“Sellers as well as Brokers/Agents should … be aware of the critical necessity of getting the price correct from the start. Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average… Therefore, get the price right from the beginning. It is best for all.”
Ken H. Johnson, Ph.D via KCM Blog
Not all Prices are Equal
In today’s market, it is very rare for the initial list price to end up the sale price of a home. Between offering and selling, prices can change drastically due to the length of time on the market, inspection results and contract negotiations. If a seller refuses to list their home at a competitive price, these issues only intensify. If you closely examine the listing statuses
and prices on comparable listings, you can learn a lot about what the right price is:
- Active – This is the current price of comparable homes currently for sale. This is your seller’s competition.
- Pending – This price attracted showings and contracts.
- Settled – The sale price your client can actually expect.
- Expired – This prices that pushed buyers away. What NOT to do.
Looking at the comparables, are the prices for Active listings higher than those that are Pending? Are they closer to the prices that Expired? If so, why price with the competition?
Aim for the Pending prices, undercut the competition, and attract more buyers, all while maintaining the expectation that your client will receive full market value. Finally, Settled prices inform the seller the final sale price they can expect after negotiations, and help manage their expectations.
Document and Share Your Process
Why do many consumers trust real estate websites like Trulia and Zillow to price their homes, while questioning your numbers? Consumers found it themselves. They went to the website, entered their information, pushed a button and out came a value. They “created” this knowledge and therefore trust it more than if it came from a third party. (This is an education phenomenon called “synthesis”) This leaves the real estate professional with the task of constantly defending their position as the authority in real estate.
Be prepared to explain why your pricing model is superior, and the question isn’t what you used… but WHY you used it.
- Why did you choose school district instead of municipality to determine the area for comparables?
- Why didn’t you search for only properties with in-grounds pools?
- Does air conditioning affect home value?
- Why did you remove new construction and fixer-uppers?
- Why did you add garages, and remove finished basements?
All of these questions are common knowledge to you, and foreign to consumers, but they are learning everyday. If they learn from you, and not from the Internet, you can avoid conflict and strengthen your relationship.
Know Your “Competition”
On-line websites like Zillow and Trulia are competing with you. They aren’t competing with you for listings or sales, but they are competing with you for the consumer’s trust and confidence as a resource for real estate information. Knowing this, you should never be caught off guard by a valuation your customer presents you from these sources.
Go to these websites and run your own valuation models for your customer’s property. Compare the inaccurate results to one another. More than likely they are thousands of dollars apart. If your customer presents a Zillow, Trulia, or another on-line valuation to you, present them with 2 or 3 valuations you found from other sites. Which one is right? The consumer will have no idea because none of them share the methods used to determine the estimate. Then present the customer your Comparable Market Analysis (CMA), backed with valid, hand picked comparable listings, and a thorough explanation of your methods.
If you want a sneak peek at what your customers may discover on-line, TREND’s Find property reports offer a comprehensive Automated Valuation Model (AVM). With this information available from Find, you are empowered with different values and the methodologies behind how they were determined.
Use Maps to Find Better Comparables
Not all information needed to find the best comparable properties can be entered into TREND. There is no way to use a standard search to eliminate houses near highways and railroads, under high-tension wires, or downwind from water treatment facilities or landfills.
When reviewing your search results for comparables, open the map and switch to Aerial and/or Bird’s Eye views to examine details about the property and location that the listing details may not include.
When you search for comparables to create pricing plans, you aren’t finding good matches as much as you are eliminating properties that do not compare. As you cut the wheat from the chaff, save some of the chaff that you can use to answer objections and debunk misinformation found on-line. Do their on-line resources include these “uncomparables”? Do they even know if they do or don’t use them? Odds are, they do.
Explaining what works and what doesn’t work for pricing not only mediates the confusion and frustration your customers experience, but it also effectively establishes you as their expert and not simply a salesperson.
Kurt Miller • Account Executive Manager
Kurt joined TREND in 2006 as an Account Executive. Kurt is currently the Account Executive Manager. He contributes to the TREND community by writing news stories, as well as providing his expertise through personal office visits and training.