What does it mean when a real estate agent “buys” the listing? It means that she consciously inflates the value she believes your property has when you are discussing how much to list it for. In effect, it’s as though he is offering you more money for your house. But he’s not actually the one who’s going to buy your house, right? So his “offer” isn’t really representative of what a real buyer might pay.
Here’s a scenario: you’re preparing to sell your house and you interview three agents. One tells you she thinks your house is worth $550,000-$565,000. Another says $540,000-$560,000. The third says $560,000-$580,000. You might be tempted to list with the third agent, which is exactly what she hopes. But wait. Has she reviewed different comparable sales with you than the others? If so, and those comps sold for higher prices, are you convinced that yours are more similar to them than to the comps the other agents showed you? Has that third agent given you any kind of guarantee that the house will sell for a certain minimum amount? No?
A good agent will review the comps, talk with you about current competitive listings and explain her rationale behind the market value range she provides. If someone tells you your house is worth appreciably more than someone else, make sure their evidence convinces you. Remember: prospective buyers, their agents and the bank’s appraiser will all be looking at the comps that these agents are (or should be) showing you. There needs to be justification for a higher price.
You might wonder why agents can get away with this unethical practice. It’s because they have nothing to risk by giving you an artificially high number. When your (overpriced) house hasn’t sold, these agents will tell you the market has changed and that you need to lower the price. That “bait and switch” is known as buying the listing–misleading a seller into believing the value is greater than it is in the hopes of winning the listing.
So when you interview agents, be sure not to be dazzled by an agent who suggests he can “get you more” for your house unless he can justify the price. Remember, the evidence is clear: homes that start out overpriced end up, on average, selling for less than if they had been appropriately priced at the outset. By the time you have lowered your price, not only is the house not fresh on the market (so there’s less sense of urgency among the buyer pool to snatch it before someone else does), but once the buyers see you’ve lowered the price, they know you’re feeling pressured to sell and they will offer you even less.