Is your listing a “pinball”? If it is, you may want to rethink its price tag.
A “pinball listing” is, in short, an overpriced listing that competing agents use to their advantage to make their listings seem more affordable. The process is strikingly simple: agents show their client a property that is priced unrealistically high, thereby creating the perception that homes in the area are priced higher than they actually are. Then, after showing that high-priced property, the agent shows the client one of their properties, one that is similar to the earlier property but selling for a lower asking price – an asking price that now seems extremely appealing compared to its pricier brethren. Thus, the pricier listing becomes a “pinball,” and the client bounces from that listing to the cheaper listing.
For example, if two very similar homes are near each other, with one priced at $250,000 and the other at $280,000, the higher-priced home is often shown first. Then the real estate agent essentially says, “If you like this home at $280,000, you are going to love the home down the street at $250,000!”
When these situations happen to an agent, it can be quite painful, and recent price increases in the housing market don’t make it any easier to avoid. Some sellers, especially in the mid-to-upper price brackets, are so excited that the U.S. is finally out of the recession that they are tempted to disregard agent recommendations on pricing; thus, they price the home where they think it should be priced, overshoot what the market is actually willing to support and unwittingly enter “pinball” status.
Clearly, having one of your listings achieve “pinball” status can be quite detrimental to its chances in the marketplace, but how do you avoid such a nasty distinction? Here are three suggestions:
- Avoid the Listing Altogether – If the seller refuses to list with a price that’s a better fit for the market, given what the CMA says, don’t take on the listing. It may not be worth your time and effort, especially if the seller is unwilling to negotiate on the price. But if the seller is willing to listen to the facts, then it won’t become a pinball listing with a too-high price.
- Don’t Believe the Hype – There’s a good chance that pinball listings will get lots of traffic with their high price, but remember what we just wrote about agents using the listing to their advantage? It may seem like people are interested in the property, but it actually benefits nearby, lesser-priced residences, so you may want to reevaluate your pricing strategy if you notice a pattern of several showings, but no offers.
- Contractual Obligations – Take the listing, but bind the seller to a contractual agreement that if the home does not sell in a specified time (two or three weeks is a good measure), the asking price must be automatically reduced.