Overpriced Property - To Market or Not To Market?

Wed 23 Jul 2014

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Paul Jager
MOL Product Manager - Property & Conveyancing

A seller agrees to instruct you to market their property. But, it is at a figure far in excess of your recommendation.

What do you do?

This is a dilemma we have all had as property agents. You have three options

1. Demonstrate to the seller that their figure does not compare favourably to similar properties recently marketed or sold in their area.

Presumably, you’ve already followed this process during the market appraisal - showing the seller information on other properties in the area and how this has influenced your suggested asking price. If they’ve decided to ignore this data, then a good first step is to ask why? The most common reasons include

“I need my figure to be able to buy a property I’ve seen”
“All my friends tell me what a beautiful property I have so I must be able to get more for it than others”
“I’m in no hurry and want to test the market”
“Other agents have told me I can ask this”
“A property across the road sold for a similar figure”

How to counter these?

“I need my figure to be able to buy a property I’ve seen”
This is an understandable position but the agent needs to add some realism to the situation. Better to be honest with the seller and lower their expectations before they start to spend any money on their potential purchase. Often the seller is trying to swap their property for one that is far superior for little or no extra investment. Simply discussing this with the seller can help them see the difficulty of the situation.
“All my friends tell me what a beautiful property I have so I must be able to get more for it than others”
Unfortunately, unless one of their friends is planning to buy the property at the inflated figure, then strangers are not going to be so generous bearing in mind what else has been available on the market. Again, refer them back to your local property data.
“I’m in no hurry and want to test the market”
This again is an understandable position. However, it’s worth explaining to a seller that the longer a property remains unsold the more questions it raises in prospective buyer’s minds ie is there something wrong with the property? If though you feel inclined to take instructions in this situation then agree a date to review matters. Perhaps little response will be enough proof to the seller that they have indeed been over ambitious.
“Others agents have told me I can ask this”
Time to discuss with the seller how many properties you’ve recently been instructed on, that were originally given to other agents who over valued and couldn’t sell them?
“A property across the road sold for a similar figure”. It isn’t always clear to the public the difference between an asking price and a selling price. The seller might assume that what was asked is what was finally achieved. Nothing could be further from the truth and it’s our job, when necessary to make this clear.

If having spent time explaining the reality of the situation the seller still chooses to ignore your advice then your next option is to…..

2. Refuse the instruction

This is a difficult subject to discuss. It goes against the grain of every sales person to even think about walking away from business. And, generally we shouldn’t. But are there certain circumstances where declining an instruction is valid? If there was one reason to consider this, it would involve price.
Does there come a point where an asking price is so extreme that it isn’t worth the time and effort marketing the property? Probably. Where that point comes is a decision you and your organisation would make. But, when it comes you may have to politely decline the instruction and better use your time on property that will sell. But, always keep the door open for the seller to return if their plans don’t materialise with other agents. Who knows, perhaps they will be so surprised that an agent has had the professionalism to say ‘No’ it might cause them to reconsider their position.

3.Take the Instruction

Why might you decide to take this course of action? You know the property’s asking price is too high but you also remember the saying ‘you gotta be in it to win it!’ So, reasons for taking the overpriced instruction might be

Even if it doesn’t sell at least you’ve had a For Sale board advertising your company
Maybe someone unexpected, with an overwhelming reason for buying the property will make an offer that is acceptable
Perhaps after a period of time the owner will realise how high their asking price is and reduce it. Better they reduce it while you’re instructed rather than with another agent
If it doesn’t sell and is withdrawn from the market but you offer exemplary service, the seller may return to you at a later date
You can use it as a ‘how not to sell your property’ example when you ‘value’ other properties
A neighbour may see your For Sale board, and it causes them to call you for a market appraisal

Although there are several reasons above for taking the overpriced instruction, each of these also have a negative side to them. I won’t cover them here; I’m sure you can decide what they are yourself. What is important here is that there are reasons not to immediately dismiss a seller and their inflated property priced expectations, but do ensure you have given your honest opinion about the price that can be achieved in case you need to suggest an adjustment at a later date.