Posts Tagged ‘Pricing’
Earlier this week we did a show in the SWS Virtual Studio called “Listed to Sold: Beyond the Old 
3P’s” where we discussed various strategies to getting listings SOLD so that our sellers can move on with their lives and we can enjoy a well-DESERVED paycheck. I say well-DESERVED because the premise of the show was that you can (and should) go way above and beyond the “Old 3P’s” (Put a Sign in the Yard, Put it on the MLS, Pray) if your goal is to be the Best Listing Agent You Know (and I truly hope that IS your goal!).
At the end of the show, I surveyed the audience to see what tip or tips they found the most valuable toward reaching that lofty goal, and here’s what they told me:
Favorit-est Tip #1 (by far): Make your seller a partner in the pricing process. Show up with a detailed CMA along with clear summary pages, but don’t include your suggested price. Go over the data with your seller and then ask them to sit on it overnight with a promise to call them in the morning to discuss.
Favorit-est Tip #2: Price is not always the best solution to a non-selling listing. Sure, recommending a price reduction is an EASY solution, but is it the best? Unless you’re just grossly overpriced (and that shouldn’t be the case, right?), there is probably something else that is keeping your listing from selling. And you can almost always fix the problem much less expensively than you can price for it.
Favorit-est Tip #3: Explain the two types of seller’s regret.
Favorit-est Tip #4: Don’t overpromise and under-deliver in your marketing. If your listing has a substandard feature – e.g. a rickety garage – consider being upfront about the issue in your marketing so buyers aren’t disappointed. In the example of a crummy garage, consider removing all mention of the garage in the MLS and let buyers be pleasantly surprised by the large storage building in the back yard!
Favorit-est Tip #5: Approach difficult conversations with your seller with a positive attitude“as if” you know they are going to be willing to consider your advice and suggestions.
How To Recommend a Price Reduction without Risking Your Credibility or Upsetting Your Seller
2011
Related to a recent blog entitled “READ THIS Before Your Next Price Reduction Recommendation, today’s post is about HOW to recommend a price reduction if it comes to that without blowing your credibility, or, frankly, ticking off your seller.
In a perfect world (and why not strive for that?), a price reduction is rarely necessary. In this perfect world, real estate agents price, prepare, and present their properties properly (I love alliteration) and therefore homes sell in a reasonable amount of time without the need for a price adjustment. Agents don’t capitulate to the demands of sellers to overprice a home, nor do they “buy” listings with inflated estimates of market value, planning to push for a price reduction six weeks later.
Okay, so it’s not a perfect world and L’il Miss Smarty-Pantz JAH didn’t always score a 10 on the beam either when it came to pricing her listings for sale. Pricing is an art, not a science; the “right price” is a constantly moving target, and can be affected by many factors outside our control. So, it happens. Sometimes a price adjustment is the right thing to do.
So, what might be some ways to approach the price reduction conversation with your seller without jeopardizing your credibility (hey, YOU suggested or agreed to the price in the first place!) or otherwise creating unnecessary drama and angst between the two of you?
I have a few suggestions, but would like to hear yours!
1. Prepare the seller ahead of time that a price adjustment may be required if the market doesn’t respond as favorably to the home as we hope it will. But do this carefully, not with a pre-printed price adjustment form or with a snotty attitude of “Well, we’ll TRY it your way if you insist, but BE PREPARED to reduce the price,” but rather as if you have just as much to lose as the seller does. In other words, “as if” you’re on the seller’s team… which you are, right!?
2. If you recommended (or agreed to) a price believing with all your heart that you were in the ballpark, but discover that, um, you weren’t, take the blame. Admit that you were wrong and that you’re very sorry you got the seller’s hopes up. Perhaps something like: “Bob and Sue, I blew it. I really thought your house was nice enough to overcome XXX, but I was wrong. I’m glad we gave it a try, but I do think we’re going to have to reduce the price significantly. Let me tell you what I’m thinking…”
3. As pontificated about in the original blog, it’s best NOT to lead with a price reduction as your primary solution, for several reasons. One of those reasons is that if you are able to suggest alternatives to a price adjustment and the seller rejects your suggestions (e.g. stage the home, replace the carpet, mow the lawn, etc.), then you can feel much better about recommending a price reduction because it’s actually the seller making the choice to reduce instead of fix or improve.
