In the real estate brokerage field they’re known as “setups” or “pinball” homes, and this spring’s improving conditions in some markets could be stimulating more of them.
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 is this: Real estate agents, including even the listing agent, are using the overpriced house as a negative example to sell other, similar homes nearby that carry lower asking prices.
“It’s like a pinball machine,” says Debbie Cook, an agent with Long & Foster Real Estate in Silver Spring, Md. 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. Or maybe the sellers’ agent didn’t fully brief them about what the house could command in today’s conditions.
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.
“We’re definitely seeing it,” said Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard, Calif. “Some people think they can go higher now because the market seems to be doing better.”
Joe Manausa, owner-broker at Century 21 First Realty in Tallahassee, Fla., 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!’ ”
As a matter of principle and ethics, should realty 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.’ ”
Acevedo 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.
Bottom line here for owners thinking about selling in modestly improving markets: Get as much accurate info as you can about closed sale prices of comparable houses in your immediate area. Talk to multiple realty agents. Sure, you can try pushing a little on price, but if you go overboard, you seriously risk becoming the unwitting setup, the pinball, the out-of-touch competition everybody else loves to visit.