I hated discussing ideas with investors. Because I then become a Defender of the Idea, and that influences your thought process. Once you became an idea’s defender you had a hard time changing your mind about it.”
–Author Michael Lewis, quoting investor and fund manager Michael Burry in The Big Short (p. 56)
I’ve been using the long holiday weekend to do some recreational reading (yeah!), including the wonderful The Big Short by Michael Lewis (Thomas Wolfe and Lewis are my two favorite writers).
In my experience, something analogous to Burry’s experience with investors (above) happens to listing agents, too: namely, in the course of pitching a home to prospective Buyers, it’s easy to lose your objectivity about the home’s value, and become convinced that it’s worth the asking price.
Unless the listing agent is buying the home, it’s worth what someone (else) is willing to pay for it.
The Danger of Sitting Tight
That’s why Realtors say, “ten showings, $10,000.”
Translation: if ten serious, well-qualified Buyers view a home and all pass — the home’s (at least) $10,000 overpriced (make that 3% – 5% for a more expensive home).
So what’s so bad about the listing agent thinking a home is properly priced when it’s not?
They’ll be slow to counsel a price reduction, which will (eventually) cause the home to linger on the market.
In turn, homes that linger on the market often need to be deeply discounted to sell.