4. Related to #1, when a seller wants to push the price beyond your comfort level and if he’s not too far removed from reality, agree to try his price for a week to ten days, no more. Don’t get snotty about it because the fact is, you don’t have a crystal ball; maybe the market will respond more positively than you expect! Say something like this: “Okay, let’s try it for a week or so. It’s a bit higher than I’d like, but I don’t want to give away your money if I’m wrong. If we aren’t getting the activity we need or if the feedback indicates the price is high, we’ll reduce it to $XXX,XXX, deal?”
So… there are some suggestions that worked for me… any you’d like to share with the class?
I have a friend who listed her house with one of the top agents in her area. They went on the market about two months ago, at the exact price the agent recommended and supported with his market analysis. Showings were brisk at first, then trickled off, as typically happens. Feedback has been generally positive, although the home is rather unique and simply not practical for many buyers, and the feedback has reflected that.
A few weeks ago, out of the blue, the agent recommended a $50,000 price reduction. This caught my seller friend by surprise since the feedback she’d received never mentioned that pricing was an issue; most of the negative feedback centered on the unique features of the home that made it “not work” for the buyer. But no one, to her knowledge, had mentioned price as an obstacle. My friend asked the agent for an explanation of his recommendation, but no explanation cometh, the agent simply reiterated his recommendation that she reduce her price.
My friend came to me for advice. I suggested she ask him the following questions as to the WHY of his recommendation:
- Has there been consistent feedback that we are overpriced? (If so, it has not been shared with us.)
- How is the overall market right now? Is anything in our price range selling? Is the market typically slower this time of year?
- If the market is not interested in our home at the current price, would your recommended price reduction change that?
- Will reducing the price by $50,000 overcome buyer’s objections to the unique character of the home, or will buyers still expect a more traditional home?
- Are homes in your recommended price range getting more activity than homes in our current range?
and the kicker…
6. Has the market changed significantly since you recommended the price we listed at?
My friend is not categorically opposed to reducing her price if that’s the right answer, or to withdraw the home from the market and wait for a better time to sell. But she wants (and deserves) information. A coherent explanation. Some evidence that her agent (who is supposed to be looking out for her best interests) put a little effort and thought into her situation — and his recommendation.
Contrary to what we like to believe, our sellers are not stupid and they aren’t unreasonably stubborn. But when we recommend a list price, back it up with data, and then, like clockwork, push for a reduction to that price six weeks later without explanation or exploration of other solutions, home-sellers have every right to be frustrated with us and to question our credibility. To doubt our commitment to their best interests. Or perhaps, to reach the conclusion that we’re just lazy.
(My friend is thinking all these things about her agent and I can’t blame her).
The moral of the story… before you recommend a price reduction, make sure you have answers to all the questions YOU would ask if it were YOUR home on the market and your agent advised you to give up a chunk of your equity. DO your homework, not just to pacify the seller, but also to determine if, indeed, a price reduction is the right solution. Maybe it is, maybe it’s not. But be a PROFESSIONAL real estate agent and find out.
Oh, and it wouldn’t hurt to price it right in the first place.
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When Your Listing Isn’t Selling, What’s the First Thing to Fix – All together now…
STOP! Before You Reduce the Price!
If Price is All That Matters, What Do They Need Us For?
I wrote two unrelated blogs yesterday – one about how I would rule the (real estate) world and another about how we real estate-types are put in an awkward position when negotiating our commission with sellers.
After a day and night to ponder my blogs and the commentary, I realize that these two blogs are indeed, very closely related!
To summarize blog #1 – I am currently negotiating a contract for a book deal. The person I’m negotiating with will also be my editor, if we come to agreement. So, this guy has to first wine me and dine me (cyberly-speaking) to pique my interest, then he has to put on his a&&-hole hat and negotiate against me – but after that, we have to work closely together over the next year to produce a killer product (my book). So, he has to build my trust, then shatter it, then build it again.
Blog #2 was a little ditty about how if I were Queen (that is, a managing broker), I would require my agents to convince me that their listings are worthy of my sign in the yard. Thus, any seller who wants to be honored with my sign has to sell US on HIM! Instead of the other way around.
So here’s my point.
We real estate agents are in the exact same position as my potential editor. We have to build the rapport that encourages our prospects to like us and trust us. Then we have to risk trashing that rapport and trust while we negotiate our commission and list price. If the seller hires us, we have to somehow rebuild the trust and rapport so that we can work together to get the home sold. It’s a tough job description.
