What Is An Overpriced Listing and Should I Take One As A Real Estate Agent in Santa Barbara?
We as real estate agents often talk about "overpriced" listings that are on the market here in Santa Barbara, Montecito etc. We also tend to talk often about certain agents that tend to be the ones that take a lot of "overpriced" listings in our area.
So what is an overpriced listing?
The problem with this question is that there really is no concrete answer. This is especially true here in the Santa Barbara area in general and then more so as the real estate market is seeing prices rise. Also, are we comparing the prices of today vs. 2011 or 2000? Are we comparing Santa Barbara to Miami Beach? To answer the question though...Let's talk about today's real estate market and just here in the Santa Barbara area. With this said, I would tend to think that the generic definition / thought for an overpriced listing would most likely be a home that is priced 7-10% (or more) above comparable comps. One reality that we face here in Santa Barbara is that we live in a town where the majority of the time there tends to be more buyer demand than supply of inventory. We also live in a town with a lot of $$ and we often get surprised by this and some real estate sales that do happen.
It is not uncommon to see a home come on the market that shocks with the price they are asking...and then ultimately sells and thus shocks again. It becomes the talk for a few days, but the reality is is that if one buyer is willing to pay the asking price, then this sets a new price point. It might be an inflated price point that will ultimately be an outlier, but nevertheless it happens. Sometimes though this sale alone can change prices in certain parts of the real estate market. As you get into higher price points, this can happen quite often as you are dealing with people where time / timing is more of value than $$. If the perfect home for someone comes on the market for say $4 million and almost everyone sees this as really "only" a $3.5 million home...the buyer sometimes will still pay the $4 million asking price. For them, $500K is less important than other things and they have the means to pay this. The reality of this is then what leads to the second part of the question...
As an real estate agent, should I take an overpriced listing? Why do some agents do this and others not?
This is a big debate in our industry and some people have strong opinions on both sides. Some of the generic answers for taking an overpriced listing are:
- Business is slow and maybe I can grab a few buyers or sellers off a new listing (thus not looking out much for the actual seller they are representing).
- Someone is going to take it and it might as well be me. I have the time and hopefully the seller will eventually see that it is too high priced and will reduce to a market price.
- It is in an area I know and / or want to be the expert in and so I have to.
- You never know.
- Eventually the market will catch up to the asking price.
For agents that are unwilling to take overpriced listings, here are some generic thoughts and answers as to why they don't:
- By taking it, it shows other agents that we do not know the market, that we have not properly educated our clients and thus this will lead to difficult transactions.
- Don't want to spin wheels for themselves or for the clients...have unrealistic expectations.
- Once you start accepting overpriced listings your reputation becomes this...this ultimately effects you and effects the homes you represent as many assume they are overpriced since most of your listings are overpriced.
- You are trying to represent your client and not just troll for new business at their expense (open houses, flyers, all marketing opportunities).
The huge reality for agents and sellers is that when the market is rising, you do never know and in this there is merit on maybe testing (quite aggressively sometimes) what a home will sell for. The biggest problem with this is that you set up sellers and your self for disappointment. The win win situation in a home that is being aggressively priced is that the agent and the seller have a crystal clear understanding of the market, what the marketing plan is for the property and what to do if it does not sell. For an agent to take an overpriced listing, I think they need to:
- 100% realistically think the home could sell
- 100% understand the market and have a clear path and idea of how to market and ultimately sell the home
- Have a motivated seller that really understands the "real" market price and is willing to sell there if they first try and sell for a higher price and nothing happens.
- Have a seller that understands the potential negatives of listing high and what happens or can happen if you have to reduce the price of the home (it might take multiple reductions, it might sell for less than if you had priced it more at market etc.)
For me, as long as these 4 points above are understood, the market is strong, the asking price is not crazy high, I am OK with taking an "overpriced" listing based truly upon the exact home I would be listing and the relationship I have with the seller. Some overpriced homes (as well as some sellers) have a 99% chance of not selling and for these I would not do it for both me and the seller.
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For more information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in our wonderful town, please don’t hesitate to contact Kevin Schmidtchen at Berkshire Hathaway.
Thank you for reading. I hope you find Santa Barbara Real Estate Voice informative. Please feel free to contact me or comment below with any thoughts.