Why Every Listing Should be Priced at $1

By
Real Estate Agent with CENTURY 21 American Homes

This is a follow-up to my post, There is No Such Thing as an Under-Priced House.  While reading through various posts on the topic of under pricing, on comment really caught my eye.  Basically, the commenter said something to effect that if the goal of under pricing was to simply get the highest bid, then every property should be priced at a dollar.  Here's why I think that's a GREAT IDEA!

As a listing agent

There would no longer be any reason to have to 'prove' your pricing range based off your market analysis.  The market (as it always does anyway) will determine that value by the prices that come in on the offers.  Yes, you'd still have to do a CMA (sorry) because it would still be nice to know where the actual sales price should be, but now, with one dollar pricing, condition and show-ability (staging anyone?) take a front seat to pricing.  Now you'll know that your property needs work (if it does) and the pricing will reflect that, and you'll know in days, not months or years.

Marketing becomes primary to the listing agent.  Not the BS about listing on MLS/websites, etc but true marketing, as in "how you can market the home to the most people in the shortest amount of time and get the most people in the home making offers" type marketing.  You truly do have to be better than the next agent, and if you are, you now have the real ability to charge differently than the next agent, as well.

As a buyer's agent

Gone will be the lackluster buyer's agent.  No more glorified chauffeur service.  Buyer's agency will now have true value for the masses!  The buyer's agents can no longer simply say, "well, it's priced at X, what to you want to offer?"  Nope, now, as a buyer's agent, your client is looking to you to do a market analysis on the home and help guide them in making an offer that will both get them a deal AND get them the home!  It's all on you buddy, but it's all good, too.  See, with one dollar pricing, it's the buyer's agent that is now the most important agent in the transaction.  Upfront fees will be standard practice, and if you're a successful buyer's agent, one that gets their clients into properties, then, like the listing agent, you can realistically charge...and get...more for your services than the so-so agent.

Will this actually happen?  Probably not in my life-time.  But for those agents that always argue for a "Higher Standard" for real estate agents, it's not in increased education, higher fees and other methods that have been mentioned.  It's one dollar pricing on all listings.  That's where the cream of the crop will rise and the others will settle at the bottom.

Posted by

__________________________________________

Hickory Home SearchForeclosure Hunter

 

Roger Johnson is a Realtor with CENTURY 21 American Homes in Hickory, NC.

 

I service the Catawba and surrounding counties, and the Hickory, Newton, Conover, Taylorsville, Claremont, Statesville and Charlotte, NC real estate markets.

Visit us on the web at: www.HickoryNCHomes.com

You can contact me via Email or give me a call at 828-381-9245 or 828-568-2121 ext 310

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Lenn Harley 06/27/2010 07:41 AM
  2. Brigita McKelvie 06/29/2010 07:58 AM
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Show All Comments
Rainmaker
511,797
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Hmmm, interesting idea.  

Patricia

Jun 27, 2010 09:50 PM #44
Rainmaker
103,346
Robert Slick
Beach and River Homes - Georgetown, SC
NRBA, RDCPro, Trident/CCAR MLS

I like this idea. And the seller would only owe the listing agent a few pennies for each full price offer they turned down.

Jun 27, 2010 09:53 PM #45
Ambassador
567,864
Rob Lang
At Home Kansas / www.AskRobLang.com - Lawrence, KS
Local Expert in Lawrence Kansas Real Estate Homes

I agree with the principle that asking price is not necessarily the price that is being asked, but it does portray certain expectations.  I find that missed expectations are the easiest path to offense, so an asking price gets the ball rolling towards exposed expectations before there is any dialogue... and that's a strength.  

Jun 27, 2010 10:05 PM #46
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

Okay, guys and gals, this was presented as a concept.  A novel idea whose primary purpose was to drive home the point that there really is no such thing as an under priced listing.  The market will ultimately decide the price of the property, No matter what the listing price.  I understand that this concept doesn't fit neatly into the existing box, and that's the point.  If something like this were to ever take shape, the existing box wouldn't function anymore.

Matt, case in point, if this became standard practice, a buyer simply would not go on the Internet to search for homes in the $100-125K range, because it wouldn't work that way anymore.

Yeah, Lee/Pamela, whoever actually tries this first will have some eye-popping sellers, I'm sure.