What might be really cool would be to apply the car dealership technique of requiring management approval on any deal struck between buyer and seller, that is, listing agent and seller prospect. Here’s how it would work…
Agent meets with seller and builds rapport. Once rapport and trust are established, the financial discussions begin (commission and list price). Agent and seller work TOGETHER to come up with a proposal for the Queen to approve. The agent cannot accept a listing without that approval. Together, the agent and his new best friend, the seller, create a marketing plan which includes the list price, the agents’s commitments to the seller, the seller’s commitments to the agent, along with a proposed commission to be paid upon success. Both parties know that they have to present a reasonable proposal to the Queen or it will be rejected.
Let the Queen be the bad guy! It lets the agent off the hook, while bringing the seller more into the process of selling the home. Best of all, the agent never has to switch hats!!!
Under this scenario, I, as Queen, would be tickled to market the hell out of any listings that are deemed worthy.
I love it. Do you?
Okay, that’s a little melodramatic and I don’t have time to talk about everything I would change. And, frankly, I have no interest in ruling any world.
So, let me rephrase that. If I ruled my real estate company…
I’d pass this law: Any agent who works for me will have to prove to me, their queen, that the sellers they allow to hire them have either a strong NEED or a strong DESIRE to sell. No market-testers allowed.
My company’s listings would be 100% marketable. My company’s listings would sell. Buyer agents would flock to show my listings first because they are priced right, easy to show and smell good. Or if they aren’t easy to show and/or smell awful, they are priced accordingly.
We’d take 60 day listing agreements and not a day longer. That’s plenty of time to sell a home and frankly, I don’t want my real estate sign sitting in front of a house any longer than that.
Sellers would have to sell themselves to my agents. My agents would have to sell their sellers to me.
If an agent didn’t like my law, they could leave. But I think they’d love it once they understood it.
I remember interviewing for my second listing back in 1997. The seller asked me this question: “Jennifer, I assume our house will sell quickly because it’s so cute (it was), but if it doesn’t sell right away, what will you do?”
Hmmmmmmmm. Hell, I dunno. I was a green bean agent; I’d only had one other listing in my career and didn’t have a clue. I came up with something, that probably sounded like this: ” I’ll do a broker open house, I’ll do mid-week open houses, I’ll distribute color brochures throughout the neighborhood and post an ad on the nearby college’s bulletin board.”
Lucky for me, the house did sell quickly, so I didn’t have to implement my admittedly weak Plan B.
But it’s now 12 years later and I still don’t have a good answer to the question: “What will you do in 30 days if my house hasn’t sold?”
However, with 12 years of experience under my belt, I KNOW that there ISN’T a great answer to the question! Especially if the seller is expecting me to reach into some magic bag of tricks and pull out a secret marketing strategy that I reserve only for my non-selling listings!
Here’s the thing. Even if I HAD a magic bag of secret marketing tricks, why would I hold out using them until after the listing is stale? Wouldn’t it make more sense to hit the market with all guns blazing?
But the truth is, I don’t have a magic bag of tricks (and neither do you). NO AMOUNT OF MARKETING CAN SELL AN UNSELLABLE HOME. You can do broker opens every day of the week, distribute enough color brochures to kill a small forest and refresh your Craigslist ad every 21 days for the next five years and your listing will not sell if it’s not properly priced, properly prepared and properly presented! NO AMOUNT OF MARKETING CAN SELL AN UNSELLABLE HOME!
Our job as professional real estate agents is to know what it’s gonna take to get a house sold. We need to know how to price the home TO SELL; how to prepare our sellers for the reality of Being on the Market and how to help them prepare the home to evoke the most positive emotional reaction from the greatest number of potential buyers (and their agents). It needs to look good, smell good and photograph well. It needs to be easy to show without the distraction of barking dogs or a work-at-home owner. If there’s an obstacle to sale, we need to recognize it and have the balls to be frank with our seller about it (and help ‘em fix it).
That’s how you sell your listing. By working with your seller to create a marketable product, not to throw time and money at advertising after the sign goes in the yard. Frankly, the MLS system is an incredibly efficient system to sell houses and there’s nothing we can do individually to out-market that MLS.
