Welcome to our monthly feature, Close-ing Time – in partnership with TheClose.com.
Chris Linsell from TheClose.com talks about underpricing properties to induce a price-war. Chris continues to discuss why this behavior of the agents is not healthy for the market. Next, Chris discusses how to do a comparative market analysis for the property you’re representing and the importance of building relationships with other agents. Last, Chris shares advise to both parties of agents on how to behave in this market and also for agents with aspirations to move up the real estate ladder.
If you’d prefer to watch this interview, click here to view on YouTube!
Chris Linsell can be reached at chris@theclose.com.
This episode is brought to you by Real Geeks.
Transcript
D.J. Paris 0:00
is listing a property under market value to induce a bidding war? A good idea or a really bad idea? Stay tuned. This episode of Keeping it real is brought to you by real geeks. How many homes are you going to sell this year? Do you have the right tools? Is your website turning soft leads and interested buyers? Are you spending money on leads that aren’t converting? Well real geeks is your solution. Find out why agents across the country choose real geeks as their technology partner. Real geeks was created by an agent for agents. They pride themselves on delivering a sales and marketing solution so that you can easily generate more business. Their agent websites are fast and built for lead conversion with a smooth search experience for your visitors. Real geeks also includes an easy to use agent CRM. So once a lead signs up on your website, you can track their interest and have great follow up conversations. Real geeks is loaded with a ton of marketing tools to nurture your leads and increase brand awareness visit real geeks.com forward slash keeping it real pod and find out why Realtors come to real geeks to generate more business again, visit real geeks.com forward slash keeping it real pod. And now on to our show.
Welcome to keeping it real, the largest podcast made by real estate agents and for real estate agents. My name is DJ Parris. I’m your guide, and host through the show and today is our monthly series called closing time with Chris Lin sell from the close. Now this is a partnership between keeping it real and the closed.com. Let me tell you about the close. Now the closed.com is the kind of real estate website designed to give agents teams and brokerages actionable strategic insight from industry professionals and they cover real estate marketing lead generation tech team building strategies from the perspective of working agents and brokers who want to take their business to the next level. Now please visit the clothes.com That’s th e c l o s e just like it sounds.com And subscribe to their newsletter and you can get notified every time they publish an article, they just did a reap a refresh of their website and everything is super clean, it’s really easy to navigate. And just the articles are amazing. And in fact, before I tell you about our guest, Chris, in case you’re new to the show, we actually used one of the clauses or we’re in the process of using one of your articles about about brokerage, software around paying out commissions. And so we actually were looking to find out which which tech provider we wanted to use. And we came across the amazing article that the close has written about that. So we’re huge fans of the close. But with us as always, today is Chris Lin salah, he is a staff writer and real estate coach for the close. Chris is the closest resident expert on real estate topics ranging from marketing lead generation, transactional best practices and everything in between. He’s a licensed agent in the state of Michigan, and he has been part of hundreds of transactions from modest rural starter homes to massive waterside compounds. When he isn’t writing, you’ll find Chris fly fishing or performing on the stage in his community, theaters production. And also you’ll find him possibly speaking in your areas, he is often asked to come speak about topics related to real estate all over the country at different events. So definitely keep your eyes open for everything related to press. Chris, welcome once again to the show.
Chris Linsell 3:39
EJ it’s a pleasure to be here. Thanks for having me. As always,
D.J. Paris 3:43
you’re soon gonna have to have a calendar with all of your speaking events so people can find out because you are you’re really you’re speaking you have a lot of speaking engagements coming up. So it’s very, very exciting. And that’s why we’re so excited to have you on the show. And let’s just jump right into it. Because you and I have oftentimes we just to sort of let people know how it works is we’ll we’ll get on and I’ll and I’ll say Oh, I hope I Chris has something to talk about because I always a lot of times I don’t. And Chris said I’m very passionate about this topic today. So we have we have a good topic today. Do you want to jump right in?
