Why would [he] take an overpriced listing?
I was on a listing appointment the other day in Etobicoke, Ontario and it came to the part of my presentation when the homeowner wanted to know what I thought we should list the home for. In this particular situation the comparable listings were very easy to spot in the neighbourhood and the obvious list price was very clear to be between $550,000-$560,000 to be competitive.
They said "the other Etobicoke real estate agent that was here yesterday said we should list around $650,000." I was shocked. Then they asked, why would a Realtor tell us $650,000 knowing that it would never sell? He wouldn't make any money if it didn't sell, so why would he want to list our home at a price that wouldn't be competitive?
Well thats a great question. There are a number of reasons Realtors take over priced listings.
They think if they tell you what you want to hear that you will just love them and list your home with them, and then later week after week, after week, after week, they will beat you up on the price until they get it to a price that will cause it to sell. You are already under contract and have no choice, if you want to sell your home at that point.
The problem this causes for you is that by the time you get to the price that would have enabled it to sell three months ago, the market has already decreased another few percent and you are caught chasing the market. By the time you adjust to that $550,000 three months later, prices have all decreased and now you should be at $525,000. You chased the market.
Have you heard of the "Bait and Switch" tactic? Discount real estate agents or commission cutting real estate companies specialize in this tactic. Buyer calls come in and certain Real Estate agents take the buyer calls and bank on the fact that they will switch the buyer to a better priced property down the street, where they will make 2.5% of the buyers side on a another property. Then another buyer call comes in on your over priced property , and they take that buyer to another property better priced and make another 2.5%. As you can see, it would be in that listing agent's best interest for your property not to sell anytime soon so they can keep USING YOU and YOUR PROPERTY to make 2.5% + 2.5% = 2.5% from various buyers. They did make money from your listing, unfortunately it was at your expense.
It could just be inexperience or lack of knowledge on how to price a property. I dislike this practice. You don't price property based on what has sold 1 year ago. The market is changing every month. If homes sold for $600,000 a year ago or even 6 months ago, but now all the comparable homes are so competitive that they are all priced around $550,000, then you need to beat your current competition. It doesn't matter what they were selling for yesterday. Only today's competition matters. When the market is changing as fast as it is today, even lenders won't allow comps to be used older than three months because of this changing market in Toronto.