Let’s go sell our listings!
Why do we put such stock in the Average Days on Market (DOM) statistic in our MLS’s? I suppose it might be meaningful if YOUR average DOM is much less than the overall DOM, but otherwise, I believe it’s a totally 
meaningless number.
If I were to run a market analysis of all the 1920’s Bungalows that have sold in my market (NW Denver) in the last three months… (okay, wait a sec, I’m going to do that right now… BRB).
Okay, I ran my analysis. Had to go back six months ’cause the last three have been kinda quiet around here.
The DOM of my subject search ranged from 2 days to 171 days. The average DOM was 53. However, out of 21 properties, seven sold in under a week (five of those in less than 3 days), eleven in less than three weeks, while five took over 100 days to sell. Only three of the 21 properties had a DOM of anywhere close to 53.
So, when a seller asks me what the average Days on Market is in Northwest Denver, I tell them “I don’t know” and explain why. I then explain why my goal is to sell their home in 30 days or less (obviously it’s perfectly do-able in my market), and how I’m going to do that.
But maybe that’s just my market. Do you feel that the DOM statistic is meaningful in yours? If so, please explain!
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Picking up from Wednesday’s “If Your Listing Isn’t Selling…”
So, if your listing isn’t selling and you’ve agreed with me that perhaps price might not be the best solution, what else can you look at?
Well, it might be really simple. Have you checked access lately? Lockbox still there? Key still in it? Key still work in the lock (sticky locks kill showings)? Is the seller declining or restricting showings?
Have you previewed your listing lately? Does it still show well and smell good?
How’s your MLS description? Is it dull (“3 bedroom/2 bath ranch in Woodbridge”) or jazzy (“Mid-Century tri-level with modern flair!”)? Do you over-promise and under-deliver? Are the photos in season? ARE there photos? Are the driving directions correct, if the property isn’t a slam-dunk to find?
Here’s a biggie – IS THERE A BUYER for this house? Are other similar homes selling? If so, there’s something wrong with yours. If not, there may simply not be a buyer on the planet at this time and you can’t manufacture one. Not all homes are sellable, contrary to popular opinion.
Take a really close look at what IS selling in the neighborhood or market area. Can you identify any common denominators among the selling listings versus the non-selling ones? Maybe all the sales are of 4-bedrooms and yours has 3. Maybe it’s the 2-story models that are selling and yours is a ranch. You can’t fix that, of course, but it might help you understand (and explain to your seller).
But what if the problem isn’t simple, but is fixable?
Tell ya what – if you want to hear the rest of the story – click here for a 15-minute audio from a live presentation I did this spring on this very topic! Hope you enjoy!
Any Idiot Can Give Their House Away…If Price is All that Matters – What do they need us for?
2011
This is yet another follow-up to the topic of “Is Price Always the Best Answer to a Non-Selling Listing?” that I started last week. You can read more HERE and HERE.
Real estate agents are quite fond of the philosophy that “Price conquers all,” meaning that if you price a listing low enough, it will sell regardless of the challenges the property presents.
Fair enough.
But I must ask. So what? Is that our job as professional real estate agents to simply recommend a price low enough that any piece of junk will sell?
Or, rather, is it to help our sellers get the highest possible price in the shortest possible time, whatever a realistic price and time may be? If our job is to simply sell it fast, at any price, well, shoot, just about any idiot can give their property away! Isn’t that why homesellers hire us in the first place, to do a better job for them than they can do for themselves?
Real estate agents are always bragging about their listing expertise and defending their commissions by claiming they MORE THAN EARN THEIR FEE. Uh, well, I have to disagree if the only solution we offer our sellers is to price aggressively. There ARE other things a seller can do to maximize his sales price, and it’s our job to 1) know what those things are, and 2) be willing to share those secrets with a seller and 3) help the seller accomplish those things. (and those were the topics of the previous blogs linked to above)
What if you went to your doctor with a pain in your leg and the only solution he offered was to cut the offending appendage off? Yes, that would cure the pain in your leg, but maybe there’s a better way that involves a little more effort on his part (and yours). Or if your plumber simply removed the toilet that wasn’t flushing instead of figuring out how to repair it?
Of course, if I request that the doctor amputate my leg, or that the plumber tear out my toilet, or that my Realtor simply give my house away, well, then, they have my blessing. But in most cases, c’mon, our clients deserve a little more effort and expertise than that, don’t they?
