The Misguided Non Cents Of Real Estate Experts

The Misguided Non-cents of​ Real Estate 'Experts'
A few words about self-proclaimed experts on Realtors and​ pricing your home, especially those self-proclaimed experts who aren't Realtors or​ haven't read the​ studies .​
Generally, in​ my readings, I​ find two diametrically opposed 'expert' opinions on how Realtors price your home .​
Both can't be right because they contradict each other .​
And as​ a​ Realtor, I​ can tell you that both are wrong .​
What are these two expert opinions? and​ what is​ the​ truth? Keep reading.
First, some experts claim Realtors try to​ get your listing by telling you your house is​ worth more than it​ is​ .​
This is​ a​ bit like waving a​ really big check in​ front of​ someone's eyes while they sign the​ listing papers half-hypnotized .​
They're not really hearing anything you say; they are just seeing dollar signs .​
Of course, this sounds like a​ great way to​ get a​ listing, but it​ doesn't really work this way, or​ if​ it​ does, it​ doesn't work long.
The experts say that Realtors do this and​ immediately start pressuring the​ client to​ 'lower' the​ price .​
Well, truthfully, if​ a​ house isn't selling, lowering the​ price will get it​ sold, but listing it​ too high to​ get the​ listing may not be the​ best business move .​
Now think about this, what good is​ a​ listing if​ it​ is​ listed at​ such a​ price that it​ won't sell? How much money will the​ Realtor make on it? I'll tell you: none .​
So, else the​ home eventually sells for​ a​ price far below what the​ Realtor originally said it​ was worth, or​ it​ doesn't sell at​ all .​
Neither produces a​ satisfied client.
Realtors succeed in​ business (and about 95% of​ all Realtors fail and​ quit) through a​ process of​ referrals .​
That's logical .​
It works like most businesses .​
My wife uses this analogy: no woman, period, will ever go to​ a​ hair stylist without a​ referral from a​ trusted friend .​
All the​ advertising in​ the​ world isn't going to​ increase the​ stylist's business (from women) .​
Referrals drive the​ business, and​ Real Estate is​ just like that .​
Now, given this, how many referrals will a​ Realtor receive from a​ client if​ the​ client feels the​ Realtor lied about the​ value of​ his or​ her home in​ order to​ get the​ listing and​ then constantly pressured him or​ her to​ come down on price? My guess is​ none .​
Probably yours too .​
So, this expert opinion about how Realtors get listings really doesn't stand up to​ pragmatic business sense .​
It doesn't work in​ the​ long run, because it​ doesn't build a​ loyal client base .​
So to​ all you 'experts', listing above fair market value doesn't work .​
It produces dissatisfied clients, it​ doesn't sell houses, it​ doesn't produce income, it​ doesn't produce referrals, and​ it​ damages a​ Realtor's reputation.
Now, there exists a​ whole 'nother set of​ self-proclaimed experts that say Realtors like to​ list homes BELOW market price in​ order to​ get a​ quick sale and​ make a​ quick buck .​
Duh! I​ assume I'm talking mostly to​ potential clients, so ask yourself this? You know 'about' what your home is​ worth, and​ you know what your tax value assessment is, so would you jump at​ the​ chance to​ list your home for​ significantly below what you think it​ is​ probably worth? No way .​
Such a​ strategy would rarely produce a​ listing for​ the​ Realtor .​
Realtors don't get listings by underpricing the​ property - who would ever list with them? No one .​
Of the​ two 'expert' opinions on Realtor pricing, this is​ the​ dumbest.
So, what do Realtors do? Well, they run a​ Comparable Market Analysis .​
They try to​ find at​ least three homes (more, if​ possible) that are comparable to​ the​ 'subject' property (your house) .​
Then they use this information to​ establish a​ recommended price that they think is​ close to​ fair market value .​
Not a​ price that's too hot, nor one that's too cold, but one that's just right .​
Now, Realtors aren't appraisers, and​ if​ the​ property is​ quite unique, they might ask that an​ appraisal be done before listing it, but for​ most properties, the​ Realtor is​ trained to​ get pretty close to​ fair value, though, by law, they can not establish with certainty the​ fair market value of​ a​ property.
Why would a​ Realtor want to​ price a​ home at​ what it​ is​ worth? This may sound like an​ odd question, but it​ is​ one whose answer is​ quite important .​
Here are some facts produced by the​ National Association of​ Realtors .​
On average, homes that are intially priced either significantly above or​ significantly below fair value eventually sell below fair value .​
Did you get that? Houses initially priced too high, end up selling below fair value! Why? Well, here's why?
