You Can Price it to Sell or Price it to Sit: The Market Will Grant You Whichever You Choose
Member contribution by Alexis Bolin, ABR,AHWD,CRS,CRP,PMN,SRES,SFR
In speaking with sellers, a good script is; “I can tell you what you want to hear, or I can tell you the truth about the market and the pricing, what would you like me to do?” Always be hard on the market and soft on the people. Explain the state of the current market.
There is a definite psychology to proper pricing. It is both an art and a science which takes knowledge of the market and an innate ability to properly analyze the sales data. It is your job to help sellers understand the advantage of setting a reasonable price.
Start by asking questions to discover the seller’s motivation.
- Why are you selling?
- How soon do you need to sell?
- Are you willing to price your home at market value?
- What is more important, getting the price you want, or whether or not the house sells?
- What is your game plan if for some reason the house doesn’t sell?
You must know your numbers. Be prepared to interpret the current market data so sellers can make an intelligent pricing decision. Handle pricing objections by answering with facts, data, and logic that support your point.
- Active listings versus pending sales.
- Number of new listings each month versus last month, last year.
- Active listings versus sold listings .
- Month’s supply of inventory – Absorption Rate.
- Average days on the market in MLS, in their area of town, in their subdivision.
- Average Sold Price.
This information can be extracted from your MLS statistics or you can outsource it.
Sellers always want more money for their home and the best way get it is to price it right in the beginning. Ask, “Do you want your home to sell or do you want it to sit on the market?”, “Show me three comps from the latest neighborhood sales that you want me to use to defend your price to the buyer, buyer’s agent, the appraiser and the loan underwriter.”
All sellers say the same thing: Become an expert in scripts and dialogues.
Learn the answers to the most common objections:
- We are in no hurry!
- We aren’t going to give it away.
- We can start high, and come down on price.
Sellers always feel their improvements will add value to their home – Improvements add to the property in two ways. They make it more saleable. They make it more showable. But they don’t make it more valuable.
I use this football analogy to explain the importance of being in the market to sell, not just on the market to sit. Ask the seller how many players are on a pro-football team? (53)
How many players from each team are on the field? (11)
How many players from each team are sitting on the bench waiting their turn in the game? (42)
Do you want to be one of the 11 players in the game to score, or one of the 42 sitting on the sidelines with no opportunity to score? This is what happens when you over price your home.
No amount of marketing will sell an overpriced home. We can sell the worst looking home in the worst neighborhood in town if the price is right. But we can’t sell the best home in the nicest neighborhood in town if the price is too high. There are always two prices for a home, the AS IS price and the Top Condition price. Ask the sellers which one they want to use in pricing their home.
Share with sellers the benefit of pricing right from the beginning:
- New listings create a buzz in the real estate community.
- The right price creates buyer urgency. They think your home is a great buy compared to the others on the market!
- Homes priced right sell for a higher price in a shorter time.
- Generates more ad calls and Internet inquiries.
- Homes sell closer to their asking price during the first few weeks they are on the market.
- Fewer mortgage payments mean less interest paid = more money in the seller’s pocket!
- Less hassle for the seller who has to keep up the home for showing.
- The longer the house sits on the market, the more buyers think there is something wrong with the house.
Most agents spend more time with sellers presenting their marketing plan than they do on proper pricing. They believe that they will be successful in selling the house because of their market savvy and skill, instead of working to get the seller to set the best market price. Don’t get so involved in the process of winning the listing that you forget to ask yourself if it is smart business to take the listing, and on what terms.
Your responsibility as their Realtor is to interpret the market so that they can make an intelligent decision. The Code of Ethics-
My question is: Why do so many agents still take listings that are overpriced? Perhaps they don’t know the Code or they are trained to get listings at all cost. Some may really believe the seller will become reasonable and they can get a price reduction later. Show them why setting the price right will normally bring a higher price, increase buyer interest, generate more showings, and result in multiple offers. They only get one chance to make it right.
Don’t get so involved in the process of winning the listing that you forget to ask yourself if it is smart business to take the listing, and on what terms?
You don’t have to work with sellers who won’t do what is necessary to sell the home, and that includes pricing for the market and doing necessary repairs or cosmetics to get their home sold (unless they compensate the deficiencies with the price).
In the end, if a home doesn’t sell, the sellers blame the agent and their poor marketing. It’s most important to be a hero to the seller, have a sold sign on the property and have a satisfied customer. They are our best source of business. Do you want to be known as the agent who gets homes sold or the agent who doesn’t sell it.