Part II of Overpricing the Listing, posted yesterday.

Overpricing a listing just to get the seller under contract is a practice that has its drawbacks. But many Realtors continue to do this because the risks rarely outweigh the rewards. There is always the chance that you'll sell it; you can always use the exposure; and you know that when the property doesn't sell, you can document the showings and feedback to show the seller you were right about the market all along. The question is - will the seller appreciate it?

Think about the way you feel whenever someone says, "I told you so." Do the words resentful, angry and embarrassed come to mind? These words are not exactly the building blocks to a better understanding with your seller. In fact, it is exactly these feelings that cause the seller to list the property - at a lower price - with some one else. The seller can blame you instead of his/her own poor judgment, and the next agent will simply sympathize and agree while pocketing the listing.

Still waiting to hear if he is going to get a plum group of four listings from an investor/seller, Canadian Realtor Chris Newell observes. "There are still many agents who just want the sign out there, whether the property sells or not. They 'need' something to advertise. They feel like they're working if they have a listing, over-priced or not. They will try to beat the seller up, and go for constant price reductions, thus putting the seller off of Realtors."

Before Newell ever gets to the point of defending a suggested listing price range, he tours the seller's property. Then he sits down with the seller and asks, "What do you think your home should sell for? Why?

He says that chances are good that the sellers have been watching the real estate ads for a while, and have a price in mind.

"You'd be surprised how many of the people have a lower-than-market price in mind. And, don't you look like a hero when you tell them that they should be setting their sights on a higher price," says Newell.

All too often though, the opposite is true. The seller has an unreasonable price in mind. One way to disabuse the seller of that idea is to offer to take the seller on a tour of the competing properties. Chances are very good that the seller has never set foot inside the competition and may be relying on word of mouth quotes, or comparables pulled from the Internet.

Arizona Realtor Cece Daniels suggests using cost as a motivation for more reasonable pricing. "If the seller will listen, I have used time on market as one of the primary factors when pricing property," she says. "For example: If the monthly debt on the properties were 2,000 and it takes 10 months to sell, the seller has just spent another $20,000 on the property that is unrecoverable. Conversely, if the property is priced slightly below market, the property will sell very fast (perhaps within a month) and the savings can credit my commission, in this case, I am nearly free."

If you find that you are the lone voice of reason in a overpricing war, Newell advises the following:

1. When it is one listing, be prepared to walk away from it; calculate how much it costs to carry a listing that doesn't sell for 3 months, and ask yourself if you can afford that.

2. Don't fall for that "Realtor-logic" that says that it is good to have a sign out there. It may generate some ad calls for you, but it could also have a negative effect as a non-sale-listing on your reputation.

3. Go into a listing presentation with the data on both suggested list price and sale price.

4. Be prepared to explain to the seller how Realtors have to sell a property 3 times; to other Realtors, to buyers, and the bank appraiser.

5. Ask the seller what it is about their property that makes it worth x amount over market value. Tell him/her that buyers comparison shop, so the Realtor has to justify to showing agents and buyers why the price is so far over what the market says it should be.

6. If you are in a situation where several other Realtors are suggesting listing prices much higher than yours, ask for more time to do more research, so that you can determine what they are basing their price upon.

Published: September 16, 1999

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