A real estate agent that inflates a list price beyond reality just to get the listing is deceptive and may be harmful to the sale of your house. The deceptive practice of inflating the list price is effective because the client wants to hear that their house is worth a high price. Bad agents are more than eager to feed into this delusion. Good agents base their suggested list prices on real conditions so they will be lower than an inflated price. If you want to get the most for your house, and everybody does, you’d naturally pick the real estate agent with the inflated price. Now you’re falling victim to the Inflatable Agent’s trap. I see this sort of thing happening all the time. If all of the real estate agents were honest with their recommended pricing, the list prices should be very similar. Never use price as a factor for choosing an agent. Here’s why it will work against you.
It Doesn’t Take Talent to be an Inflatable Real Estate Agent
A real estate agent that inflates a suggested list price solely to win the listing is basically lying to you. Real estate agents that have to lie to win favor, usually lie more than once. What else did they lie to you about during their presentation? Good Realtors give truthful facts, even when the facts may not be attractive. They know you need to know the facts to effectively sell your house. The bad agent knows that too, but they don’t care because they are only looking out for their personal interests.
Chasing the Market
The first month of the listing is usually when the house receives the most attention. If your house is priced too high initially then it will not receive the attention that it could receive if it were priced right. Waiting a month to drop the price to a more reasonable price is too late. You’ve already blown it. It’s too late because your listing is getting stale. Even worse, in a competitive market prices may be dropping so your reduced price may be overpriced for the current market. The process repeats and the price drops further keeping the house on the market longer. In most cases, if it’s priced right, it will sell for more than if it’s priced wrong, even if the wrong price is higher.
Increased Time on Market
Your house becomes less attractive to home buyers each passing day it stays on the market. That’s why it’s important to be competitive from day one. Past a certain amount of time your house becomes stale and it will remain stale until the next price drop.
Significant Price Drop
I’ve mentioned price drops three times already. If the agent lets you chase the market with small price reductions, the only way to catch up is a big price drop. By significantly dropping the price you attract the attention of the bargain shoppers. Bargain shoppers never pay retail so expect to get an offer for a “lowball” offer.
Sometimes Less is More
In most cases, inflating a list price and gradually reducing it over time results in a lower sales price than the other agent’s lower suggested list prices. It also means a longer time on market. In this case, lower price means more money, especially in a competitive buyer’s market.
How to Spot an Inflatable Agent
Agents that inflate prices must lower them to be able to sell the property. This trend can be spotted in a market comparative market analysis (CMA) data. Inflatable agents have a greater difference between original list price and current list price in their listing data. In your CMA, it’s referred to as LP%OP. You also need to check their days on market (DOM) because this practice usually results in a longer time on market. To compare all of the agents’ data to the market you’ll need a CMA that shows all of their transactions. The agents can provide this data for you when you meet them. Don’t forget to ask before the meeting. Look at the total market averages for these statistics and compare them to each agent’s statistics. Also compare each agent’s average to the other agents you are evaluating. You are looking for significant differences, not slight variations. For example if one agent has a LP%OP of 70% then you know that agent dropped the list price by 30%. If all the other agents had a LP%OP around 95% then something is up, especially if there is a significant difference in the days on market stats. Keep in mind that you need to look at averages. Don’t make judgments based on one or two transactions.
How to Avoid Hiring an Inflatable Agent
Successful agents who sell homes price houses correctly so that they sell quickly. If you want to avoid using inflatable agents, only use agents with a history of selling houses in your neighborhood. AgentHarvest’s free real estate agent finder service can help you find those agents.