Lisa, I don't practically see this happening either.  Thanks.

Not sure about  the agent rating system, Brandon, but I see where you're coming from with it.  To me, it would simply put real estate agents more in line with other service industries.  Again, compare it to attorneys.  Basically any one of them can do what another does, but they each charge differently based on experience, performance and/or specialization.  Same concept to me.  And I'd love for someone to run with this and actually make a practical application for it.  Thanks.

Paige, BB, as I mentioned, wrote an article about price ranging.  It can be a bit confusing and the first people you have to convince of any change to the system would be the agents.  If they don't get it, it's likely never going to go anywhere.

Concept only, John.  I don't have all the answers to every possible issue with it.  That said, I say that they still would.  There would still be sales which gives comps and a good buyer agent would be able to tell them the price ranges homes in particular neighborhoods would normally sell.  As to builders, I don't know.  If something like this were to start, they'd probably have to figure out something fast.  Besides, do builders still exist in today's real estate :)

Thanks, Pat.

Robert, I'd guess that the entire pay structure would change if this were in place.

Jun 27, 2010 10:28 PM #47
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

You're right, Lawrence.  Too low, and the seller comes across as desperate to sell or maybe that there are major issues with the property.  Too high, and most buyers will never look at it, assuming that the seller is not in tune with the market or that they are one of those sellers that have a "special" property.  The real trick in today's market is to price it aggressively enough that it still appears to be a "deal" to the majority of buyers, but not so much that it creates concerns for buyers.  Thanks for commenting.

Jun 27, 2010 10:34 PM #48
Rainmaker
976,831
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Roger, way to go for out of the box thinking! But think of the law suits when a contract came in at $1 and then the seller was sued for specific performance! Would have to cover that in the fine print, right? :)

Jun 27, 2010 10:52 PM #49
Ambassador
1,229,245
Tammie White
Benchmark Realty, LLC (615) 495-0752 or www.TWRealtyGroup.net - Franklin, TN
Franklin TN, South of Nashville

Hmmm, very interesting.

Jun 27, 2010 11:29 PM #50
Anonymous
Anonymous
Anonymous

Roger,

This would never work and the legal implications would be horrendous.

Jun 28, 2010 12:23 AM #51
Rainer
123,615
Nicholas Caron
Caron's Gateway Real Estate - Derry, NH

One question that I have is, how would you keep sellers from not waiting a little while longer until they recieve a better offer?   I imagine sellers saying to agents, "This is a good offer but if I wait a little longer I can get a better one.

Jun 28, 2010 05:27 AM #52
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

Frank/Sharon: Again if something like this were to be put in place, then there would definitely be something in the contracts that would take care of that.  Stating only highest and/or best offers will be considered would probably be enough since it's very, very doubtful that the highest offer is going to be $1.  Of course, if this type of system was here, then I'd also doubt that the law on specific performance would be as it is now, either.

Thanks, Tammie.

Way to think positive, Terry!  You're putting today's laws on a concept that clearly wouldn't won't with the system of today.  IF something like this were implemented, Terry, then the laws concerning real estate would look much different than they do now.

Nicholas, how do you do that NOW?  Answer that one, and I'll answer yours :)

Jun 28, 2010 06:59 AM #53
Anonymous
Anonymous
Ann B. Gravel

It is inevitable that the real estate industry will change in the way business is conducted.  Even now there is talk of the readiness of agents when these changes take place.  A movement toward high technology and better service is on the table.  I respect your idea Roger and the fact that you put on your thinking cap however, like most of the comments I've read, I don't feel that it would make a good case for Realtors. They are the ones who are in a profession that puts them on the carpet for everything they do.  The most important thing is to leave the client satisfied and happy; confusing them is the last thing we need to do. 

Jun 28, 2010 07:37 AM #54
Rainer
147,103
Deborah "Dee Dee" Garvin
W. J. Bradley Mortgage Corp. - Carlsbad, CA
WJ Bradley Mortgage Corp.

Roger, interesting concept...but you would have to "sell" it to the underwriter.  See, the underwriter will question a contract and/or value anytime the final sales prices is significantly less, or more, than the listing price.  I can just see the documentatin, letters of explanation and market analysis data the underwriter would require.