Chris Linsell 4:17
Yeah, absolutely. And I’ll just say, there’s gonna be people who disagree with me here DJ and and, you know, I actually I think you might be one of those people on a couple of points here. So please feel free to tell me you think I’m wrong. And those of you who are listening if you think I’m crazy, feel free to argue with me in any of the public social media town squares that I’m a part of. So I never, oh, gosh,
D.J. Paris 4:42
I say I never think you’re wrong, but I might take the other side. Well, just just because, you know, I always defer really all of my real estate knowledge to you, but but I do want to present sometimes some of the opposing opinions so let’s Yeah, let’s jump in.
Chris Linsell 4:58
Okay, well, I’m just gonna I’m just gonna throw the Sound here, guys. Those of you, real estate agents, brokers, those of you who are actively listing properties, you are hurting yourself, your clients, your community and the market at large by underpricing them. And I don’t mean like, Oh, my clients aren’t going to get the amount of money that they deserve. I mean, you are contributing towards the market panic that we are experiencing right now. I’m not gonna say it’s all your fault. But agents, if you are pricing properties in order to induce a bidding war, this is some of your fault. And I want to tell you why. And I know that’s a little accusatory, I know, it’s a little of a negative way to get started here, but I look at it as accountability. And what I mean by this is, real estate professionals have a duty to their clients to represent their fiduciary best interests. And that means getting the best terms for sale or purchase possible. And that also means being a thoughtful representative and advocate for the real estate process as a whole. And when we underprice properties, when we create a pricing structure that induces essentially market panic, we are not helping our buyers, we are not helping our sellers, and we are not helping the market at large. So starting today,
D.J. Paris 6:35
great. And so we’ll just define a little bit more specifically what we’re talking about. So what we’re talking about is brokers who under price or under list, price their their listings, in order to encourage competition with buyers to drive up numbers for showings. And also to be able to the theory is, the more people bidding on this property, the higher the end price is going to be. Plus it generates a lot of activity. So for if I’m the listing agent, maybe that is really impressive to my seller, like hey, look at all these people I’ve been bringing through. And right now of course, with interest rates still being relatively low, there’s still a lot of buyers out there. And we know that inventory is low. So if I price it low, there’s all these buyers that will pounce on it will drive pricing up. I’m guessing that that’s the overall thought process.
Chris Linsell 7:33
Yep, yep. 100%. And here is, here’s why I take this position that this practice is bad for everybody. It is bad for everybody. Because it is a self serving, frankly, it’s a selfish practice it is goes against the realtor code of contact, our code of conduct and code of ethics here, when a real estate agent is pricing property so that they can make a Facebook post later on about the 100 showings and 50 offers they got. It’s not good for people. And we can break down exactly why I think that is but I guess I just want to start with you, DJ by asking you a question that you and I we started chatting a little bit about this before. But you you said when I was kind of taking this position in our pre interview, you were saying, Well, isn’t it best for the sellers in order to get the highest price possible to induce this sort of multi bid scenario? Tell me a little bit more about that. I mean, what what is your position on that?
D.J. Paris 8:45
Well, I was thinking of it from just a simple supply and demand, you know, sort of econ 101 driving down supply is going to increase competition to four buyers. So it made sense to me to think and by the way, I know a lot of agents that do this. There’s one of the top agents here in Chicago. This is what I won’t say who they are, but this is what they instruct their team members to do is price it aggressively, which really means underprice it and let the bidding war commence and, and everyone wins. Now, again, I don’t you know, I don’t personally, sort of, I had never thought about it more than that. That was as much as I thought about it. I said, Oh, make sense. Simple, simple economics. But let’s talk about why that’s a bad idea. Ultimately, long term or even short
Chris Linsell 9:39
term. Yeah, well, so you use a phrase here that I think is really interesting, which is everyone wins. What about the 49 offers that didn’t get accepted to those people when
D.J. Paris 9:51
there’s only there’s only two winners, right? And there could be 100 players. And now there’s not only are there people Who don’t win? There’s a lot of just upset people because they figure they’ve got as good a shot as anyone to purchase this property. But because it’s underpriced, it’s going to bring in people. Well, I’m sure you’re going to talk about this, but maybe who are under the wrong impression. And maybe there are agents out there that aren’t as queued into what’s going on right now. And they just see this list price, bringing their clients out, and then immediately find out oh, that’s not in their price range anymore. So there are a lot of losers in the space.
