it the same as if it were $170,000.
I remember presenting an offer to my brother in law Joe. I said Joe, what would you counter if the offer were $200,000, he responded $205,000. I said let’s counter at $205,000 then. He said what IS the offer. I said $180,000. He said to tell the buyer to shove it. I said no, we’re not going to do that. We’re going to counter at $205,000. Asking price was $209,999. House was worth $185,000, but had a pool on top of that.
Many counters later, the house sold for $203,500.
Two consumers may not have acted well in your scenario. But reality is that your seller wants a buyer who will live in that property and not an investor. It wasn’t stupidity on either of their parts. Just wasn’t a match. I hope your client has an offer from a non-investor and sells the property for more than the investor was willing to pay.
Good luck with that to both of you.
Um…thanks for the lesson, Ardell.
If I’m a buyer’s agent and want a counter, especially on a 10%-blow-list offer on a property in the MLS thirty six hours, I don’t write the offer for $169,900, I write it for $170,000. Neither have much of a chance, but the former is an in-your-face you’re priced too high insult, precisely how the seller interpreted it. And, Ardell? That was stupid on the part of both the buyer and the buyer’s agent if they actually wanted a transaction to come together.
Incidentally, the condo went under contract two days later for $185,000.
Best.
Jeff,
When an investor is trying to get a deal, as most investors are want to do, it doesn’t make them stupid. I almost submitted a “stupid” offer last weekend until I had a heart to heart with the buyer and asked why the offer was being structured that way. He said he really didn’t like the place that much.
It’s more like saying, if it’s a great deal then I’ll take it. But otherwise I’ll keep looking. In my case we decided he had time to find something he liked better, and the “stupid” offer wasn’t submitted.
Sometimes what the buyer is trying to do just doesn’t match what the seller is trying to accomplish. Doesn’t make either of them stupid.
Since I started in 1990, buyer numbers are often 169,900 and seller numbers $170,000. If it’s so close to $170,000 that the buyer should just put it there, why isn’t it close enough to $170,000 for the seller to see it as the same as $170,000. It’s still just $100 regardless of who is saying the number. Just as “stupid” for a seller to react emotionally to the number, as it is for the buyer to do so, don’t you think?
Glad it went under contract. Was the eventual buyer an investor or someone who is going to live in it?
Hi Bill,
Sorry I missed your first comment there. I think it was stuck in a filter and released after the fact.
In this case, it is not an agent trying to undercut listings. Given the remodel it is the highest price ever in the complex. It’s a condo. It will be hard to appraise, so pushing it $500 over the high 2s didn’t seem to make sense, anyway you slice it.
If someone is the ONLY unit that remodels…it can be difficult come appraisal time. That’s why full complex conversions seem to fare better. Though I worry about all the displaced renters when huge condo complexes get converted.
>If it’s so close to $170,000 that the buyer should just put it there, why isn’t it close enough to $170,000 for the seller to see it as the same as $170,000. It’s still just $100 regardless of who is saying the number.
Sorry, Ardell; no.
I got my business education at Nordstrom, where $xx.95 is the standard, because the number of units sold at $49.95 is dramatically higher than the same item at $50.00. Perception is king, the fact that it’s only a nickel notwithstanding.
If I’m representing a seller whose home comps around $500k, I’d recommend listing at $499,900; always. If I’m representing a buyer who’s making an offer on a $430k listing, as I was not long ago, I recommend offering $400k, which was accepted. The chance of $399,900 being accepted – trust me – would have been zero.
So I’m back to my original premise: if the buyer wanted a steal, she could have offered $170k, perfectly legit. $169,900 was stupid; unless, or course, the object was to get a rejection.
Actual buyer has lived in the complex before, will be living in it again, and has a terrific agent. Should be a smooth transaction.
I agree, Jeff. I still think it just wasn’t a match and the difference between $170,000 and $169,900 wouldn’t have made a difference.
Not meaning to pick on you. Just am senstive to sellers being more right and buyers doing “stupid” things. It’s a conversation I hear too often in this business. Had you said it was a stupid Buyer’s Agent and ended it there…I would have wholeheartedly agreed with you.
I have often in that scenario offered to pay the difference, The buyer asked why. I explained the rationale of the numbers. They agreed and changed their offer without accepting my offer to pay the difference.
Agents need to be willing to walk away more, and not be willing to
get paid to help someone shoot themselves in the foot. That is the subject of the post.
