Agents! Get the list price right and really annoy people!

We neighbors are really upset that you priced your listing so low. It's reprobates like you that bring down property values in our million-dollar neighborhood. I'll be the guy at your first open house with a nervous tic and a freshly-sharpened pitchfork.

rough paraphrase of an unsigned email recently received by an agent in my office

So there I was, all set to riff on Homegain's interesting but innocuous March 5, 2009 article "Pricing Disagreement: What Is A Home Worth?", when an agent a few cubicles (sorry, I mean a few corner offices) away read this "hate email" to her office-mates. It made me reflect that, as Woody Allen says, 90 percent of success is just showing up. And the other 10 percent is keeping your ears open. Makes that arduous ten-minute commute to my office worthwhile. And file this email under "Just Listed! postcards, unintended consequences of".

I never made it to "Pricing Disagreement", but it sounds like a great article. The abstract I read in NAR's online Daily Real Estate News says that "home[owners] and the real estate professionals they choose to sell their homes don't always agree over what the property is worth, and many buyers think both of them are setting prices too high". So what else is new? Is this, like, the human condition or what?

The table below shows the broad diversity of opinion that, according to Homegain's survey, exists these days on the subject of list price correctitude:

Sellers who thought agent-recommended	%	Buyers who thought	%
list price was too low in general	63	list prices are fair	18
list price was 20-30% too low	45	list prices are up to 10% too high	21
list price was 31%-plus too low	14	list prices are 10-20% too high	32
		list prices are 21%-plus too high	6

This is one of those surveys that raises more questions than it answers. For one thing, they forgot to ask ol' Pitchfork. For another, does a buyer's or seller's perception of the fairness of list prices these days depend on which price range he or she is in? Do a full 32 percent of entry level buyers really think that list prices are still "10-20% too high" even though entry-level prices have fallen as much as 50 percent since late 2007?

It also shows the challenge listing and buyer's agents face, which should tone down the "agents lead their clients around by the nose" nonsense emanating from agent-bashers and other real estate economists. According to the survey, less than one in five buyers is ready and willing to make an offer that could lead to a commission check. Over half aren't willing to make an offer at list price. Almost one-third aren't willing make an offer that has a snowball's chance of acceptance. Yet despite this yawning chasm between buyer expectations and current market reality, presumably the majority of buyers unwilling to buy at today's prices are looking at houses every week-end with their agents.

On the opposing side of the conference room table, almost half of sellers secretly or otherwise think their agent priced their home too low. I wonder how these sellers feel about the offers they're getting from the majority of buyers who think the seller's agent priced the home too high.

Finally, these numbers give us some insight into why FSBOs (For Sale By Owner homes) are so often overpriced. About 63 percent of the time, would be my guess. Which illustrates one of the functions agents serve in the marketplace: assist in pricing properties so that, eventually, skeptical buyer meets overheated seller and an equilibrium price is reached.

Although the survey's numbers are drawn from a bust market, there's little reason to believe they'd differ much in boom times. I think most agents will accept the idea that perhaps just one buyer in five is actually in the market at any point in time, boom, bust or otherwise, although it's plausible that boom-time euphoria might bump up the "list price fair" group a few percentage points. Why would the majority of buyers remain at the margins of the marketplace? There are many good reasons for this, as well as a few not so good, but it's a fact that the total number of homebuyers going through open houses on a week-end doesn't indicate what an economist might call "effectual demand" for homes.

The euphoric vibes of boom times might also persuade a seller to have a slightly higher opinion of her agent's recommended list price. But this brings up an important point: until now we've assumed that the sellers surveyed accepted their agent's recommended list price, albeit sometimes grudgingly, when in fact there's no certainty that they did. Because, despite what our pitchfork-honing friend thinks, agents don't set list price: sellers do. It's gotten to be kind of a custom: seller's house, seller's money, seller's decision. Sometimes sellers listen to their agent. Sometimes they don't.

Just like buyers. Hey! Maybe buyers and sellers have volition and free will! Just like regular people!

Let's put aside this dangerous speculation to return to our anonymous emailer, the one who has the listing agent inspecting her first open house like a fire marshal, making sure all the exits are unobstructed. Pitchfork grumbles that listing agent has, by bringing her listing on the market at a price lower than the going rate of the past few years, brought down neighborhood property values. Never mind that the listing agent was so conscientious about coming up with the correct list price, the list price that would actually sell her client's house in a challenging uncertain market, that she invited her entire sixty-agent office over to help her price it.

Never mind all that, because Pitchfork apparently pulled a Rip Van Winkle over the past year and awakened yesterday thinking local real estate is still the hale and hearty specimen he knew when he nodded off. Or, yes, maybe he has heard some chatter about prices going down in other neighborhoods, lesser neighborhoods where spineless sellers and equally spineless agents refuse to hold the line on property values by propping up list prices in the face of evaporating demand. But Pitchfork vows that this ain't a-gonna happen here, no sir, not in his one square block of permanent seller's market. Just circle the wagons, keep the list prices at 2008 levels, prices no 2009 buyers will pay and...well.........uh..................what?

Bingo! Which would bother Pitchfork not one whit, because Pitchfork ain't a-sellin'.

So here's a tip o' the hat to Pitchfork and his ilk. You aren't the first vaguely scary guy to aim your anger over uncontrollable and misunderstood events at the wrong people, and you aren't the last. But in the future you might want to restrict your hate emails to AIG executives. Really, Pitchfork, it's the sporting thing. Your communiqués will still be nothing more than knee-jerk sound and fury, signifying nothing, but at least their recipient won't be a woman unfortunate enough to run the chance of meeting you at an open house.