Chris Linsell 10:29
Yeah, I think I think the phrase everybody wins is a, it’s one that gets thrown around a lot on this topic. Because the thought process here is well, what we what we mean by this is that the right offer will eventually come to the surface, right? And that is different than everybody wins, right? Because if you think about just from a raw opportunity cost, a buyer who spends time touring a property and writing an offer and anticipating an opportunity that they have no realistic shot to get, that person could be using their energy elsewhere. That buyer’s agent could be using their energy elsewhere, they could be pursuing property for which they have a legitimate chance to secure. And so not everybody wins. In fact, almost everybody loses when we create this panic atmosphere around our around our pricing. The other thing that happens as a result of this strategy that’s related to, you know that that sentiment of almost everybody loses is that it creates a market sentiment, for which the headlines gravitate towards what headlines always gravitate towards, like the sexiest part of the scenario. This Oh, we had this $350,000 house sold for $100,000 over asking price. Think about what I just said there. I said this $350,000 house sold for 100,000 over as a just a general civilian consumer here. I don’t know, is this house actually a $250,000? House that sold for 350? Is it a $350,000 house that sold for 450? Or is it just that everything is expensive right now, if you go on CNBC, on MSNBC, on Fox on the Chicago Tribune on the Denver Post all of these websites right now on their front pages, and I know that there’s we’re not going to be listening to this when we’re recording this. But if you go and look right now, there is talk on every major news outlets website about a real estate bubble. And that real estate bubble is being the fear of that is being fueled by this incredible explosion in price. And this perception that the Fed is going to most likely jack up interest rates, which is going to plummet buyer demand and all of a sudden we’re gonna have super high prices, nobody interested in buying and then all of a sudden, pop. Yeah, and that the the left end of this, of this lever, real estate agents and their pricing has a direct effect on how high that left side goes. We can be in control of this. We can bring the panic in the market back down to earth by appropriately pricing things. But we’re not because you can’t post on Facebook about that sort of thing. Nobody likes being Oh, yeah, we had four offers. You know, after six or seven days of showings, nobody likes posting that because that’s not sexy and flashy and fun. We do like posting all the craziness. And that is just not healthy for the market. It’s not healthy for our clients. And it’s certainly not healthy for us as professionals, if we want to have a sustainable career on this.
D.J. Paris 14:19
So I’ve two points. One This is reminds me of it. I think there’s an I have to be a little careful how I say this, but I think if you underprice a property, or if you under list, if you underprice a property when you’re listing it I think it’s it’s disingenuous at best maybe and maybe worse than that right? Because what you’re really it’s kind of like when I remember those websites it I think we can all probably we’ve all probably seen where somebody is selling some sort of knowledge product you know, learn how to do X or learn how to build a business and then there’s this long sales page and at the top there’s like this offer is only good for the next few 10 minutes, or whatever has some sort of time, you know, sort of thing on it. And and then you refresh the page and the timer resets. And you’re like, okay, there is it’s an artificial, there’s no actual timing thing, but it’s used to prey upon our sort of, you know, this FOMO this like if I don’t act now. And so I think I think it’s disingenuous, right, because, but I think maybe we should talk about and maybe worse, maybe it’s actually doing more bad than just being more of a sort of a marketing tactic. I underpriced I’ll get a lot of activity. But let’s talk about I would love to talk about how, how and why, aside from just increasing activity, if I’m an agent, I go, Well, okay, Chris, I agree that it’s a little crazy right now. But if I run comps, you know, I’m just, I’m pricing it, what I’m seeing in the last three months that’s closed in the area, and you’re telling me to price it lower than that.
