Beware of Real Estate Agents That Inflate List Prices To Get Listings

Real estate agents that inflate the listing price to get the listing
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.

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.

This entry was posted in Hiring an Agent and tagged by Bill Petrey, Realtor. Bookmark the permalink.

About Bill Petrey, Realtor

Bill Petrey, the CEO and Founder of AgentHarvest, has been written about in the Los Angeles Times, Inman News, AOL Real Estate, and Inman Next, among others. He founded AgentHarvest for the sole purpose of making the process of finding a good Realtor better and easier. Bill Petrey is an author and editor of both The AgentHarvest Blog, Real Examples of Really Rotten Realty Blog, and the creator of Really Rotten Realty.

11 thoughts on “Beware of Real Estate Agents That Inflate List Prices To Get Listings

  1. Eventually, the agent gets a reputation of over-pricing. His listings are avoided as a waste of time. After dropping the price below what the home could have sold for months earlier his reputation lingers. Eventually, the practice refects on the entire office. Why a BIC permits the practice is questionable. I see no reason to have many listings if few are going to be sold.

  2. Hi there! I actually have plans of buying a lot. I must say, real estate agents are very aggressive. They will explain to you all the benefits that you could get. As a buyer, we always consider the pricing. Better if we could really avail discounts. I excited to own a house.

    • Best of luck buying your new lot. Personally I don’t think your timing could be any better. Finding an agent to help buy a lot is just as important as when buying a house. Just be sure to find an agent that knows about lots, specifically building restrictions, HOA rules, etc. Make sure the agent knows your desired area. You don’t want to fall in love with a lot that could be located next to a future highway off-ramp. Besides residential agents, AgentHarvest can find agents specializing in land sales too.

  3. It’s being a nice experience of reading this post. It’s not only informative but also useful too. So, I bookmarked this site and looking forward for more.

  4. It’s really true that if an agent inflates the property just to please the seller, then it’s basically a lie. The house won’t sell because the market won’t pay the inflated price, the seller gets upset because it won’t sell and the real estate agent won’t get a commission. It’s a lose-lose situation. It’s always better to fact facts than hear what you want to hear.

  5. Thank you for this posting. It is a dis-service for agents to give poor pricing advice, or any bad advice. This business is about service! The Boston real estate market is so tight right now that any home on market for 6+ weeks can be assumed to be overpriced (except luxury homes). Pricing can be tough in a dynamic market, but deliberately over or underpricing hurts the real estate industry’s reputation.

    • Ruth:
      I agree, it’s horrible when agents tell you what you want to hear, knowing how wrong it is, just to get the listing. That’s why it’s so important to do research beyond the interview before hiring an agent. However, these exaggerations are easily spotted if you interview multiple agents since they all give you an estimated listing price.

      Sure, not all news is good to hear, but we owe it to our clients to give them the truth about their situation. Sadly most clients can’t handle the truth.

  6. The internet is a good way to find out if a property value is inflated. All the tools accompanied with google maps helped me find out a vacant lot is being listed in a premier area but actually far away. I knew it was too good to be true but still chose to investigate into why this property was selling for less than a 1/4th of it’s actual value. Buyers beware of the Portland and Seattle areas as I’ve seen the agents trying to cash in on out-of-towners. You can’t sell a million dollar house next to $400,000 houses if it’s the only one. A mansion in the ghetto is still in ghetto LOL.

    • The internet is not as good as you might think. Not all data available to the public is accurate. Google Maps is great for doing a flyover and drive-by of a property and neighborhood to judge the neighborhood. Unfortunately it’s not perfect since some areas may be years out of date and gated communities are usually left out since the Googlemobile doesn’t have access.

      Believe it or not, you can sell a million-dollar house in a $400,000 neighborhood. Happens often Dallas, but it’s usually a new house in older teardown neighborhoods and other new houses are popping up nearby just like it. Or, I’ve seen small pockets in lakeside communities where a highly desirable location or natural feature or view makes that land a scarce resource. In those cases, people will buy a home, tear it down and build something nicer.

      However, while I’ve seen it happen, it goes against my better judgement to do it or recommend someone else doing it.

    • Debbie:
      Sure, it happens all the time, especially in a competitive bid situation like in a seller’s market. However, once the offer is accepted, then the seller must sell it at the agreed upon price. My last property sold for more than the listing price. In that case, the listing was on the market for 3 days, had over 100 showings scheduled, and I received 9 offers. Since every agent submitting offers knew I’d probably receive multiple offers, they made sure to make them as competitive as possible. Several offers were over list price. I accepted one of those higher priced offers.

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