When you decide to put your home on the market, interviewing several real estate agents should be on your to-do list. The agents will provide you with house listing presentations to convince you to hire them. However, due to a tough and competitive Minnesota real estate market, some agents will use an unethical technique called “buying the listing.”
It’s a secretive practice that homeowners rarely know about but one that many realtors commonly use to secure listings. What it means is that an agent who wants to sell your home at all cost will go along with any price you ask, no matter how ludicrously above what comparable homes in your neighborhood command.
How Buying the Listing” Works
A real estate agent provides you with a high sales price for your home and convinces you that they can secure it if you list with them. As the seller, you will probably get enticed by the high price and sign the house listing agreement before the agent places your home on the market.
Sometimes, the agent may not provide you with the high listing price but instead agree with your asking price without advising you accordingly.
Once your home is on the market, you may end up waiting for a long time without getting any offers. Later, your agent will call you and recommend a price reduction because your home does not attract any interest. They may subsequently recommend more price reductions until your home sells.
Unfortunately, buyers tend to avoid overpriced homes even after the owner reduces the asking price. It may take months to sell your home, that too, at a relatively lower price than it would have gotten if you had priced it realistically.
The agent who buys your house listing knew from the beginning that it was overpriced and still secured it. He or she was confident that they would convince you to lower your price until the home sells.
Why Real Estate Agents Practice Buying the Listing
Buying the listing works for agents who practice it because they get a cut into the commission payout they would otherwise miss had they passed on the listing. Additionally, they reap immediate benefits in that they get to plaster their name and agency on your front lawn. They also hold open houses, which bring in new clients and sell other properties listed with them.
Buying listings is profitable, even if the agent does not sell the home. Merely placing a sell sign on your front yard markets their business, and they will receive texts, calls, and emails about the house listing. They will then convince the interested parties to either buy your home or upsell another property listed under them. To them, every house listing is an opportunity to market themselves and generate new business.
Why “Buying the Listing” is Bad for Sellers
“Buying the listing” has potentially severe drawbacks for sellers. Overpricing your home can doom it to spend months sitting unsold and without attracting interest, sometimes even after price reductions. Once your house listing gets a bad rep amongst buyers, it turns off ready buyers who may not return even after reducing the price. Consequently, you end up with a final price that’s considerably less than what the house would have fetched had you priced it realistically from the beginning.
Buying the listing is also a highly controversial issue within the real estate field. It’s potentially an unethical violation for the National Association of Realtors members. The body prohibits any attempts to secure listings by deliberately misleading owners regarding the market value and conditions.
Failure to advise overly optimistic sellers about their property value to obtain the house listing is construable as misleading them. Unfortunately, the practice is common in many real estate markets across the U.S., including in Minnesota.
Some agents defend taking a house listing at an elevated price because they discuss it as a pricing strategy with their clients in advance. Others claim that they are open to accepting a slightly overpriced house listing after discussing with the sellers about comparable recent sales in their area and agreeing to future price adjustments if the house fails to sell within a specific period.
How to Avoid Agents Buying Your House Listing
The best technique is to talk to several agents and arrange multiple presentations by realtors who specialize in your area. Have them all prove their recommended sale prices with recent sales of comparable homes in your neighborhood.
Do not trust realtors or let them convince you about the seller’s market without proof of sales. Make your choice based on crucial factors such as a proven sales record near the house listing price, outstanding references and reviews, and strength of marketing resources and strategies.
Protect your home from realtors who buy house listings and other predatory practices by staying informed on the latest real estate news and sale tactics. And remember, the market never lies.
About Steve Lehmeyer & Transition Realty
Transition Realty owner Steve Lehmeyer specializes in helping people manage real estate transactions in the Minneapolis/St. Paul area. His experience in the Minnesota real estate market spans 20 years. Steve and his team work with clients to buy & sell single-family homes, townhouses, condos, lake homes, and investment property. Download a free home search app for your smartphone or search the MLS at TransitionRealty.com.