Chris Linsell 15:56
So I can tell you as and I have some, a lot of personal experience, I’ve done hundreds of CMAs, probably 1000s, frankly, at this point. And I also not to brag a little I’m gonna brag just a little bit. I also have the number one Google ranked article on conducting comparative market analysis for real estate profession.
D.J. Paris 16:16
It’s amazing what we’re gonna, by the way, we’re gonna post a link to that in our show notes. Yeah. So thank you for mentioning that.
Chris Linsell 16:23
Come take a look. In fact, this is one of the things I have read presented on quite a bit last year, and the conference circuit was, I’m creating a bulletproof CMA. And one of the tenets of creating a bulletproof CMA is adjusting your comp ratios relative to the aggressiveness of the market. And that sounds like a whole bunch of gobbledygook. But let me just let me just translate that the more aggressive, the more the crazier the seller’s market is, which is like if your buyer demand is really high inventory is really low. The more aggressive that market is, the more recent your comps have to be. So if you’ve got a really balanced market, you can look at comps, 434, even six months back, that’s that seems relatively reasonable. If your markets heating up, and it’s started, you know, you’re on kind of just on the seller’s end of things. You got to be looking three months or less on your comps. If things are really getting pretty intense, you got to be looking at comps in the last month or so. And the things if the if people’s hair is on fire, like it is in my local market, for instance, there was a house that went up for sale in my neighborhood, there was literally a line out the door showings were limited to 15 minutes, there was there was literally people standing in the street in my neighborhood waiting to get in. If this is how aggressive your market is, you have to have not just the most recent sold comps, but you have to be accounting for what’s on the market. You have to be accounting for buyer activity in the moment, even on listings that haven’t closed yet. And you might be saying, well, there’s no database that I can go and look at to see how many offers something got, or what the sentiment is. There is a database, it’s called Facebook, because all of the agents I know literally cannot help themselves. They even before something is closed the moment it goes under contract, they’re on Facebook and Mark Zuckerberg is sitting over their shoulder and he’s like, okay, and I type in how many offers you got. Okay, you can’t say the price yet. Because the you know, this is still confidential that you can just say, oh, yeah, we’re really happy double winky face. You need to start accounting for this stuff. And you’re right, there’s no scientific means of quantifying this, there’s not a formula that you can use to say I know exactly what I have to account for where, but if you if people’s hair is on fire in your market, and you know it is when it is, you’re gonna go and you need to start accounting for kind of extraordinary circumstances. And that includes pricing your properties accordingly.
D.J. Paris 19:11
And I imagine what you could do is also reach out to those agents that have closed listings that are in you know, in that area, that you’d be running the CMA for your client, and asking them say, Hey, tell me about how you priced you know, it just because you know, an agents I think are pretty, usually pretty open about things. It’s like, hey, congratulations on the sale, I’m going to be listing something down the street. Can you talk a little bit about you know, the experience of listing right now and if the, because a lot of times agents love talking, oh my god, we got 60 offers, and it’s like, okay, and then I think the agent after that ends is probably like maybe I priced it wrong. The the listing agent that closed the property and having to deal with 60 offers or 30 offers is just a ton of work for everybody. And also you’re right there’s a lot of disappointed people. especially other agents who bring their buyers in who who look at these listing agents and going, I know what you’re doing. I know that you listed this artificially low, and I’m now pissed at you who this isn’t really, it isn’t a super friendly thing to do. And you’re really just doing this to create all this demand. But you could call that listing agent and say, Hey, how, you know how just out of curiosity, how many offers did you get? And if you were to have done it differently, again, would you do it differently and, and they might say, I’d price a little higher, or, you know, whatever, I think you’ll get a lot of feedback, if you just have these conversations with other agents and 100%, because they’re going to be exhausted by the time these things close.
