We offer very competitive listing commissions in Colorado Springs. At the time of this writing, we are listing homes over $150,000 for 3.5% total commission. One of the positive results of this aggressive marketing scheme is that we get plenty of listings. Our listing clients realized this will save them thousands on the cost of selling their home. One of the reasons we can list homes at such a great commission rate, is that we work hard to market the home and sell it quickly. It does not benefit the Seller or the Agent, if the home is on the market for 3 months prior to sale, it now has a stigma. If it were priced right, it should have sold within the week.
One question we regularly receive is: “why can’t I list my home for more than it is worth?” Please let me share a few reasons below:
1. Days on Market - The Seller will see the most candidate Buyers in the first 2 weeks of the listing time. After this the pool of candidates slows down significantly. The day before a listing goes on the market, there is already pool of Buyers who have been searching this neighborhood or price range. These savvy Buyers have looked at several homes and already know the value of a home with a quick walk around. These Buyers may have been looking for months and either missed the good deals, or not found the right home for them. The day the Seller’s home goes on the market, this pool of Buyers will begin to schedule showings on the home. Within about 2 weeks, this largest and best pool of Buyers diminishes to only a few new Buyers coming on the market. This represents a significant reduction in showings.
Many Sellers like to test the market by overpricing the home, in the hopes of garnering an offer. In a hot market, most Seller’s do not consider weak offers within the first few weeks of the listing. Buyers know that low-ball offers are the most rejected and in fear, will not make a low offer on a home, in the early stages of the listing period.
2. High “Days On Market” Indicate An Overpriced Home: The Seller overprices the home; weeks go by and the home does not sell. The next logical step is to reduce the price. The Seller reduces, and the next wave of Buyers wonder why the home is still on the market. The Buyers deduce this home is overpriced, or there is a material defect and move on. This cycle repeats until the home is reduced below what it would have originally sold for.
3. Buyers Searching In The Higher Price Range Are Looking At Nicer Homes: If a Seller overprices a listing, their home is now priced in a larger sized / nicer conditioned / more upscaled neighborhood. The pool of Buyers is not correctly matched to the home. The homes these upscale Buyers are looking at may have granite countertops instead of Formica, an additional 300 square feet of finished space, or possibly in a more desirable neighborhood. Although the feedback may not be “overpriced”, in reading between the lines, a comment like, “did not like the neighborhood”, or “did not like the layout”, makes the same statement. Since the Seller has priced the home above the target Buyer candidates, these bets potential Buyers never see the home because it is overpriced.
4. It Takes More Resource to Sell The Home: From a more selfish perspective, we offer an attractive listing fee. An overpriced home requires 2 or 3 times the resource and effort on our part to sell. First, we have to answer to the Seller why the home has not sold. Second, additional marketing materials have to be printed and delivered to the home. Third, we have to answer many more calls from other agents, inquiring as to why the home is priced so high. Fourth, every price change requires more legal documentation. Fifth, we gain a reputation for having overpriced listings and appear to lack professionalism. Sixth, this additional resource prevents us from effectively providing service to the clients who do price their homes right. This is why we often turn down overpriced listings.
In summary it is never a good idea to overprice a listing. This tactic may only work in 1% of all deals. Our business model works in the other 99% of Sellers.