I’m not sayin’ that price isn’t important – of course it is. But if we keep preaching that “Price is the ANSWER!” to the exclusion of any other effort on our part, we may end up preaching ourselves out of a job…deservedly so, I might add.
Sellers want more for their homes than the market is likely to pay. That’s a fact; it’s been a fact forever, during boom times and busts, and will continue to be a fact long after the Recession of 2009 is behind us.
Nothing wrong with it; it’s human nature and we’re all guilty of putting a higher value on our own precious 
stuff than anyone else is going to. But part of our job as listing agents is to gently persuade our seller clients that we need to price properly in order to get their home sold.
But should that “proper price” take in to account what the house might appraise for?
In my opinion, no.
WHAT???? Jennifer, are you out of your mind?? What if you overprice the house and it sells at that price and the appraisal comes in low?? What then?
Indeed.
I take great care in pricing my listings – I want to get my seller the highest possible price in the shortest amount of time, assuming that’s his goal, too. And I’ve been doing this long enough to understand that pricing it RIGHT is best way to get the highest price, as opposed to pricing it high and hoping a bigger idiot comes along and pays that price. So, before I continue, let me assure you that I know how to price a house to sell quickly, without giving away my seller’s money. (Read more about that here).
If I feel a house will sell for more than the market data indicates, I’ll not hesitate to price it accordingly. If a particular house shows so well and feels so good that it blows away the similar competition and recent sales… even if “on paper” it’s not “worth” more, I’ll put that higher price on it. My seller deserves the opportunity to see her hard work or design-sense or whatever pay off for her.
(Again, remember, I’m not stupid and I’m not inexperienced. I know what I’m doing.)
So, back to the original question. “What if it sells at full price and then doesn’t appraise?”
Frankly, I’ll deal with that when and if the problem arises. If I get my seller “too much money” for his house, and the appraiser or underwriter doesn’t agree with me and the buyer, then we’ll go to Plan B. Which, yes, may include the seller coming down on his price to meet the appraisal. Or getting a second appraisal. Or whatever other solutions we can come up with.
And yeah, it might suck and everyone might get mad. But I’ll deal with that at the time!
I’d much rather take the chance of getting top dollar for my seller and then scrambling to justify it, then to pro-actively risk leaving my seller’s money on the table when we could have gotten more. In other words, I don’t believe in underpricing a home in order to avoid appraisal issues, and I don’t believe it’s a good tactic to use when discussing price with a seller prospect.
How do you feel about it?
Thanks, AR, for the Gold Star yesterday on my blog entitled “Should You Price to Ward Off Appraisal Problems?” I didn’t intend for the blog to generate a war between agents and appraisers, but sometimes these things take on a life of their own. Okay, well, “war” is a bit strong, but we did have a lively discussion.
So, let’s continue it. What the heck.
However, being a Friday at the end of a long week, I’m feeling a little lazy, so I’m going to resurrect a conversation from last July on this very topic. To recap – I did an interview with Real Estate Radio USA where I casually stated my opinion that appraisers should not be in the business of pricing homes for market. I didn’t think that was such an inflammatory statement, but… it was. At least to the appraisers of the world. I really wasn’t trying to insult anyone; in my opinion, what appraisers do and what we do are two completely different things, at different points in a real estate transaction, for a different audience.
But my good friend Mike Lefebvre (who really IS a good friend; I’m not saying that sarcastically) took offense to my comments and wrote a rather outspoken blog in response. Which sparked a lively debate over at Real Estate Radio USA.
Here’s what he wrote:
Jennifer was on yesterday’s show to discuss the seemingly age-old question of how listing agents justify their fees. Anyone who listens on a quasi-regular basis knows that Barry and Barry flat out feel that it is nearly impossible for 99% of listing agents to justify their fee for the services they provide. (That’s another topic all together and I feel strongly that Jennifer and I are both part of the 1% who can justify their fees as listing agents.) I enjoyed her last interview a lot and looked forward to her take on this one. She speaks with authority, knows her stuff and I was anticipating a spirited debate.
The conversation eventually turned to pricing properties and appraisers and then the fangs came out. To be honest, I wasn’t prepared at all for what I was about to hear. It was appraiser hate-speak! I’m sure Jennifer would tell us that “some of her very best friends are appraisers” but I certainly wasn’t feeling the love yesterday afternoon. READ THE REST HERE and don’t miss the comments – they’re fantastic!
