Why does a listing sell for more or less than list price? Episode #319

Why Does a Listing Sell For More Or Less than List Price?

Hello. Welcome to Todd Miller TV. A user submitted question which is, “Why does a listing sell for more or less than the list price?”

So it’s important to understand where a list price comes from and a list price is nothing more than an invitation to make an offer. It’s nothing more than a seller and an agent saying, hey, this is the price we should come out and say, “House is for sale. Here’s sort of the starting point,” if you would.

So why would it sell for less? OK. A couple of reasons. One reason is it was overpriced, meaning the agent may have come in and said house is worth 150. The seller said, “Yeah, we want to put it on the market for 160, 170 just to see if we get anybody like from California that comes in and oh, thinks it’s a deal and just buys it.”

Then it sits on the market. It sits on the market. It sits on the market and finally somebody comes along and says, “Well I like the house but it’s only worth 150. I know it’s listed for 160 or 170. So I will just offer the 150.” Then the agent goes over and says, “Look, here is the offer. It’s the only one we’ve had. We’ve been on market three months. No one wants the house because it’s overpriced. We talked about it before. It’s only worth 150. You have a 150 offer.” People go, “OK, you’re right. We tried to get the higher amount,” and in a way that could be bad and the reason that could be bad is because a lot of people can be turned off and not even go see it.

So if you list it at 150, you could just hold your ground and say, “We’re not taking less than 150.” So it can sell for less because you overpriced it. That’s really one of the reasons. Now why couldn’t it sell for more? OK, obviously you underpriced it. Even if you priced it appropriately in a climbing market to sell for more because the price that you decide when you sit down in a listing appointment between a seller and the agent, they’re looking back at the sales trying to guess what the value is and if the market is going up a little and they picked – oh, this sold two months ago. It’s the model match. Let’s add five grand or let’s list it at that price.

And the markets increase a little bit but you don’t really know because you can’t prove it with data and then all of a sudden a bunch of offers come in and people outbid it. Like the offers I have here are these properties which are – I have over list price offers on it because there’s a very shortage – amount of shortage of inventory.

Now this offer I’m talking about here that we have on this property, we listed at 15,000 over the last sale because we could see the trajectory of sales. It’s going like this, like there was a sale here, then here, then here. We could see them line up. We looked out among other housing communities. They were all higher as well and there’s nothing for sale in the neighborhood. It’s a nice neighborhood.

So we just said, “Hey, let’s add a little bit to it and take that strategy,” and we nailed it because we get all the offers right at that point but we got a couple above that too. So it can sell – the list price is not – it’s not a government stamp of value. It’s not a definite, “This is what it’s worth.” It’s not, “This is what it will take.”

If you said it’s not for this, we have to take it. It’s none of that. So it’s just a guess. So whether it sells for more or less really doesn’t matter. I guess in a perfect world there wouldn’t be list prices. People would just put the house on the markets and they send the offers, whatever you think is worth, and that would be an interesting way to do it but this helps people narrow down what they’re looking for.

Give something a starting point to look at. So whether it sells for more or less, a lot of times it doesn’t mean anything. If you take two listings and one is listed for 160 and one is listed for 140 and the140 gets a bunch of offers that sells for 150 and 160 sits on the market but eventually it sells for 150. The list prices were not relevant. The house is worth what the house is worth.

So I’ve done this a lot obviously. We’ve listed over 2000 houses here between my partner and I so we know how to price the properties and the goal is price it to get the most money in a reasonable amount of time that suits the seller.

That’s what they need. It works for them and so those strategies are what are really important. Not just picking a number then hoping that it works and of course that list price is going to depend on what’s happening in the market. The market is falling. The market is rising, whatever.

So I thought I would share that with you and give an update to the person, the user that asked that question. That’s my update for today and hope to see you on another video. Thanks.