By Korey Welch, Owner of Boom Realty 

and Senior Mortgage Broker, Loan Factory

Want to know one of the easiest ways for a real estate agent to win a listing? Tell the homeowner their house is worth more than everybody else says it is.

It works.

A homeowner interviews three agents. One says $600,000. Another says $625,000. The third walks in with a beautiful comparative market analysis – otherwise known as a CMA – and says $685,000. Guess who suddenly looks like the smartest agent in the room?

There’s just one problem. The market wasn’t invited to the presentation. And eventually, the market gets a vote. Actually, it gets the only vote that matters.

A CMA is an opinion. An offer is money.

A CMA can be an extremely useful tool. I prepare them myself. Comparable sales, square footage, lot size, condition, location, and current competition all matter when determining a realistic asking price. But a CMA is not an appraisal. It’s not a guarantee. And it certainly isn’t a check someone is promising to hand you at closing.

I recently had a perfect example of this. I was referred a property through a divorce attorney I know. The sellers had previously received a CMA from another real estate agent. When I first looked at it, red flags immediately started going up.

The home was approximately 2,084 square feet. Yet several of the comparable properties used in the CMA were considerably larger – 2,420, 2,508 and 2,598 square feet. The subject property sat on roughly 5,832 square feet of land, while the comparable lots ranged from approximately 10,000 to more than 19,000 square feet.

I also felt the locations of the comparable homes were superior. Then I learned something even more concerning. The agent who prepared the CMA had never even visited the property. That’s a problem. You can analyze numbers from behind a computer screen all day long, but homes aren’t stocks. Condition matters. Layout matters. Street location matters. Neighborhood position matters. Updates matter. Deferred maintenance matters. Sometimes you actually need to walk through the front door.

The CMA recommended a listing range of $679,000 to $689,000. After seeing the property myself and doing my own research, I told the attorneys involved exactly what I thought: “This house isn’t selling until it has a five in front of it.” I wanted to list it at $599,900. That wasn’t exactly what everyone wanted to hear. But there’s an important difference between telling someone what they want to hear and telling them what they need to know.

My job isn’t to win the listing

One seller remained convinced the higher CMA was correct. And I understand why. Who wouldn’t rather hear that their house is worth $680,000 instead of something beginning with a five? But my job isn’t to walk into your kitchen, compliment the house, throw the biggest number on the table and hope you sign my listing agreement.

My job isn’t to win the listing. My job is to sell the house.

Eventually, we compromised and listed the property for $674,900. We had activity. People came through the open houses. Buyers looked. Agents gave feedback.

You know what we didn’t have? Offers.

Not even the low offers everyone seems so afraid of making these days. And that’s when the market begins talking. Sellers sometimes think silence means, “We just haven’t found the right buyer yet.” Sometimes it does. But when plenty of qualified buyers see your house and none of them are willing to write an offer, the market may be telling you something much simpler: The price is wrong.

The most important time is the beginning

After about a month, I finally got the price reduced to $619,900. I was still pushing for $599,900. Again, my message was the same: It needs a five in front of it.

Still no offers. Eventually, after 58 days on the market, we reduced the price to $579,900. Five days later? Contingent. We had multiple offers. The property eventually sold for $570,000.

Funny how quickly the market clears things up. But here’s the frustrating part: I believe we very well may have received more money had we started around $599,900 in the first place.

Why?

Because when a house first hits the market, that’s when it has everyone’s attention. It’s new. Buyers receive alerts. Agents send it to clients. People come to the first open houses. There is urgency. There is excitement. There is competition.

But if you come out overpriced, buyers don’t negotiate with you. They often just move on. Then the listing sits. Twenty days. Thirty days. Fifty days. Now buyers start asking a completely different question: “What’s wrong with it?”

Price reduction follows price reduction, and suddenly the seller who thought they were protecting themselves by starting high may actually end up costing themselves money.

You only get to be the new listing once.

Here’s the part that really gets me

The CMA itself contained some excellent advice. It said it was especially important to “price your home right from the beginning.”

I couldn’t agree more.

The problem is that pricing a home correctly and telling a seller what they want to hear aren’t always the same thing. There is tremendous competition among agents for listings. And when multiple agents are sitting at the same kitchen table trying to win the same business, there can be an enormous temptation to be the person delivering the highest number. But an agent does not increase the value of your home by increasing the number printed on a CMA.

If Agent A tells you $600,000 and Agent B tells you $700,000, Agent B didn’t just create another $100,000 of equity. They created another opinion – now find the buyer willing to pay it.

Don’t hire the highest number

If you’re interviewing agents to sell your home, don’t automatically choose the agent who gives you the highest suggested price. Ask how they arrived at the number.

Look at the comparable properties yourself: Are they really comparable? Are they substantially larger? Are they on larger lots? Are they in better locations? Are they in better condition? Did the agent even visit your property? And perhaps most importantly, ask the agent this: “If we list at this price and the market doesn’t respond, what happens next?”

A good agent should be willing to have the uncomfortable conversation before you sign the listing agreement – not six weeks later after the house has been sitting on the market.

I’ve been doing this for more than 26 years. Sometimes my job is to tell a seller their house may be worth more than they think. Other times my job is to tell them something they absolutely do not want to hear. That’s what they’re hiring me for.

The bottom line

Your house is not worth what you want it to be worth. It’s not worth what I want it to be worth. And it’s certainly not worth whatever number happens to appear at the end of a fancy CMA. Your home is ultimately worth what the market is willing to pay for it.

In this case, one CMA suggested as much as $689,000. The market ultimately said $570,000. That’s a $119,000 difference. So, when you’re choosing an agent, don’t look for the person willing to give you the biggest compliment. Look for the person willing to give you the truth. Because at the end of the day, the market doesn’t care what your CMA says.

About the Author: Korey Welch, Owner of Boom Realty and Senior Mortgage Broker (NMLS: 14991) with Loan Factory (NMLS: 320841), is a licensed mortgage broker/real estate broker based in Rockland. For more than two decades, Korey has been helping seniors determine the best fit. For a complimentary consultation, contact him at korey@koreywelch.com, 781-367-3351.