No, really, go read it. It’s great stuff. We’ll be here when you return.
So, what do you think? Who is the more appropriate party to price a home for market? A professional, experienced, competent real estate agent? Or a professional, experienced, competent appraiser? (for the purposes of this discussion, let’s leave out all the idiots in both professions).
A few months ago (sheesh, almost six months already!) I stopped actively selling real estate. Oh, not to worry, I still keep my fingers in the pie and my toes in the water of the Denver real estate market, but I don’t actually list or sell properties in my own name. However, being the control freak that I am, anyone who gets a referral from me can count on lots of – ahem – help from me, especially if they’re working with someone from my precious Sphere of Influence. I’m sure my – ahem – help is very much appreciated.
Anyway, I recently referred a sweeeeet Charming Old Denver listing to a fellow SWS’er – Mary Beth Bonacci. It’s in one of Denver’s many historic neighborhoods and was built in 1908. If you’re fortunate enough to work in charming old neighborhoods, you know how challenging it can be to accurately price these homes. After 100 years (give or take a dozen) of renovations – not only of the subject property, but also of the surrounding neighbors, the influx of infill development, changes to perceived trendiness “boundaries,” the comings and goings of neighborhood amenities, not to mention school district nuances and zoning codes… you can pretty much bet that there ain’t another house just like the one you’re trying to 
price.
Oh, sure, on paper, there are probably dozens. After all, builders weren’t much more creative back then than they are today. Drive down a street in Denver’s Washington Park and you’ll see Bungalow after Bungalow built in 1927 – the tract homes of the 20’s. On the next block, you might see Tudor after Tudor built in 1935 – the tract home of the 30’s. Similar square footages, similar lot sizes, the same existence of or lack of a basement…
And of course, all the MLS descriptions of your comparables proclaim the homes to be Renovated with Pottery Barn Flair! Or to have a Gourmet Custom Kitchen with Stainless Appliances & Granite Counters! Oh, and in a Perfect Location, too.
But I digress.
I decided Mary Beth needed my help pricing the sweeeet listing I referred to her. And she graciously agreed to let me – ahem – help.
Actually, we had a great time. ‘Specially me – since I’d been out of the loop a few months, it was a bit of a novelty to get out there in the trenches and exercise my pricing expertise again.
But, as it usually does, it amazed me that many agents price simply from what the seller tells them about their home and what the MLS data tells them about the market. In other words, they have a telephone conversation with the seller; spend an hour in front of the computer and voila! They create a “professional” CMA and proudly present it to their seller prospect as gospel.
And proceed to the market with an improperly priced home…
Perhaps this strategy works just fine in a newer tract home development. But in a historic neighborhood? No way.
Earlier this week (or maybe last week?) I promised to do a little series with tips on how to properly price historic homes in urban markets.
Got distracted by conversations ‘bout Real Estate Reality Shows, but here I am again, back to the more mundane issues of our daily grind… pricing homes to sell. Yawn. (I say that a little sarcastically; I totally love this 
stuff).
Pricing historic homes in urban markets is a bit (a lot?) more time-consuming than pricing newer homes in planned developments. But, at least to my way of thinking, it’s a whole lot more fun! Hope you think so, too…
Step One is to Drive by the Home. Never, ever, ever begin the pricing process until you’ve at least driven by the subject property. You need to have an accurate mental picture of the home and its general location on the planet in order to take the next step. When you drive by, be sure to look for any locational challenges such as nearby railroad tracks, overhead high-tension power lines, undesirable neighbors (either commercial or residential) or obvious parking issues. If the home has an alley, drive through it to see what the back of the house overlooks.
Very few older urban homes are in a perfect location; almost all have some locational “amenity” that buyers will object to. You need to be aware of any such objections upfront. On the other hand, if the subject property IS in a perfect location, that’s something you need to know as well, because most of the comparables you’ll be using won’t be.
While we’re on the topic, it’s far better if you can get inside the house before you prepare your CMA. I usually handle this by doing a 2-step listing presentation – the first being an information-gathering/rapport-building meeting and the second focusing on the current market – i.e. pricing. (Actually, I do a three-step listing presentation, but I’ll talk about that later).
