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What Does it Mean to "Buy a Listing"??

Heather Stevenson

With 29 years in Real Estate and a background in new home sales as both a Sales Agent and the VP of Sales and Marketing, enables Heather to utilize th...

With 29 years in Real Estate and a background in new home sales as both a Sales Agent and the VP of Sales and Marketing, enables Heather to utilize th...

Jul 9 10 minutes read

The two biggest questions a seller asks us on a listing appointment is how much and how long their home will take to sell. One of the things we excel at is reading the market. When I was a VP of Sales and Marketing for Shea Homes, I was responsible for 34 communities all in Southern CA and my key jobs was to read markets.

Let me explain a few things first on pricing strategy in residential real estate. 

There are three ways to price a property for sale. First, a seller can price it low. This is the eBay mentality. Make the home look like it is a “deal” and get a feeding frenzy on the home with multiple offers. This will create a bidding war and the goal is to sell the home far above asking price. It feels like a solid strategy right? 

Here is the flaw. 

People who are looking at the low price of a potential property are excited to be getting a deal that is nowhere in reality of what they will get the home for. The seller is unwilling to sell for such a low price, and even if the buyer is willing to pay over, they usually cannot qualify for the higher sales price (a clear bait and switch tactic). The buyers at the higher price point are not usually looking in the lower price range, thinking a home is priced low for a reason like problems with the property. 

In this scenario the seller becomes frustrated with low offers and normally begrudgingly sells for far below market price, or they take their home off the market altogether. Many out of area agents subscribe to this philosophy so they don’t have to spend too much time driving out to the property or spending any marketing dollars on the home. (Did you know the average agent spends less than $200 on their listings? Shocking but true). In the end it is a lazier way of selling a home and it is one that costs the listing agent little to no marketing dollars, gets them another sign up in the yard, and yields less sales price ultimately for the seller. A clear win-lose scenario, with the loser being the client. 

The second and best pricing strategy is pricing the home to current market conditions. This means the real estate agent needs to know the nuances of the market. Supply and demand levels for the given property needs to be analyzed and why the home is better than all competing properties. Scientific staging needs to be implemented and state of the art marketing executed. This is how sellers get maximum sales price for their homes. 

This is how our team prices our properties, and we never deviate from this strategy. Ever. 

The last and sadly most common pricing philosophy by typical agents is to list it way over the market price. The problem is that with today’s information at the buyer’s fingertips, buyer’s are savvy. Homes that are overpriced will sit for a long time and will ultimately sell far below asking price. But you are probably wondering why any agent would subscribe to this methodology? Many times it is because they have to do what is called “buying” a listing. 

Here is the hustle. 

Let me set the stage for you. An agent is going up against multiple realtors fighting over a listing. The typical agent cannot explain the value of their services except to do one thing, tell the seller’s they will get more for their home. They tell them an outrageous price, and the sellers are none the wiser. I mean, if agent x and y said their home is worth $700,000 and the agent Z commits to selling their home for $788,000 who wouldn’t want that? The listing agent just bought themselves a listing. 

The listing agent will overprice their listing, and get the seller locked into a long term contract. Then the listing agent, knowing that there will be no activity, will hand the listing off to someone in his office. Usually this agent will have little to no experience. It is kind of like throwing spaghetti on the wall and seeing if it sticks. Most of the time it won’t, but occasionally they will get lucky. The listing agent gets another sign in the community and can market themselves and not the property. Then, when there is no activity on the property the seller gets really upset. They end up taking price reduction after price reduction, eventually selling the home for far below market price. The seller is unhappy, and the listing agent is happy to get paid. That is a win, lose situation again with the seller being the loser. 

It really happens all the time. 

Here is a real life example of how this scam works. Mark and I were recently on a listing appointment for a home in South Corona. We built good rapport and the seller appeared to understand what we were explaining to him about our strategy. In fact, he loved it. The seller was using a price per square foot comparison of a single story, smaller home to his (which is not the way to price a home, and we illustrate that clearly in our Value-Driven Approach). That would place the seller’s home at $788,000 instead of the $739,000, which the home is really worth. At the end of the conversation, the seller understood and agreed with our pricing strategy. 

When we left the appointment and exited the seller’s home, a well known agent was waiting outside the door to meet with the seller next. 

When the agent saw us, his face fell. He knows that he can’t beat us in marketing or the value that we bring to the property. The only way he can beat us is to, you guessed it, buy the listing, and he does it all of the time.

I wasn’t surprised when the seller let me know that not only did this agent agree to list their home at $788,000 but he drastically reduced his commission. Winning in the seller’s eyes, right? 

The first showings were at the open house described as a “mega open house”. If you know The Stevenson Team you know we pride ourselves on our open houses, we've even been asked to teach numerous classes on the subject because we sell many of our homes that way. We also, know the agent, Tim, never does his own open houses. So how was he going to do this “Mega Open House”? We decided to come see it for ourselves. 

When we arrived at the open house we were not surprised to see a different agent conducting the open house. She had sold only one home before and was newly licensed. We were not greeted when we entered, and there was warm $5 champagne bottles out for display. (In our open houses we use rare micro-brews to taste which we utilize social media to get the word out - the strategy works well for us, and we had shared this also with the seller). The agent was quick to tell us that she knew the home was overpriced, and all the furniture was available as well. Again, this isn’t the way to build value in a home.

Mark and I left the open house shaking our head. 

That same day we met with new potential sellers. Their home is located in Eagle Glen, also in South Corona. It is a fabulous home. We told them our push price would be $700,000. They had listed their home 90 days previously for $670,000 with other agents and didn’t sell it at that time. 

The seller’s took our advice and we had our first open house. By the end of the weekend we had multiple offers up to $715,000! We even got the appraisal back at full value, and our sellers were elated. 

Meanwhile, within 5 days at the other property, where Tim bought the listing, that was listed at $788,900 the price was reduced to $758,900. It eventually sold for $722,500 - a full $17,400 below what we could have sold it for, and $66,400 below what the agent, Tim, committed the home was worth. So in the end where we ended up getting our sellers, $65,000 more in sales price, the other agent that bought his listing cost the seller $66,400 in sales price. 

That is why we will never buy a listing. 

As a seller it is easy to see whether an agent “buys” listings. Here are some of the key ways to make sure your not being taken for a ride. 

First, the agent has consistent price reductions. Had the original sellers that listed with Tim looked at the stats online, they would have seen that Tim has 100% price reductions on his listings. Conversely, our team sells typically within 1% of asking price, and consistently beat the average number of days on the market. Agent Tim has a 65% cancellation or expired listing rate in the last 12 months. The Stevenson Team has also had 0 cancellations or expired listings in over 2 years. 

In other words, if you want to list your home with Tim, be prepared for a terrible experience. If you want to sell your home for top dollar then hire The Stevenson Team. 

We have taken our approach and written a book about the subject. It is titled “The Value-Driven Approach to Selling Real Estate”. Our hope is to help further educate home sellers to make sure they make the right decision when it comes to selling a property. Also, we hope that by educating sellers, agents will stop the unethical behavior of buying listings, and pricing a listing too low. 

If you would like to learn more about our Value-Driven Approach, please click HERE.

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