Chris Linsell 20:37
The the fact of the matter is, as much as we are competitors with the other agents in our market, we are also colleagues, and there are so many instances that I can think of personally, in my own real estate career where I have thought to myself, Wow, I am so glad that I got a chance that I have the cell phone number that I can text, the agent down the street or in the next office, because I just have a question about something. And I bet you unless you are operating a real estate business on an island by yourself. Every agent listening to this has some experience of when they texted the agent that they happen to either share an office worth or be in the same brokers with or they did a deal once with and everything went great. And they kind of remained on good terms. We get information from one another. And frankly, it is not a matter. It’s not collusion is collaboration. It is not there is nothing underhanded here. And in fact, if we are not collaborating with each other, we are we begin to take on the characteristics of an industry again, that is selfish, it is not about our client’s best interest, it’s about our own best interest. If you protect information, hoard it, and you don’t share it with your colleagues. I mean, it’s one thing to disclose confidential information that you are not supposed to. That’s not what I’m talking about. I’m talking about how do we work together to build a sustainable market economy that doesn’t crash and burn because frankly, if pricing continues in a panicked rise, we are going to have a really severe correction. And then the all of the agents who have been, you know, who, who put down a down payment on a boat, you know, assuming that things are going to be, you know, just a Lego gravy for the next three, four years, these people are out of luck. And these are not necessarily just the greenhorns in our in our agency, these are people who, you know, that boat that they put down the down payment on, these are people who just remodeled their kitchen or are trying to send their kids to college, we want to make sure we’re creating a sustainable atmosphere for everybody. And, and not working together. And collaborating is the opposite of that.
D.J. Paris 22:56
So I know what I just had a thought. So what I might do if I was about to list a property, and I looked at the sales, the actual final sales prices for the comps in my area, and I went, Whoa, these are really high because of course, everything’s high right now. I would probably pick up the phone, call some of those listing agents and say, Hey, obviously, you know, you can’t disclose any confidential information. But just out of curiosity, did you get a lot of offers on this property more than you thought? And if you were to do it over again, assuming you could still get to the same and price? Would you have priced? Would you have listed this at a different price? Because I think there’s a lot of agents, they get a listing. And of course, those are gold right now, because of how much activity there is on the buyer side. And then they don’t think about it until once it’s over. And they might have a different opinion. Like, you know what, I think I actually priced it lower than I should have, and it cost us a ton of extra work. You know, the owners had to deal with, you know, people not even being able to get in for showings, which is not a great experience. Because that owner wants, you know, people to come through and make an offer and, and other agents are were kind of pissed about it or, you know, and I think those are great conversations to have, like, if you would have to do this again, would you have done it a little differently? You know, and I think generally speaking that they’ll probably tell you, you know, if you have a decent relationship, and what you’ll probably I think you’ll what you’ll probably find is like well, I thought it would be cool to have 60 offers but actually really ended up being just a ton of work for everybody and a lot of upset people.
Chris Linsell 24:27
Yeah, without a doubt, without a doubt and I want to just encourage all agents here I’m gonna I’m gonna I’m gonna speak to just both sides of the transaction here listing agents. If I am your client, if I’m your seller, and you show up on Monday at 5pm or whenever whenever the whenever offers are due on on our on our new listing, if you show up with you know a Cheshire Cat grin on your face and say well we had so 71 or 71 showings over the weekend, and here are your 45 offers Mr. Seller. If you show up to my house with that information and that smile on your face, I’m not going to be happy with you. And the reason is, if we have 45 offers on this property, you have mischaracterized who the buyer is for this house, you have not proven to me your expertise. Prove to your clients your expertise, by not getting them 45 offers, get them five offers from the best clients in the in the region that you were able to bring, because you priced appropriately. And buyer’s agents, I want to speak to you here because you’re a part of this too. You need to set your client expectations such that they are prepared to realize there are agents in our market who are just trying to create feeding frenzies. And so when we go to this listing, we have to remember, when you see that line out the door, we have to put our mindset put our mindset in the right spot here to recognize we’re likely going to be one of dozens of offers here. And we cannot hang our hat here, because it was really a lottery. And I can almost predict word for word what’s going to happen, we’re going to look at all these offers. On Monday afternoon or whenever offers or do, we’re going to get a message from the listing agents, we’re going to say we’ve had multiple offers on this property, it’s time for your highest and best if that hasn’t already been stated, basically. So we have to set buyer expectations appropriately. And make sure that as buyer’s agents, we are voicing our vocal concern that properties are being priced appropriately. That way we don’t waste our time as buyer’s agents, sellers, agents aren’t wasting their time creating all of this admin headaches to sort through. And ultimately, our buyers and sellers, our clients aren’t wasting their time, by having to go through hoops that, frankly, aren’t necessary to the process.
