I had lunch with a respected colleague (and favorite friend) of mine last week and was bemoaning the loss of a coveted listing due to a competitor having promised a substantially higher outcome (in real estate parlance, we refer to this as "buying the listing"). Maureen and I meet several times a month to commiserate, support one another and trade helpful advice. With her permission, I am sharing some of our conclusions from that timely sandwich.
Every real estate agent I know has run into this from time to time and lost an important listing to another agent, so I'm certainly not alone, but it seems more prevalent now, given that home values have softened considerably over the past few years, making sellers especially vulnerable to this ungainly tactic.
Don't get me wrong, pricing a home is never easy, given the subjectivity of defining a home's true value. As I have often written, there are two values to any given property: "intrinsic value" and "market value" and unfortunately, they are rarely the same. As has always been true (and always will be) your home's market value is worth what a willing and able buyer will pay for it, at any given time.
Moreover, homes - especially here in Piedmont, Rockridge and Berkeley - are unique entities so while smart agents will utilize the most recent sale on the block as their basis of comparison, it isn't an exact science by any means.
However, the market analysis by competing agents should still be within spitting distance of one another, given the fact that any well-versed and finely-attuned agent should be drawing upon the same data points (which aren't subjective) and coming up with very similar conclusions!
That being said, there is always the unexpected, intrinsically emotional house that brings in a price WELL above its neighborhood value and can carry the sales price as much as 10-20% higher than expected! Recent neighborhood sales, square footage of the house, lot size, upgrades and amenities, and location, location, location are still the best indicators of a home's real "market value" and what an experienced appraiser will be basing his/her assessment upon - not on what you think your home is worth or what you want (that's called "intrinsic value!").
Remember that anyone can tell you what you want to hear, but your home still has to appraise for the offer price in order for the bank to underwrite the loan.
If you have invited two agents into your home to give you a listing presentation and their recommended listing price differs dramatically, you should be suspicious. Someone hasn't done his/her homework properly and I'm betting it's the agent who has come in with a much higher listing price! In this instance, it may behoove you to invite a third party to the table to decipher the truth before making a decision.
Then make a decision that is informed - not one based on smoke and mirrors - or on hope alone.
Can an agent be wrong when we suggest a lower price than you had in mind? Absolutely, we can and we have been. But better to price a home on the low side and have the market bid it UP than to list it too high and have to chase the market down with typically, disastrous results! Homes don't "undersell" (they don't) but I've seen many sell for far less than they should have, had a different pricing strategy been employed from the beginning.
So that's my opinion, with some help from my good friend and colleague, Maureen. Lunch is on me next time around!
Julie Gardner, has been writing The Perspective for 15 years and has published more than 600 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.