That said, whether you do a one-step, two-step or even three-step listing presentation, never meet face2face with a seller without first, driving by the house, and second, perusing the relevant market data online. You need to be at least conversational about the local market, even if you haven’t done your detailed research yet. Remember, the general public thinks all we do all day is drive around and look at houses, so if you stutter, stammer and hedge when the seller asks you about his neighborhood’s market activity during your first meeting, he’ll certainly doubt your professionalism and expertise. Being able to casually toss out a few neighborhood statistics or hyper-local market factoids will do wonders for your confidence and credibility.
If there are any homes for sale or any that have recently sold within one block of the seller’s home, know the details of the listings or sales, even if they aren’t comparable. Your seller knows all about them and he’ll expect you to as well.
Homeowners in urban markets tend to be pretty enamored with their neighborhood and will expect their real estate agent to be, too. So, be as prepared as you can, as early as you can
Just another installment in the series: Pricing Historic Homes in Urban Markets…
In the last installment, I recommended that you always, always, always drive by your subject property before doing anything else. If you can get inside, so much the better…
So after you have a good visual of your subject property, it’s time to go check out the competition – otherwise known as “previewing.” (If your market frowns on previewing, and many do, please share with the audience how on earth you properly price homes!).
When I interview to list a property, I often find myself bonding with the home, to the point where it’s almost as hard for me to be objective about it as it is for the sellers. I really have to fight the temptation to be overly critical of “my” listing’s competition, while excusing “my” listing’s challenges and flaws. Sometimes I’ll take another agent with me on my previewing tour to help keep me objective.
SELECTING THE HOMES TO PREVIEW
Which homes should you preview? In a word (okay, a phrase) – as many as you can. Even if they aren’t exactly comparable. With every house you tour, you gain a little better grasp on the up-to-the-minute marketplace, which makes it much easier to pinpoint the proper price range to recommend. It just happens naturally. As you look at the competition, you’ll start to get a feeling for where your listing falls in the scheme of things, and the more you look at, the more confident you’ll be in that feeling.
I try to preview at least 10 houses when I’m pricing a home. Sometimes I’ll get lazy and only hit five – and I always regret it. It seems that it’s right around the sixth or seventh house that I start to trust my gut about pricing. And that gut feeling is further confirmed on the eighth, ninth and tenth.
Depending on my price range, I’ll preview all comparable houses within $50,000 (on each side) of where I think my listing will fall. By “comparable,” I mean homes that offer similar square footage for the money. I probably won’t preview a 1,000 sqft Bungalow if I’m listing a 2,000 sqft Victorian; they just won’t attract the same buyer, even though they may very well be priced similarly. I always preview any homes within one block of my seller’s property, even if they aren’t comparable at all. It’s just good practice in case the seller asks you about it.
Always preview the low outliers. A “low outlier” is a house that looks good on paper, but seems to be a screaming deal. You need to know why it’s priced so well… but hasn’t sold. There probably is a good reason. If there isn’t, then this is the listing to beat. But we’ll talk about that later.
How about the high outliers? The houses that are priced way above the rest, which are probably getting your seller all excited? Look at those, too. Chances are that they’re just grossly overpriced (and the more houses you look at, the more sure you’ll be of this). If they aren’t overpriced, there’s something really fabulous about them, and you need to know what it is.
As you’re setting your previews, note if any homes are difficult to show. That will definitely affect market value. And frankly, if they are, I’ll skip them. Lazy? Maybe, but on the other hand, a difficult-to-show home is not going to be comparable to MY listing because I don’t take difficult-to-show listings!
Effective previewing in an urban market entails a lot more than just looking at a bunch of homes. Sure, that’s what you’re going to do (look at a bunch of homes), but in order to really evaluate the information you’re gathering, you need to go in with the heart & mind of a detective.
We’ll talk about that next time.
Here’s the third, well, kinda the fourth (if you count the introductory teaser) installment in my series “Pricing Historic Homes in Urban Neighborhoods.” You can read the rest of the series here:
Introduction
Step One – Before you price, prepare!
Step Two – Preview, preview, preview
I’ve had a few comments come in to the tune of “Wow – that’s a lot of work – is it really necessary to spend so much time pricing a home?” Well, I say – YES! It is necessary! After all, our product is property, and our sellers pay us darn good money to know our product and move THEIR product off the shelf… so I believe with all my heart that we owe it to our future adoring fans to do our homework and make the most knowledgeable recommendations we’re capable of.