D.J. Paris 27:22
And buyer agents, you need to hold listing agents accountable like this, when you see this kind of low, artificially low or intentionally low priced listings, you need to pull that listing agent aside and say, Hey, man, you’re wasting a lot of our time here like this is this is not, you know, in buyer’s agents need to now run comps, they need to see what those I mean, buyer’s agents now have to go into the MLS, look at the difference between list and close price and see whatever percentage that is, and have that conversation with their buyer, like you were saying, this is this is what we’re seeing out there. So do we even want to go see this property, because number one, it’s going to, you know, odds are it’s going to go for 85%. More than you know what it’s listed for and, and oh, by the way, there’s going to be 70 other people, many of which, you know, don’t even know this, and you’re going to be competing with just a lot of other people in a way that you shouldn’t have to. And we’re not talking about things being fair or unfair, we’re talking about just just good business practice. And also, on the listing side, this is a great piece of you’ve given our listeners, and I mean this very, very sincerely, you’ve just given our listeners an amazing piece of ammo to use in a listing presentation. Because, of course, the seller only wants to know, hey, how, what do you think you can get for my or my property? Or why should I choose you? And you know, what a lot of agents will say to them is, here’s what we’re gonna do, we’re gonna we’re gonna price it a little bit under the market value. And here’s why. And we’re going to create this, this bidding frenzy and it sounds really cool. But you now get to come to that same seller and say, This is why we’re not going to do that it’s actually not good. And we, you know, I don’t think we’re going to actually get more, but we’re going to decrease the amount of traffic into your property, which is probably something that you want, you only really want people coming through here that can actually afford this place and want and can pay it. And also, I don’t want to artificially create a buying frenzy. Because that it’s well, there’s just a lot of reasons not to. But yeah, so I think you’re giving people a great tool to use, have that conversation with your sellers about why we’re going to price it at at where we think it might actually close.
Chris Linsell 29:45
Yeah, and I want to I want to speak. Lastly, I want to speak to those agents who have aspirations of moving up the real estate ladder, maybe you are working at the lower or the middle end of the property spectrum in your market and You want to move into luxury DJ just described when he was talking through that hypothetical conversation with his set with with this seller, he described many of what he many of the components of what he said, were components that you have with luxury sellers in normal market conditions, we’re going to only going to bring the qualified individuals through your property, we’re only going to bring people who understand the value of this property, we’re only going to bring in people who are legitimately going to write offers that you’re interested in through this property. These are the conversations that you have with frankly, with more affluent, and sellers who are usually looking at property, property value from multiple angles, if you want to move up the real estate ladder, in in towards towards the luxury market, times of disruption are the best times to do that we are in a time of disruption right now, the way the market is behaving, it is a complete disruption relative to the norm. If you look at the typical undulation of buyer and seller waves, we are in a time of disruption, this is a time to move up into the next, the next set of buyers and sellers. But you only do that by creating differentiation and not going with the flow because not everybody is moving up only the people who choose to think a little bit differently and say listen, we are going to make this the experience that you deserve relative to the amount of activity here I am going to find you the best buyer by creating the best pricing strategy here. The buyer’s agents are going to come are the ones who represent the buyers who are going to write offers that you’re most interested in seeing. Those are the people that we want here. And frankly, you can always price reduce if you feel like you overpriced, eventually, you cannot go the other way around, start a little bit higher, get the right offers the first time around and avoid the feeding frenzy.
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