Ok, that’s it! The August 13th (2009) article our CEO, Jerry O’Rourk, brought in from The New Canaan News finally got me motivated to sit down and vent my frustration about this contributor to falling home prices: The article quotes a local agent (from a nationally recognized brokerage) suggesting that, to get buyers’ attention, sellers should price 15% lower than every ‘for sale’ and ‘recently sold’ comparable. And the reason this got my goat so badly is that this was the second time I had heard this tune in one week!
At lunch a few days before, a REALTOR® friend (again, an agent with a national brand) stated that their president had just directed all their agents to do a new Comparative Market Analysis (CMA) on all their listings and then go to their sellers and suggest that every seller drop their price by 10%! So, clearly agents are being advised by their higher-ups at the brokerages to advise sellers—across the board—to lower their price.
Just whose interests are being served by this arbitrary approach? Agents’ income depends on the sale. The brokerages’ income depends on their agents’ income. And to the extent that they can each have an impact on overall volume of sales, they can both make up in volume what they may lose on any individual sale when the price is dropped. So it’s in the agent’s best interest to make sure more sales happen, and not in their best interests for an individual seller to hold their ground on a higher price if a lower one will get to a sale quicker.
On a home that sells for $200,000 in a typical co-brokered sale, the two agents each stand to make $6,000. If the seller is persuaded to drop the price 10% to $180,000, then each agent’s commission drops to $5,400. So the agent makes $600 less, while the seller takes a $20,000 hit. Clearly sellers have much more to lose on a price drop than the agents.
But the bigger question is: Are brokerages working for or against the interests of a healthy economy and vibrant real estate market in suggesting across-the-board price cuts?
