Explaining the Perils of Overpricing to Sellers

You know that overpricing a listing will needlessly prolong the marketing time—no matter how much money and time is spent on advertising and promoting the property. But you should explain to your sellers that they might experience these negative consequences:

1. Overpricing can result in an eventual sale below market value. This is because agents and buyers will increasingly pass over properties listed for a protracted period of time. They wonder why no one else has wanted the property, giving it a stigma. Eventually, bargain-hunters might sniff a deal, and make lowball offers and/or offer exotic financing schemes.
   
   
2. Lost Opportunities. Chances for sellers to buy other homes or complete their relocation plans are postponed, leading to additional inconvenience and expense.
   
   
3. Misjudging offers. Sellers might not recognize a good offer when they see one due to an unrealistic basis of comparison.
   
   
4. Seller’s lives are needlessly disrupted. The multitude of showings that will not result in a sale can cause a high level of anxiety. They eventually worry about a long “siege” of marketing.
   
   
5. Overpricing can strain the relationship between agent and seller. The seller might develop suspicions about their real estate agent’s performance. Instead of making a realistic pricing decision, they pressure the agent to pay for useless advertising or hold open houses that further disappoint the sellers.
   
   
6. Misjudging the problem. The seller might mistakenly attribute the buyers’ attitudes, the season, or the weather as the true underlying problem.

You should have ongoing discussions with your sellers about competitive pricing, and you must provide the best advice, regardless of the difficulty of giving it. When the client is not right, it is your duty to tell him or her so. A doctor can’t condone smoking, nor can an attorney endorse foolhardy legal action. Similarly, a real estate professional cannot remain silently complicit in a seller’s overpricing decision without breaching his or her advisory responsibility to the client.

The preceding was an excerpt from our online course, “The Psychology of Pricing and Secrets of the CMA,” by James Tice.