Pricey homes make others look cheaper
WASHINGTON — A "setup" or "pinball" property is a house listed with an unrealistically high asking price that pulls in lots of visits by agents and shoppers, but no offers. The problem: Real estate agents, including the listing agent, are using the overpriced house as a negative example to sell similar homes nearby with lower asking prices.
The "setup" is the foil — the house that agents show clients in order to make other more realistically priced listings look better. Maybe the sellers — encouraged by reports of rising sales and low mortgage rates — insisted on the aggressive asking price and wouldn't list for anything less. Or maybe the sellers' agent didn't fully brief them about what the house could command in today's conditions rather than lose the listing.
Whatever the specifics, pinball houses tend to see heavy "traffic" but go nowhere until the sellers drop the asking price, usually by significant amounts. Before then, however, they may be used without the sellers' knowledge to market other houses. Since no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.
Joe Manausa, owner-broker at Century 21 First Realty in Tallahassee, who wrote about the phenomenon on Active Rain, a Seattle-based industry blog with more than 220,000 members, offers this hypothetical example: "If two very similar homes are near each other, with one priced at $250,000, and the other at $280,000, the higher-priced home is often shown first. Then the real estate agent says, 'If you like this home at $280,000, you are going to love the home down the street at $250,000!'"
Perrin Cornell, a broker at Century 21 Exclusively in Wenatchee, Wash., says some sellers in the mid to upper price brackets in his area "are exuberant that we're finally out of it (the recession) now," and are tempted to disregard agents' recommendations on pricing.
What happens to such listings? "Unless we're using it for a setup," Cornell said in an interview, "we stop showing it" until the seller agrees to re-price to a sensible number.
But as a matter of principle and ethics, should agents accept listings from homeowners who refuse to listen to reason? Manausa is adamant that they should not. "If you list a property at a price you know will not sell," he says, "you are misleading the seller. Effectively you are saying, 'I don't think it will sell, but I'll put my name on anything hoping to get paid.'"
Sandy Nichols Acevedo of Prudential California Realty agrees that agents have a fiduciary duty to educate even the most headstrong owners about sobering market realities, but has a compromise solution: Take the listing but require the seller to sign a contractual agreement requiring an automatic price reduction to a specified level if the house doesn't sell in the first two to three weeks.