Are you selling, or just bait?

Representing best interests does not entail catering to a client's every whim, want and desire. And sometimes the conflict between those two competing interests means refusing to work with someone. It's curious that a system like that of Real Estate, where the service provider (Realtor) and the person serviced (buyer or seller - aka "client") both want the same thing, should run into so many conflicts over how to assess value. But it happens, in some places in particular, quite often.

When I show up to a listing appointment, I assume at least 50% of the time, even when the market has been tough, the home's owner will have an overinflated sense of value for the property they want to sell. The reality is probably more like 80 to 90%, and it's easy to understand why. After all, there are many talking heads and neighbours who advocate real estate as the be-all and end-all to growing wealthy. But despite expectations, I still go into that meeting, armed with real numbers, comparable sales, and recent economic history and activity in order to demonstrate why a house should list for a certain price.

As a Real Estate Professional, monitoring what goes on in the market everyday, I find significantly overpriced homes remarkably rediculous. Any Realtor who is familiar with their local market will almost always recognize an overpriced house right away. Sometimes the description of the house will provide clues as to why a house may appear overpriced while actually being competitive. But most times it just appears to be a home destined to sit, priced out of the market and getting no showings.

Most of the time the price is just a little on the high side, requiring a small adjustment to bring it into "play". But on some occasions it just appears to be pure hubris. And when those extremely overpriced houses do come up for sale, Realtors and buyers just tune them out - and even price adjustments may do nothing to regain their attention. There are laws in my area forbidding the practice of overpricing for the purpose of getting a listing but, sadly, it rarely appears to be enforced. And when a really overpriced house does turn up - there's a short list of whose listing it probably is.

The question that should shoot to the tip of many consumers tongues is "why?" Why would a Realtor accept/suggest listing a property so grossly overpriced it will be almost impossible to get the house sold? (While many Realtors similarly wonder why some sellers insist their house must be worth more than very comparable others recently sold...) Well, there is more to a listing for a Realtor than a "Sold" sign... though sold signs are still the best signifier of success. But having many signs dotting a neighbourhood can bring more people to that Realtor or brokerage - buyers as well as sellers - even if those listings aren't actually selling. Most people aren't paying attention enough to the local real estate market to recognize that one, or several, Realtors don't seem to get their listings sold.

So profile becomes part of the equation, and it's precisely this reason there are laws about taking obviously overpriced listings. In short, the Realtor is merely using their client as bait for new clients, not exactly a model for long-term success, but it can and does work to a degree. It certainly doesn't fit the concept of representing a contracted client's best interests though - even if the price is what the client wanted. Once again, best interests are not the same as wants and desires.

So how can you (as a home seller) be sure you aren't being used as bait for a Realtor to grow their other business? Well, for starters, ask questions like how many houses have you sold and how many have you listed this year? A good Realtor doesn't have to have sold dozens of properties - it's more critical to get an idea of what percentage of their listings they sell. Some high volume Realtors may sell many dozens of homes... having listed three or four times that many.

If they are only moving 20 to 30% of the houses they list, then they aren't working for the client, they are working for profile. I looked up one who has more than three times the number of properties listed now in August than they have successfully sold all year! And they have more expired properties on the year than sales as well. All in all, they have managed to sell 19% of the properties they have listed year to date. I can't say for certain, but I suspect any client faced with the stark reality of an 80% chance their house won't sell, would think twice about listing!

Sellers can also get multiple opinions. Some Realtors don't like going to a listing appointment knowing they are in competition - but tough. That's the world we all live in. If you get three different people in to look at your house and provide a suggested listing price, that should give you a good idea of the value you should be seeking. Afterall, Realtors want to sell your house for as much as possible, and they want to get your business - so most of the time even conservative Realtors are relatively optimistic. But if one of the three comes in much higher than the others... that should be a warning sign there's something not be quite right! Be prepared as well for the price you imagine to be too high... nobody decides on a price, the market does that, and buyers quickly get an idea as they view homes just what is good and what is bad value for their dollar. So don't shop for the highest list price, shop for the most professional and proactive service... that's where you will get value for your money, and sold for that matter.

Something else to keep top-of-mind when it comes time to sell is that typically an overpriced house will, ultimately, end up selling for less than it would have had it been competitive from day one. So by trying to win the lottery, you end up losing more in the end... and have had to continue paying for the upkeep, insurance, taxes and more as the house sits on the market for longer than average! It's a lose-lose situation for you, but the Realtor may meet several new clients because of the exposure and make out like a bandit elsewhere.

For the most part, these tactics don't really work for anyone, but they do still exist. We warn all buyers that it's buyer beware when purchasing a house. Do your due diligence, have a home inspection, consider the re-saleability, understand the carrying costs, etc. The same goes for purchasing the services of a Realtor. A good Realtor will help you find other good help as well, so a little effort in the initial hire can also help find top-notch mortgage, legal, home inspection and other required services along the way - so choose carefully and save yourself all sorts of grief in the days to come!