Overpriced Listings and Discount Brokers
I’ve encountered this scenario on repeated occasions now. My Buyer is interested in an over-priced listing. It’s WAY over-priced – by about $20 per square foot, or about 15%. I am unable to find sales comps that even come close to justifying the list price, but my Buyer likes the place so I try to obtain further information from the listing agent. The property is listed by a Discount Broker. Over-priced listings are, in my experienced, disproportionately represented by Discount Brokers. That seems counter-intuitive to me, but it’s what I’ve observed. You’d think the Seller would use some of the “commission savings” to set a competitive price, but that’s not what we commonly see.
I email the listing agent and the conversation goes exactly as follows:
Me: “Hi, I have a Buyer interested in your listing at 123 AnyStreet but I’m having a hard time finding comps to justify the list price. Can you send me the comps you used to set the price?”
Discount Agent: “The Seller set the price.”
How’s that for a great answer?
My advice to Buyers in these situations is that we completely ignore the list price, perform our Market Analysis, (which we would do anyway), and offer a price that is supported by recent sales of similar properties in that area, and current market conditions. Then be completely ready to walk away if the offer is not accepted, or counter-offered in a serious way.
But since the Discount Broker topic has been floating around in the news a lot lately, this is a good example to use.
Is the Seller making a smart decision to over-price the property? Would the Seller be better served by an agent who won’t take over-priced listings? Is the Seller saving money by hiring a Discount Broker?
As a listing agent, I don’t think I’m doing a Seller any favors if I participate in fantasy pricing, and I won’t do it. A good agent will educate a Seller about pricing and walk away from the listing if the Seller wants to set a price that can’t reasonably be supported. This particular listing has been on the Austin market for more than 180 days now, in a very hot area of Austin, so the market has spoken.
And even if an enthusiast, time strapped California buyer comes along (every Austin Seller’s dream), and offers full price, the loan won’t make it when the property fails to appraise for the contract price.