Beware of the under market price listing agent

When you hire a listing agent to sell your home you want to be careful of the listing agent that recommends a price below the running market value. The primary reason they’ll give for doing this is to invoke a bidding war. The fact of the matter is that inventory is so low in many parts of the country that multiple offers are almost the norm.

The real reason for this pricing strategy, in some cases well below market value, has multiple benefits to the listing agent (notice I say the listing agent and not the seller.)

  1. Quick sale – this has a benefit to the home seller but much more for the listing agent. A quick sale means less time reporting to you as to their most recent activities. Their time on market is low which gives them a nice data point to market with. They get paid quicker.
  2. Full price offer comes in you’re happy (even if you thought you could get more.) A higher than asking price and perhaps multiple offers and now they’re deemed as an oracle of real estate by the home seller plus they can market that they helped the seller get 1.01 or 1.02% over list. It doesn’t matter that the actual listing price should have 2 or 3% higher in the first place.
  3. It doesn’t hurt their bottom line to price $10,000 or $20,000 below market value. Why? Let’s say the listing agent earns a 3% commission from selling your home. That’s $300 or $600 in total for the listing agent plus they sell the home quick and get to move on to the next one. Done and done – of course it costs you $10,000 or $20,000 – that’s real money.

So what do you do when you’re interviewing an agent to list your home? Here are a few questions and procedures to guide you.

  1. Ask for their list to close price ratio. If it’s consistently over 1:1 dig deeper. Ask for five of their most recent homes that have sold over asking price and then research them after they leave.
  2. Ask for their total time on market for listings. If it’s consistently 0 to 2 days ask to see their Zillow profile. It will show their most recent home sales on a map. If the listings are concentrated in one area it may very well be that their working a hot area and that’s the way it is. If the map shows houses all over the place and time on market is still low that’s a fair indication that they’re employing a less than market price strategy. There will be exceptions to the rule such as if you’re in San Francisco, Washington D.C. or New York City.
  3. Have them present the comparable properties that they used for determining the list price. Do they seem truly comparable or are they smaller, older or in a different area of town?
  4. Interview three agents with an eye to the same items as listed above. I like this as it allows you to gauge how far one agent is from another. You’re not looking for $1,000 or $3,000 differences but more.
  5. Compare everything presented by the three agents with Zillow and Redfin. They’re not perfect and you may see a swing of low to high from one to the other but if your agents have presented prices in the range you at least know you can fine tune.

If you are interested in buying a property in the areas of Raleigh, Cary or Wake Forest, selling your area home from one of those areas or know of someone looking to move to our area we’d love to hear from you. Give us a call at: (919) 559-3173 TODAY! We look forward to talking to you!

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