Thursday, September 13, 2018

What Does "Buying a Listing Mean?"

This is one of those hush-hush practices that homeowners rarely hear about but real estate agents know only too well: It's called "buying the listing." 

What it means is that some agents want the listing to sell your house so badly that they'll go along with whatever price you ask, even if it's outlandishly above what comparable houses are commanding.

They know that there's only a minuscule chance the house will sell at the inflated price you're proposing and yet they take the listing anyway. They fully expect that after a few weeks with no takers, you'll sober up and agree to what may have to be a series of price reductions.

"Buying the listing" works for some agents because they get cut into a commission payout that they would have missed had they lost the listing to competitors who counseled lower prices. Plus they reap immediate benefits: (for themselves, not yours) They've got their name plastered on a sign in front of your house, and they can hold open houses that could bring them new clients and other houses to sell.

There are potentially big drawbacks for you as the seller. Overpricing a house can doom it to months of sitting unsold, even with price reductions. Serious buyers get turned off by new listings with inflated prices and they may not come back when the price inevitably gets reduced. At the end of the process, you could be left with a final price well below what you would have received had you priced it realistically earlier.

Buying the listing is a controversial issue in the real estate field. Most agents insist they don't condone it or engage in it themselves. It's also potentially an ethical violation for members of the National Association of Realtors, who are prohibited from "attempting to secure a listing" by "deliberately misleading" the owner as to the market value. Not advising overly optimistic sellers about the true value of their property — solely to obtain the listing — can be construed as misleading them.

How common is this? It depends on location and market segment. Some agents report that it rarely occurs in their areas. Others, say it's so commonplace that "better than 50 percent of the listings" start out notably overpriced.

Agents elsewhere say that initial listings with inflated prices account for anywhere from 10 percent to more than 30 percent of all new properties put on the market. Some agents say the practice is most common in the upper brackets, where "a lot of agents want the listing at all costs."

Unfortunately for unknowing seller, some agents have agendas of listing as many houses as they can — regardless of how off-base the initial pricing may be — as an advertising billboard for themselves. Passers-by see their signs frequently and figure, wow, that agent must be the best. 


Some agents defend taking listings at elevated prices because they discuss pricing strategy in advance with the sellers. They draw the line: If the sellers of a house that should be priced around $400,000 are insisting on a listing at $495,000, they won't touch it. But if they see the sellers are trying to push a little — say pricing at $415,000 or $420,000 — they'll take the listing.

Bottom line: If you're planning to sell your house, arrange for multiple presentations by agents who specialize in your neighborhood. Study the market analyses they offer. Don't choose your agent mainly because he or she says your house is worth the most. Choose based on the key factors: proven sales record at or close to listing prices; strength of marketing strategies and resources; and outstanding references and reviews.

If you let an agent buy your listing at a price that's not supported by hard data, you may regret it months later when it still hasn't sold and your asking price is much lower.

Looking to Buy, Sell, or Invest? Contact:

David Demangos - Keller Williams Realty
Cell: 858.232.8410 | Realtor® BRE# 01905183
www.AwesomeSanDiegoRealEstate.com
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