Ladies and gentlemen, we are professionals, aren’t we? When your market thinks of you, do they think of a trusted advisor, or the agent in the picture above? Today we are going to cover the 5 deadly sins of overpriced listings. Depending on the current market conditions in your area, you may be faced with a lack of inventory. As real estate agents, listings is the name of the game, and the more listings we have, the more control over the inventory we maintain. This being said, we may be tempted to take any listing that comes along, in the hopes that it will either sell with the uptick in the market, or at least generate some sign calls for us. This thinking is flawed, and while may look like a good strategy in the short run, it is not the foundation for a long-term profitable business. Let’s jump in and discuss why taking overpriced listings can be detrimental to the long-term health of your real estate business..
1) Negative Brand Marketing
When you take an overpriced listing, think about the message you are sending to the rest of the neighborhood? Are you showing the neighbors you are a marketing machine, able to get your clients homes sold quickly and with little stress? Are you showing them you are the local neighborhood expert, when it comes to pricing and selling a home? Nope. When you take an overpriced listing, you are basically advertising to the rest of the neighbors: “Hey! Sign with me, and I will over promise and under deliver. In fact, lock yourself into this 6 month or year-long contract, so I can disappoint you week after week, until you are finally able to fire me for doing a bad job.” If the average days on market for a neighborhood is 48 days, and your listing is sitting for 120 days, you can bet your last dollar I am going to point that out to a potential seller if I am interviewing for the job of listing their home against you. In essence, the longer your sign stays up, the stronger the subconscious message you are sending to the neighborhood…”I talk a good game, but when push comes to shove, I can’t deliver.”
2) Loss Of Capital and Profit
You are a strong real estate agent, right? You treat this as a business, not a hobby or job, correct? Great, so then I know you are not taking listings and then walking around with your iPhone snapping pictures like a teenager on Instagram, right? You are paying for a professional photographer to come out and showcase the home in the best light possible, both figuratively and literally. You are then giving your listing file to your administrative assistant to put the listing together and upload it to your various marketing outlets, correct? Afterall, this is a non-income producing activity which you are paying someone else to do, so you can focus on generating more business, right? Well all of this takes a capital outlay on your part. One that does not get replenished if the house doesn’t sell. So for every home you don’t sell because it was priced too high, you lose the capital you put out, as well as the potential profit you would have made if it sold. In essence, you are increasing the overall cost of sale to your business. This is obviously not a good strategy in any market, and can wipe you out completely in a shift.
3) More Administrative/Maintenance Duties
Ahh Mondays. Every Monday afternoon beginning around 1:00pm, I start calling my current sellers. I tell them how the feedback came in for the showings over the weekend. I update them on the current market conditions. When necessary, I begin the discussions of having a price improvement (notice I didn’t say price REDUCTION). These calls usually go well and only last a minute or two, depending on the situation. But what happens when you take an overpriced listing? These calls not only take longer, they are more stressful for both parties. You are always fighting an uphill battle, beating the seller up for price adjustments on every call. As far as feedback, well there isn’t any, because the good agents don’t bother showing overpriced homes. Let’s say you do manage to wrestle a price adjustment out of them…great, more paperwork for your assistant (or you).
4) Loss Of Potential Referrals
“Mr. and Mrs. Seller, I have 3 goals for you today. 1st, my goal is to make sure I sell your home for top dollar and in the shortest timeframe possible. 2nd, my goal is to make sure I am able to take the transaction all the way to closing, making sure you are protected each step along the way. Finally, my goal is to make this transaction as stress-free for you as possible. In return, I am going to ask you for a favor. If I come through and accomplish all 3 of my goals for you, can I count on you to have a least one referral for me by the time we get to the settlement table?” You should use this script (adapted from Ben Kinney) on every one of your listing appointments. Now, if you never get them to the settlement table, what are the chances of getting a referral?
5) A Complete Disservice To The Consumer
I am not going to state how much you should be charging for commissions, as to not violate any laws. But here is a fact I truly believe. You should be charging the highest amount of commission possible in exchange for doing a kick ass job for your clients. You deserve it. You deserve to get paid for your efforts, your outlay of capital, your skill sets and expertise. You should get paid top dollar for going above and beyond the average agent and educating yourself on the market, on business, and on learning how to improve your practices so your clients can have a better transaction. All that being said, when you take an overpriced listing, you are doing a complete disservice your client, the consumer. They trusted you with the biggest financial transaction most of them will ever make in their lives. They believed in the words that came out of your mouth. They had faith that you would do what you said, which was get their home sold. If you don’t have the strength and the courage to tell them what they need to hear, and understand about the current market and how their home should be priced at the time of the listing appointment, do the industry a favor and turn in your license. I hear Starbucks is hiring.
If you have been following along for the last few weeks, you have noticed a trend in our blog topics. We have been focusing on listings, and the upcoming shift that is destined to hit the national market, as well as many local markets as well. I don’t claim to have a crystal ball, so I can’t predict when the shift will come, nor how impactful it will be. All I can say with certainty is a shift is coming, and the best agents actually grow their market share, and thus their businesses during a shift. I invite you to be one of those agents. Stay tuned in the weeks to come for more information on how to bulletproof your real estate business.