Have you thought about selling your home? Are you interviewing real estate agents to find the right one for you? Hoping for an agent that you can trust and that will get you top dollar for your property? When an agent shows up bragging that he or she frequently sells houses for 125% of list price or more, it sounds pretty good right? Hopefully they can get that for your property too! Selling well over list price though, is not the same as selling well over current market value and may not be the top dollar for your property. Let me explain…
A practice among many real estate agents is to list a property at a price below what the property is actually worth, and not accept offers until a certain date. This practice is referred to as “Holding Off Offers” and tends to bring multiple offers and competition. Something that you are very familiar with if you are trying to buy a property in today’s market. By pricing low, they are appealing to buyers with a lower budget as well. More people who see the property can lead to more offers. More offers frequently means higher dollar values. Commonly this lower price is only a little below market value. In some cases though, this reduced price may be $100,000 or more below market value. On a $2,000,000 property this is not a large percentage of the selling price, but on a $400,000 home it is. If the current market value of a home is $400,000 and the listing agent lists it for $300,000 when it sells for $400,000 it may have sold for 133% of list price but only 100% of current market value. This happens to all price brackets whether million dollar homes, entry level properties, or anything in between. For example, a property worth a million dollars is listed for $899,000. When it sells for a million it sold for 100% of market value.
That is not to say that every property that goes into competition and sells well over list price is not selling over current market value. In some cases it does, and in those instances congratulations to the seller and their agent. Some feel this practice is “unfair” but if you take emotion out of it and look at it logically, the listing agent’s job is to get top dollar for his client the seller. That is what they are trying to do. It is a sign of the pent up demand to purchase property. You can read more about why buyers are paying so much in my article here.
The problem comes with the dishonesty when the listing agent brags about selling the property for 133% over asking. So remember, if you are interviewing agents to sell your house and one of them said they sold a property for 125% or more of list price, ask them what the market value of the property was as well. That would be a better representation of the performance of the property on the market.
If an agent frequently sells houses for 125% or more of list price, maybe the question you should ask is why do you keep listing the properties so low?
Do you want to find out what your property is worth in today’s market? Please contact Ryan Ligeza.
