Aha - I thought this question would never be asked :)Home sellers ask me all the time why real estate agents take overpriced listings!What could possibly be in it for those agents to knowingly get involved in marketing a property thatu2019s overpriced?u201cThere sure isnu2019t a home buyer out there whou2019s going to pay those kind of prices, am I right?u201dSo, why do they?It just goes against all common sense and logic!And thatu2019s exactly why itu2019s considered to be one of real estateu2019s dirty little secrets!I will discuss in more detail below why real estate agents behave that way and why theyu2019re so keen on taking those overpriced listings:Desperation rules!Real estate agents desperate for business are often at the root of an overpriced listing.Unfortunately, a lot of real estate agents lack the basic integrity, lack negotiation skills, or are so desperate for new business, that they will agree to any price the home seller proposes!The home seller may have heard via the most recent neighbourhood gathering that u2018the one down the road from himu2019has his property on the market for at least 25% above the average selling price in the street!u201cHoney, listen to this u2024 guess how much Raymond a few houses down is asking for his house?! Iu2019m 200% convinced now we can ask AT LEAST as much, if not more for ours! Iu2019ll make sure to tell it to those agents tomorrow!u201dThe u2018weakeru2024 agent might right there and then already know that heu2019s dealing with an overpriced listing, yet agrees to market the property at that price anyway!?Why would anyone in his right mind enter into a proposition like this?To someone not active in the real estate business, this might look like the silliest move on part of the real estate agent! (to put it mildly!)As mentioned in the introduction, this counter-intuitive move is exactly what is considered to be one of real estateu2019s dirty little secrets!While the majority of us might be baffled as to why an agent would want to do this, as the veil gets lifted every so slightly, youu2019ll realize how dirty this little secret really is!Keep in mind that this very competitive real estate business is a commission-based one, where the agent who walks away empty-handed from the interview, will likely be the one not making any money on this transaction.Wasnu2019t it Heinz Guderian who said that, u201cThere are no desperate situations, there are only desperate peopleu201c?A reputable real estate agent will actually face the reality music and inform the home seller the truth regarding his price, hereby of course potentially losing out on getting the mandate to sell the property!Check mate the competition!Competition amongst agents to prthe highest valuation often leads to an overpriced listing.Even though most real estate agents are independent contractors, quite a few do have to report their u2018busy numbersu2024 to their brokers: how many open houses this past week or month, how many contracts closed, how many pending deals in mid-negotiationsu2024 and how many new listings on the books!Howu2019s the latter for an extra incentive to make sure some of those overpriced listings get onto the books?!Not only that, at the same time, youu2019re making sure via signing the mandate that youu2019re the listing agent.Yet another property the competition doesnu2019t have on their books!Eventually, the home seller will start to realize over the weeks/months of low-to-no activity that something needs to be done in order to sell his property!Yet another reason why the real estate agent who took on the overpriced listing is now rubbing his hands together! Price reduction u2024 woo hoo!Advantages for real estate agents!Of course, there will always be real estate agents who will be more than happy to take on overpriced listings!Next step in their u2018ingenious marketing planu2024 will undoubtedly be to make sure to put up a u2018For Saleu2024 sign outside the property, get it onto the property portals (or MLS) asap, and start organizing the first open houses!After all, all these free advertising tools will lead to more clients (buyer and sellers) contacting them, who would like to view other houses or want the agent to stop by to do a valuation.And if this strategy is one where they take on any and every overpriced listing in that particular suburb, guess who will be all over the place with their signs?More exposure = more business! (or at least, thatu2019s what they hope will happen!)These agents might not necessarily sell the overpriced properties they have on their books, but they sure will get some solid leads off of them, which will result in some commission somewhere coming in!In other words, these overpriced listings will be used as springboards to help sell other properties!Disadvantages for the home seller!Home sellers get the short end of the overpriced listing stick!Time is not your friend!Every day, every week, every month that passes, and your property hasnu2019t sold, it means your chances of getting a market-related price are seriously dropping!Period!As a home seller, you need to realize that the longer your property is on the market, the more damaging it will be for your final closing price!Thatu2019s assuming your house has been correctly priced, which is especially important if youu2019re trying to sell your home in a buyeru2019s market!In the event of it being an overpriced listing, youu2019re pretty much guaranteed from the get-go to be sitting on the market for a looooong time!You want to test the market and see if you get anyone interested at those overpriced levels?Sure, why not!Make sure you then remember who decided to market the property at those inflated prices!Humans are known to get greedy: if you ask anyone whether they want more money or less money for their house, what do you think the majority will answer?Point in case: was it Agent A, who gave you a correct market value, or Agent B, who was slightly overpriced? Either one would have been able to save you now.However, if you opted to go with Agent C, who came in with a valuation WAY off mark, and clearly stood apart from his fellow agents with his higher price, letu2019s hope you remember WHY you decided to choose him! There are plenty of home seller mistakes to make when choosing a real estate agent to represent you!Let me ask you this:Do you know what the #1 question home buyers ask when they meet the real estate agent doing a viewing of the house?u201cAnd how long has it been on the market for?u201dWhereas many years ago, the agent might try to avoid answering the question, nowadays, most educated home buyers can find out for themselves when the marketing of the property started!u201cOoh, itu2019s been on the market for more than two months?!u201du201cJeez, whatu2019s wrong with it?u201du201cThese home sellers must really be desperate now to see any offers. Letu2019s try to go in low and see what happens!u201dThatu2019s the reality!I kid you NOT!Having an overpriced listing is a kiss of death when trying to sell your home!Adjusting your price lower after all that time on the market will only raise even more questions from the few interested buyers left!u201cIf I wait another few weeks, Iu2019m sure theyu2019ll drop the price even more! We must not hurry with this one!u201dAs statistics have clearly proven time-and-time again, overpriced listings do eventually sell, but at prices below they would have if the property had only been marketed at the correct market price from the start!Closing thoughtsBy now, you must have a good idea how bad things can get when you decide to work with a real estate agent who was eager to tell you whatever price in order to get your business!Sure u2024 those type of agents will slowly but surely develop a reputation in town of taking on any listing, regardless of price!Some real estate agents even hope that those particular agents will get the mandates first, so by the time they expire (and they definitely will!), they can then swoop in and guide the home seller towards a successful home sale!At a realistic level!So, is it the chicken or the egg?Is it the real estate agents who are pushing those listing prices higher and higher?Or are the home sellers getting more and more greedy, only feeding off those other high prices?Bottom line: home sellers should be doing more homework prior to placing their property on the market:How to interview a real estate agent when selling your home? What are the consequences of being an overpriced listing in the market? What would be your reasons for overpricing your home?And more agents should try to take the ethical approach of actually telling the home sellers the truth when it comes to pricing!Over the long run, theyu2019re not only damaging home sellers one overpriced listing at a time, theyu2019re actually hurting their own reputation! (plus theyu2019re creating quite the headaches for those agents trying to do a correct job)I guess until then, every local property market will be faced with its fair share of overpriced listings.And consequently, its fair share of disappointed home sellers!I hope this answered your question.Good luck
