Q: “Denise, I am about to take a listing that I know is overpriced. It is not significantly overpriced, but it is definitely outside the comfort range. The problem is that our market is so fast right now that I can’t, with good conscience, say that my sellers CAN’T get that price, I just think it is unlikely. How would you deal with this situation?”
A: First of all, you are right. In many areas of the country right now, local markets are moving so fast, that the highest price that we think that a homeowner will get may be actually lower than what they actually do get. That being said, in a competitive market, buyers should bid the property up to market value anyway and underpricing slightly will garner success.
If you have a seller who wants to test a higher price for their home, you just need a structured mechanism in place for what happens when there is a lack of showings or offers along with a timeline.
For example, if average market time for your area is ten days, then a property on the market for more than 14 days sticks out as a bad value. Therefore, I would have an agreement with the seller before the home goes on the market that at the seven day mark, the property price would decrease by $x or x%. In my market, I had a 3%, 4%, or 5% price reduction rule. If a property was getting virtually no calls or showings, I would reduce by 5%. If it was getting a good amount of showings and calls but no offers, that would be a 3% reduction. You should take a look at your market and find the right fit in terms of time and the amount of the reduction.
It is important to have rules that you discuss upfront with your seller so they aren’t surprised when you enact them. In fact, I would have a sheet of paper with the figures on them so there is no confusion.
Good luck and stay strong!