We recently put an Upper East Side penthouse on the market for $20 million. The previous broker listed for $30 million.
Were we way off? Not in the slightest.
The luxury real estate industry is small — we operate in tight-knit circles and most agents know each other. That means we also know who has a reputation for overpricing.
Not all sellers do, though. They want to believe their agent has the best of intentions, so they don't think twice if their property is listed above market value. They may even encourage it: "What's the harm in asking for a little more?"
But no matter the industry, overvaluation hurts sales and reputations. While mispricing may result in short-term gains for individuals, building a strong reputation based on sound valuations brings long-term success for everyone involved.
Balance self-interest with client needs
In business, most pursue success by meeting consumer needs. But, the degree to which that need is met can vary. It becomes a balance of serving the self and the client. The most sought-after professionals spend as much time as necessary to service buyers and sellers because they understand that their success relies on consistent quality and happy clients.
Others pursue ulterior motives. They misprice products in exchange for self-serving windfalls — getting more clicks, appearing in the press or selling educational courses. Those who resort to dishonest tactics — like bait and switch, using shills or relying on misrepresentation — are promoting their brand over their client's best interests
While an incorrect price here and a cut corner there may seem insignificant at the micro-level, it has macro-level effects. Overvaluation paints an inaccurate picture. It skews product data and prices marketwide, deteriorating the economy through volatility.
The issue has become so prevalent that the White House recently announced an initiative against related fees in banking, automotive, hospitality, travel and other service-based industries. In real estate, it means too many homes sitting on the market for too long, inaccessible housing for millions and a story of underperformance.
Serve yourself and your clients equally
Instead of short-term success, a better business plan focuses on creating value that appreciates over time. Here are three ways to differentiate yourself:
1. Honesty is still the best policy.
Relationships mean everything, so choose transparency. Strong relationships are built on trust, which demands honesty.
When someone wants us to represent them with an overpriced estimate, we explain that the numbers they want are unlikely to be successful. "But," we tell them, "If it doesn't sell in six months, let's have another conversation." Almost always, our commitment to truth works in the relationship's favor.
The client may go with a broker who overvalues, then grows upset with them after five or six months without a sale. Then, they remember our honest approach and reach out to work with us rather than the broker who made false promises; that broker likely loses a client relationship.
When faced with the decision to acquiesce and take the easy route or rely on your industry expertise, always choose the latter and do it from a place of authenticity. At the very least, it will foster respect. More likely, it will result in returns.
2. Time is money.
Time is your most crucial asset, so don't waste it. If you trust your product, then time should be the only limitation to growing your company.
People worldwide reach out to us for help marketing their properties, but we choose to work with only about 50 percent of what comes our way.
Valuing your time and being selective can help you avoid overvaluation and self-service, which waste precious time and erode valuable relationships. By choosing projects carefully, pricing correctly and providing results, you can create velocity and a client experience that adds a premium without overvaluing your product, ultimately leading to a competitive advantage. Studies show that clients are willing to pay more for a transparent, honest experience.
3. Knowledge truly is power.
Your clients rely on your guidance. Meet that trust with an encyclopedia of knowledge and experience in your industry. If you're lacking in either area, fill the gaps with data.
In hyper-specific markets, that can be difficult. Few agents have the skill of walking into a property and knowing exactly how much it will sell for, and there are few data points to reference for niche segments, like selling $40 million properties. The days a property spends on the market at a specific price point in a particular area often presents a skewed view because most of the market is overpriced by nearly 15%. To become experts, we must look deeper, find new ways to collect non-traditional data and be more informed than the competition.
It's essential to look at the details behind the trades. For us, that means asking questions such as: Was the property furnished? Who bought the furniture? Why was the property last purchased? Was it a neighbor or relative willing to pay more? Ask your own industry-specific questions about your products. The more details you have beyond your competitors, the better understanding you'll have.
Build your reputation, build your brand, build success
If you want to be a market leader, start by deciding how. Will you lead from a place of collaboration, where clients can rely on you to showcase expertise, speak honestly and act with their best interests in mind? Or will you lead based on quick gains, self-service and deception?
The reputation you cultivate determines your success — but that impact extends beyond you. It influences your clients, your products and your industry. By leading from a place of respect, you can build value for yourself and your company while bringing a positive impact to the market through trust, knowledge and service.