There seems to be a persistent practice in real estate of "testing the market" with a price higher than what the agent believes that the property will bring at closing. Sometimes there is an agreement that the price will be lowered after some stated period, often thirty days. Agents often feel that sellers become wedded, however, to the original listing price, and forget completely that they were told that a lower price would be more in line with market expectations.
While testing the market might seem like a reasonable course of action, especially if there is a clear understanding up front that the price will be lowered in x days if not enough action, or an offer, is generated, those of us in the industry should know better. We now have access to all kinds of information that tells us who looks at a listing, when they search, and how (with what device). We know popular hours, phrasing that captures attention, and click-through rates by property. We can see whether they looked at it, saved it, forwarded it, or contacted us about it. Administrators like me get a copy of every email inquiry sent to an agent on certain search engines and platforms.
And what do we know from all of that? We know the power of the new. Overwhelmingly, the greatest interest in a property comes in the first two weeks after it gets listed, whether it is commercial or residential, and no matter the price or location. Some properties clearly generate more activity than others, but always get the most attention early. Sometimes that is because prospective buyers have signed up for notification alerts, so that a new listing will show up in their emails. Many times it is because the buyers themselves look on a regular basis, and click on anything that they haven't seen before. The end result is the same: They gravitate toward the newest entries.
So it's easy to see the problem with testing the market. Your property gets the most exposure and the greatest number of views at the original price, which is higher than the agent, and perhaps even the seller, thinks is the true selling price. Agents often talk about how much higher the likelihood is of securing a buyer in the first two weeks after the listing comes onto the market, but, in order to secure the listing, they also often sabotage that chance, by using the most useful marketing time to expose the property at the wrong price.
We know that buyers today know a lot, and often as much as agents or sellers, about the value of properties, through comparisons of available inventory, and market knowledge gained online and elsewhere. They aren't going to overpay, and many aren't going to potentially waste their time making offers that will be refused. They concentrate instead on properties that are listed at compelling prices, which suggest that they will sell quickly. That motivates buyers to make speedy offers, at prices near, at, or above the listing price, especially if they see that there is a lot of activity at open houses, or with showings. It's better to accept the reality that buyers know value, than to think that serving up higher-priced listings will change their minds about the correct price.
If there is one takeaway from this, it should be that sellers need to ask agents this question: What price do you believe that my property will close for in the end? Then list as close to that number as possible. And enjoy the attention your property will receive.