Oh, and for fun, add the appraiser trying to figure out one end from the other (particularly with HVCC). 

To play off Glenn's words, OY VEY!  I see fur flying in the lending process!  LOL!

Jun 28, 2010 08:02 AM #55
Rainmaker
180,791
Christa Ross
RE/MAX Select Realty - REALTOR and Green Homes Specialist - Pittsburgh, PA
Helping you buy and sell Pittsburgh's Best Homes

Interesting idea. I once read a book about selling a home as a pure auction. A very similar idea, market the home, solicit bids and the real value will rise to the top. I've just never had the guts to try it.

Jun 28, 2010 08:56 AM #56
Rainmaker
413,607
The Scott Loper Team Lansdale & Harleysville PA Homes
Keller Williams Real Estate - Montgomeryville - Lansdale, PA

Hi Roger,

I am not sure this would work in practice.  It would evolve into the Ebay mentality of "reserve" prices and "Buy it now" prices.

~Lisa

Jun 28, 2010 09:27 AM #57
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

Thanks, Ann.  Just a concept to show the possiblities.

Interesting, Deborah.  So you're saying that while the market is supposed to determine value, the underwriter and especially the appraiser base their starting points off of the listing price instead? Hmmm

Christa, you may be referring to the book, How to Sell Your Home in 5 Days by Bill Effros.  I have been involved with a round-robin style sell as he discusses in his book and if done properly, I have seen them be very successful.

Lisa, I could definitely see that happening this took hold.  Of course, if this method was used, I'm not sure if reserve prices and buy it now prices would be a bad thing.  Thanks.

Jun 28, 2010 10:19 AM #58
Rainer
151,803
Anna Tolstoy
Coldwell Banker Residential Brokerage - Natick, MA

Roger, that's very interesting concept, and I must say I like it. It reminds me of 0.99 auctions on ebay. It all boils down to marketing (good pictures, title key words etc) and of course demand for that particular item (or house in our case). One thing though: some auctions will sell for market value or higher (if many bidders are present), yet others will go for starting price - 0.99.

Now, a house won't go for "1 dollar", but if it's sitting on the market, no one makes offers, seller has to sell, gets impatient, then a buyer comes into play - and offers ridiculously small amount, it might be harder to negotiate. Say, if in regular model house is priced at 375,000, there's some cut off point for the lowest offer. No one will probably come in with " I give you 50,000 take it or leave it", yet if it's priced at 1, a 50,000 sounds much better than nothing...

So it might need a clause of "reserve price", similar to eBay - you won't sell below XX, and if the bidding doesn't go beyond that point, house stays on the market... It's optional clause though.

 

UPDATE: I posted my comment, and saw that Lisa already wrote about it. Great minds think alike? :)

Jun 28, 2010 11:04 AM #59
Rainmaker
351,538
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

There is a business platform that uses this model.....it is called an auction and auctions are not bringing top dollar in this market.

Jun 28, 2010 03:00 PM #60
Rainmaker
296,994
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

While pricing homes at $1 probably won't work, pricing a home lower than the competition still does as the nicest home in its price range sells. If this idea ever does come to fruition, we'll give you all the credit, Roger, and perhaps they'll call it the "Johnson" pricing module.

Jun 28, 2010 05:16 PM #61
Rainmaker
672,420
Brigita McKelvie
Cindy Stys Equestrian and Country Properties, Ltd. - Lehigh Valley, PA
Rural & Horse Properties & Farms in Eastern PA

Roger,

That is a great idea!  What better way to get multiple offers!

Brigita

Jun 29, 2010 07:56 AM #62
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

Anna, great minds do think alike! :)

Damon, I guess that depends on what is your definition of 'top dollar.'  Yes, auctions work on the same basic principle...if marketed correctly, given enough time, an auction brings the 'top dollar' for that property on that given day.  That's true fair market value in a nutshell.  If by top dollar, you mean waiting 6 months to 2 years to sell, then all you're doing is advertising it until the market catches up with what you consider 'top dollar.'  Thanks for the comment.

Dan/Amy, Now that is a truly scary thought! Thanks. :)

I'd say that every property done right, would receive tons of offers, Brigita.  Thanks for the comment and the reblogs!

Jun 29, 2010 10:11 AM #63
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Roger Johnson

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