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Possibly the Worst Mistake a Seller Can Make

The other day, I met with a couple that was interviewing agents to sell their home.  We met twice, for several hours each time. 
I gave them the low down on the good, the bad and the ugly about their home.  I suggested ways to make their home more desirable and we spoke at length about the best way to price their property in this market. 
The sellers were avid HGTV fans and had almost memorized the list of the 25 biggest real estate mistakes. 
The phrase that they kept repeating over and over was that one of the worst things you can do when you sell your home is to be greedy about the price.  In fact, Setting Too High of a Sale Price shows up as number 2 on HGTV’s list of the 25 biggest mistakes. 
When I talk to sellers about the potential price of their home, I talk to them about three different numbers: 

  1. The Listing Price – This is more about strategy that it is about the true value of a property.  A listing price is used to generate interest in the property.  In some SF housing markets, it’s still a very safe bet to underprice a property to gain the most interest possible.  The market then naturally determines the true value of the property by letting buyers compete.  In other San Francisco housing markets, the listing price must be much closer to the true value of the property.
  2. The Likely Selling Price – I’m conservative.  I’ve always been conservative.  I tend to focus on promising only that which I am confident that I can deliver.  So – when I speak to my sellers about a likely selling price, I’m really talking about the minimum price that I’m confident the market will pay for the home.  This is the low end of the price range I provide.
  3. The Maximum Selling Price – The fact is that every property has a maximum value.  I call this the “wishful thinking” price.  This is the maximum price a seller might get for her property if it’s priced properly and marketed properly, and there’s ample competition amongst the potential buyers. 

The highest price a seller should ever list their property at is the likely selling price.  Setting the price too high will leave the property languishing on the market while the properly priced competition gets offers and gets SOLD!
Back to my story.
A reminder – the sellers had stated over and over and over that they knew that being greedy about the sales price was one of the worst mistakes a seller could make!
When I called them to follow up to see whether they had chosen a listing agent, they said they had, and they said that they chose an agent because the other agent had given them a higher value for their home!!!
I don’t like to speak poorly of other agents, but the fact is that some unscrupulous agents will give sellers a high value for their property knowing that the sellers will likely list with them once they hear this price.  Once they have the listing, they know that the property will eventually sell, even if it takes months on the market, and several price reductions before this happens.
The problem is – it’s not the agent that decides the selling price, but the BUYER!  The market will ultimately decide what the final selling price will be, not the seller, not the listing agent, not the buyer’s agent – but the buyer.
In this particular case, I actually know of the agent that provided the sellers with the higher value and ended up with the listing.  As of today, this agent has almost a dozen active properties on the market with an average time on the market of almost 70 days!  In fact, only one of this agent’s listings sold in the last six months!  And it sold for around $50K under the asking price after more than 100 days on the market!
I’m not sure whether it’s ironic or just sad that even though the sellers knew what the worst mistakes in real estate could be, they will be making that mistake when they list the property too high. 
Unfortunately, because they already signed the listing agreement with the other agent, I’m not even allowed to give them advice about the pricing of their property and to remind them that being greedy about the sale price will be the biggest mistake that they can make.  But if they just happen to be reading this – then hopefully they’ll get the message.  I wish them the best of luck with the sale.  They have a really cool house in an awesome neighborhood. 
If they just get serious about the price and they’ll not only be avoiding one of the biggest real estate mistakes, they’ll end up with a smooth and stress free sale and a nice profit to boot.