It's the​ law of​ Days on Market, or​ DOM .​
People like to​ see how long a​ house has been on the​ market, and​ the​ longer it​ has been on the​ market, the​ more suspicious people become as​ to​ why it​ hasn't sold? What's wrong with it? Well, if​ it​ was initially overpriced, no one bought it, because, well, it​ was simply overpriced .​
Nothing may have been structurally wrong with the​ house, but time passes while it​ remained overpriced and​ as​ the​ Days on Market (called DOM in​ the​ industry) starts to​ accumulate, buyers become cautious .​
If the​ situation isn't corrected quickly, then no one will touch the​ house for​ fear something is​ wrong with it .​
Eventually the​ seller withdraws the​ listing, or​ is​ forced to​ sell below fair value because the​ house now has a​ DOM stigma .​
NAR (the National Association of​ Realtors) confirms this nationwide statistic every year using the​ millions of​ homes sold over the​ past year.
Now, the​ opposite is​ also true, but is​ really almost pointless to​ discuss .​
If a​ home is​ priced below fair market value, it​ will sell below fair market value .​
Duh! the​ problem is​ who would knowingly list their home significantly below fair value? Unless the​ seller is​ under duress or​ highly motivated for​ some reason, they won't .​
But if​ they do, it's pretty much a​ given, listing it​ below fair value will produce a​ sales price below fair value .​
But generally speaking, most people won't list their house so low, and​ getting such listings is​ hard (and rare), if​ not downright impossible for​ a​ Realtor to​ do.
So, the​ self-proclaimed critics of​ Realtors are, well, I​ hate to​ be so cruel, but if​ they can talk about me and​ my profession in​ such slanderous terms, then I​ guess I​ can return the​ favor: they are idiots.
For a​ Realtor to​ survive financially and​ professionally, they must build a​ loyal client base .​
This is​ paramount to​ success .​
Overpricing homes is​ the​ fastest way to​ a​ pitiful reputation in​ the​ business, to​ no sales, to​ no clients, and​ to​ no referrals .​
Underpricing homes just isn't even possible, plus, I​ haven't mentioned it​ yet, but per the​ Laws of​ Agency, it​ is​ questionable that such a​ practice, without the​ consent of​ the​ seller, is​ even legal .​
I​ am not an​ attorney, but a​ real estate agent must place the​ needs of​ the​ seller above his or​ her own needs, and​ knowingly underpricing a​ home for​ a​ quick sale without revealing to​ the​ seller its approximate fair value probably violates the​ Laws of​ Agency .​
Legally, at​ this point, I'm obligated to​ say that if​ you want to​ validate this supposition, you need to​ talk to​ an​ attorney .​
I'm not licensed to​ practice law, but I​ am familiar with it, and​ I​ would be very concerned about engaging in​ such pricing practices.
In closing, I​ read a​ book recently that noted a​ study that showed Realtor's own residences sold for​ a​ higher average price than the​ clients they represent .​
The authors of​ this study concluded that Realtors must be taking an​ unethical advantage of​ their expertise in​ pricing for​ this to​ occur .​
However, in​ my experience, in​ more than 90% of​ the​ listings I​ take, the​ client wants to​ 'start the​ listing' at​ the​ highest possible price (or higher) that I​ can remotely justify .​
Rarely does a​ client actually take my advice on pricing their house .​
Given the​ results of​ the​ annual studies by NAR mentioned above such a​ strategy would result, on average, in​ a​ sales price below fair value.
Realtors, on the​ other, do have an​ 'advantage in​ expertise in​ pricing' .​
They know that to​ obtain the​ highest possible price on their house they should initially list it​ at​ something very close to​ fair value .​
And they do .​
And guess what, the​ study meant to​ show that Realtors aren't that ethical actually prove that if​ clients just followed their realtor's advice, they too would have, overall, nationwide, higher sales prices .​
This independent study just served to​ prove that you really should listen to​ a​ professional when it​ comes to​ pricing your home, especially if​ you want top dollar for​ it.
The study proved that realtors know how to​ get top dollar .​
They simply price it​ near fair market value .​
It's odd that such information is​ used to​ attempt to​ prove that Realtors aren't ethical, when, if​ simply analyzed a​ little more deeply, it​ would uncover that Realtors know exactly how to​ get top dollar, it's just their clients usually don't take their Realtor's advice.

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