Should You Start Out with a HIGH Listing Price? 


By: Bill Sahadi

Published in May 2007


With the winds of change blowing on real estate market conditions across the country, our sellers are competing for fewer buyers. In the Moore County area we have experienced a lot of growth and appreciation over the last 7 years. Against this backdrop of changing market conditions, it is once again important to challenge a long-standing "myth" of real estate.  

"The initial listing price isn't that important because the price can always be adjusted down later."   Many homeowners believe this. It is a myth. It is not true.  

How does this whole process start? 

It all starts with advertising in such mediums as newspapers, on line web sites, real estate publications and color brochures that do such a valuable job of getting the wheels in motion.  These mediums get the prospective buyer to make inquiries.  These mediums enable prospective buyers to start conversations with buyer agents.  The buyer agents facilitate the purchasing process.

Buyers are now in communication with a buyer agent.  A good agent knows the current inventory and will know of other property that DOES fit their needs. Those are the properties that buyers look at, and THIS is how most buyers eventually end up looking at your house, by their use of other agents.

As a result, you need to get other buyer agents interested in your property, and this is where your listing agent comes in, and why a good listing agent is extremely important. The listing agent gets buyer agents looking at your home. Those agents have clients who called in on other properties. They look at the needs of the client; location, condition, # of bedrooms, square feet, and
other details of the property...



A good listing agent will also defend the price of your home by supplying sold comps to the buyer agents to support your price.  This goes a long way to educating the buyer agent and their client. In this manner your listing agent helps to qualify any offer that comes in.  A good buyer agent knows price and can verify that a home is priced fairly or is overpriced.

If your house is overpriced, agents are going to show similar homes that are priced more attractively. They may show your home only to drive home their point of relative value to convince their client that another home is a better buy. Your listing will get passed over.

Agents pay the MOST attention to new listings.  

There are fewer NEW listings than current listings. It is easier to keep an eye out for what is NEW, compared to the vast number of current listings.

New listings circulate on our "hot" sheet report.  Our Multiple Listing service identifies new listings for us each day. There are office previews and MLS tours to showcase new listings. A lot of attention is focused on what is NEW.  With agents looking at newly listed homes so aggressively, a properly priced home gets attention quickly. An overpriced home gets passed over.

You may be thinking, "But I'm willing to negotiate!"

Buyers aren't thinking in advance about how much you are willing to negotiate. They are comparing your asking price to other asking prices. Additionally, when your house is new on the market, you may not be willing to negotiate as much as you will later, once you've realized your error. Keep in mind that statistics show, quite often, the first offer is the best offer.

So what happens if you overprice in the beginning and get more realistic down the road?  You don't have all those important Buyer Agents looking at your listing because it is no longer NEW.  

A price reduction later in the listing cycle often gets overlooked. It is just one of many listings that are now stale and not one of the attention grabbing new listings.

As time passes, you could actually become desperate to sell because you've accepted a new job or because you have already bought a new home. That is a recipe for receiving lowball offers, so you could end up selling for less than if you had priced the home correctly in the first place.  Agents know this, but many sellers still mistakenly believe they should "price it high" because they can lower the price later, if necessary.

That is not the best strategy.


If you start out with a high sales price, then drop it later -- your house is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house could take longer to sell. If you don’t have an offer on your home after 12 bona fide showings with ample feedback, you’ve got a price problem, no matter what the feedback says.  So many times the feedback is more important by what is not said.

Even if you do successfully sell at an above market price to an uninformed buyer, your buyer will need a mortgage. The mortgage lender requires an appraisal to satisfy the loan contingency.  If comparable sales for the last six months and current market conditions do not support your sales price, the house won’t appraise. Your deal falls apart. Of course, you can always attempt to renegotiate the price, but only if the buyer is willing to listen.

Your house could go "back on the market." 

Once your home has fallen out of contract or sits on the market awhile, it is harder to get a good offer. Potential buyer agents will think you might be getting desperate, so they will encourage their clients to make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have normally received.

New or less experienced agents might take a listing at any price.

In this way, they get to make the phone ring and hopefully wind up with clients that might buy another home that is more fairly priced. If you start out with a sales price that is too high, there is a strong likelihood you interviewed other agents. They didn't get the listing, of course.  They got "aced out" by someone telling you what you wanted to hear. 

In short, you may have ended up with an agent who was good at selling you, but not good at selling your house

The next time you’re in this position, you should seriously consider why one agent’s suggested list price was lower than the agent who told you what you wanted to hear. 

It is human nature for you to want the highest price for your home. However, when you choose the agent who promises what you want to hear, it often leads to stress and frustration. Most of the time, it will take you longer to sell your home, and you could wind up selling at a lower price instead.

The smartest marketing tool you have is your PRICE and you generally have only one opportunity to capitalize on it.