Costlier houses used as set-ups

Some say agents should not list unrealistically priced properties

6/16/2012

WASHINGTON -- In the real estate brokerage field they're known as "set-ups" or "pinball" homes, and this spring's improving conditions in some markets could stimulate more.

These houses are listed with unrealistically high asking prices that pull 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 houses nearby at lower asking prices.

These houses may be used without the sellers' knowledge to market other houses. Because no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.

Bill Gillhespy, an agent in Fort Myers Beach, Fla., has a real-life example: He has a listing on the 14th floor of a luxury condominium project overlooking the Gulf of Mexico. The asking price is $450,000. A unit on the same floor with similar views and similar square footage and layout, but with a more updated decor, is listed for nearly $150,000 more.

When Mr. Gillhespy is asked by another agent or a prospective buyer to see his unit, he often says, "Let me first show you a unit just down the hall. It's one of the nicest in the entire building." The higher-priced model shows well, but shoppers immediately remark on the $150,000 difference, "and they can't see how it's justified."

Perrin Cornell, a broker 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' more sobering recommendations on pricing.

What happens to such listings? "Unless we're using it for a set-up," Mr. Cornell said in an interview, "we stop showing it" until the seller agrees to reprice to a sensible number.

But as a matter of principle and ethics, should realty agents accept listings from homeowners who refuse to listen to reason? Joe Manausa, owner-broker of a Century 21 in Tallahassee, is adamant that they should not. "If you list a property at a price you know will not sell," he said, "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.' "

Owners thinking about selling in modestly improving markets should get as much accurate information as they can about prices at which comparable houses in their immediate area sold.

Those who go overboard on price risk becoming the unwitting out-of-touch competition everybody else loves to visit.