Jeff, I once got one of those lowball “offers with attitude” so, with my client’s permission we countered back at $5000 *over* LP. The buyer and his agent got the message and got in a clean full price offer at list price the next day.
No the price is actually rather clever and I think you missing a very powerful point. Assuming most people do search’s let’s do the following psychological trick. (Note: my numbers in are thousands.)
You put a house at 299, and you do a search you get everybody who searches 275 to 300. But these people would probably consider 275 their low end and 300 their high end. Thus if somebody prices at 299 then they are expected to go lower. also realize that if you do a search of 275 to 300 the results go from 275 to 300. So by the time a person has reached your 299 house they have seen oodles of cheaper houses.
Now imagine doing a search priced from 300 to 325. Bang your house appears first, AND your price is the lowest of the 300 to 325 lot. This means by the time the searcher reaches 325 they will be comparing your 301 priced house to a 325 house. They will feel 301 is a bargin and not haggle since those that search 275 to 300 feel your house is overpriced.
So I would argue maybe that the agent that priced at 301 is not shooting in the foot, but actually being very clever. After all how many people DON’T start their house searching by searching the Internet first.
“How many people DON’T start their house search by searching the Internet first?”
That’s an excellent question. But even when the buyer doesn’t use a home search tool, the agent does. Hard to get away from the fact that computer generated searches rule the day.
If the 325 and the 301 are comparable properties, I’d agree. In my experience the higher end of the range has something more to offer, and so being at the lower end of the price tier is not the best position. But if they were all equal, then the lowest one would be the bargain in the mix.
Ardell: Yes you are right, but what I have noticed these days (having recently bought a property) is that there is more supply than demand. And thus I always need to narrow down my search since the mls engine says, “too much to show, please narrow down your search.”
But what I want to focus is on the psychology. Your house is worth around 300,000. If you go above you are psychologically in the lower band of the price range. Whereas if you went into the lower band you would be in the upper price range.
I just did a search in the 300 to 325 range and here is what I found (Note: my search was a populated city where I had to narrow down the search to a specific area and specific price boundary).
Houses in 300 to 325 range: 121
Houses in 300 to 301 range: 3
Houses in 275 to 300 range: 190
Houses in 299 to 300 range: 40
So when you do a search you have to compete against 40 other properties, and if the search engine showed the properties 10 per page then there are 4 pages to go through. On the other hand if you go one price band higher you are competing with 3 other properties on the page.
My point is that while you will get less hits, I am willing to bet the number, quality and amount of time a buyer spends on your property is much higher.
I’m not familiar with popluar public sites that allow someone to search for 299-300. Or if they do allow it, I’m not used to many people going to those advanced search options.
Which sites permit the 299-300 search option? If they all did that, or if many did that, then it would clearly change my opinion dramatically.
Thanks in advance for your response to that question. If many and most could put in 295 to 305, then 300,500 wouldn’t matter much.
I’m getting the actual correlating stats for this particular property and will post them shortly, to parallel your scenario.
Christian,
1) The property has been on market for five weeks and is not sold.
2) The median days on market for properties sold from 275-300 is 16 days
3) The median days on market for properties sold from 300 to 325 is 22 days
The total number of properties sold or available in either category is only 9-15 properties, so no “high inventory” issues.
I’m not clear on this Ardell. How do you feel about it. The best part is you are right!
I dunno, Ardell … Redfin’s blog you should end your sales prices with -500, so who are we to argue?
I wonder if that check was for $12,000,500 …
There nothing wrong with $299,500, Jonathan. Don’t you ever tire of pointing fingers at Redfin? Can we blame Global Warming on them next? What about the war?
You’re right … it’s just coincidence.
Absolute idiots. Selling a place for $500 above common search brackets? My guess is they took on a FSBO and did the “we will just add X%” calculation to get to that price.
Also on the buying side, I see people wanting to offer $599,900, and I’m like “Um don’t you think the seller might appreciate a “6″ in there.”
I think the psychology of negotiations matters!
[...] Ardell at Rain City Guide writes a superb post on pricing homes in the internet age. A must read for all home sellers. While surfing listings today for a client, it was amazing to see how many listings are not priced to take advantage of the property search sites such as Realtor.com. [...]
[...] Don’t hire an agent who lets you shoot yourself in the foot by Ardell The Great [...]
[...] How does this relate to real estate? The pricing of houses makes a ton of difference. I’m a fan of pricing on the 5’s or 0’s ($180,000 or $185,000) myself, because of the double exposure it brings. But the extraordinary Ardell at Rain City Guide has a great point, too. [...]