Although… we’ll never be perfect. Sigh.
Back to Pricing.
In the last installment, I talked about how important it is to preview preview preview. The more competing listings you preview, the better sense you’ll have of where your listing falls into the mix.
Remember, the houses you’re previewing are 1) the competition for your listing and 2) houses that haven’t sold.
Why is it important to check out the active listings? Some agents don’t preview because they don’t think the active listings are relevant. “All that matters is SOLD.” Eh, I disagree. First, what’s SOLD is not competing with your upcoming listing, and when you’re dealing with older homes, buyers don’t always have a lot of options that meet their criteria. In many cases, the buyer will only find one or two homes that even come close, so knowing what they’re comparing your listing to is critical.
Second, it’s important to know WHY that active competition hasn’t sold. Especially if it appears to be “priced well.” You’ll never know for sure why a house hasn’t sold by looking at the MLS, although you may have your suspicions. It’s not as if the listing agent is going to tell you that the house reeks of cat urine or point out that there’s no bathroom on the main floor.
So, when you’re previewing, ask yourself…
- WHY hasn’t this house sold?
- WHAT makes it superior (or inferior) to “my” listing?
- HOW could the listing agent do a better job marketing this home?
- WHO is the ideal buyer for this property and is it the same ideal buyer as “mine” will attract?
(I can’t think of a “when” or a “where,” so I’ll move on).
Training yourself to ask these questions at every house you preview makes you a better previewer, and therefore, a better pricer. It also helps you to remember each house so you can speak intelligently about the competition with your seller when discussing pricing, as well as down the road when that homes’ status changes (sells, withdraws or reduces the price), you’ll be able to nod and say to yourself, “Hmmmm, I thought so!”
Speaking of down the road… this is another important reason to preview. When or if the competition sells, you’ll be familiar with it in case appraisal problems come up on YOUR property and the appraiser wants to use comparables that aren’t appropriate. If you’ve been IN all the comparables, it’s much easier to make a compelling case!
Okay, ‘nuff about previewing. Next time, we’ll talk about how to evaluate the SOLDs in your CMA to help you price your historic home in your urban neighborhood!
Thanks to those who are sticking thru this series with me! While I think that the process of properly pricing homes is fascinating stuff, I know it’s not nearly as sexy as other topics! (Although SELLING your properly priced listing is very sexy, indeed.)
In the previous installments…
Introduction
Step One – Before you price, prepare!
Step Two – Preview, preview, preview
Step Three – Play detective
…we talked about how to effectively preview the competition to figure out where your potential listing falls into the scheme of things. So, what about the SOLDs?
The problem with using SOLDs in your market analysis is, unless you’ve been a previewing mad(wo)man over the last eight months, you probably haven’t seen the inside of the properties, and now it’s too late. So you have to go off the MLS description – a very risky proposition!
But we’ll do our best.
Print off all the SOLDs that seem to be comparable, even if they’re much higher or lower than your assumption of the market value of “your” listing. Drive by all of them! Pay special attention to the outliers – the ones that seem to have sold way out of whack to the rest of the market, or whose Days on Market statistic is unusually low or high.
There’s a good chance your drive-by will reveal the reason for the out-of-line price or DOM. Perhaps there’s a commercial building next door, behind or across the street. Or, common in Denver, a corner lot that doesn’t have a private back yard, or any back yard at all. Maybe it’s a pop-top done wrong and doesn’t fit in with the neighborhood. Busy street with a bus stop in the front yard?
Or conversely, you might see that it has a stellar location with an extra-large lot, a mountain view, or around the corner (at a suitable distance) from a popular coffee shop.
If the reason for the outlying price and/or DOM isn’t obvious from your drive-by, go line-by line through the MLS listing. Is it missing a garage in a market that expects garages? No basement? One bathroom? Obviously, if the interior photos show that it needs work, that’s relevant. Check the showing instructions to see if there are any obvious limitations on access.
If all else fails, and you really feel a particular house is a good comparable, call the listing agent. Hopefully they’ll be helpful in helping you understand why the house sold at the price it did. Or, maybe not. But give it a try.
It really is the outliers that give you the most grief when looking at the SOLDs. There probably are some sold listings that fall right in line with what you’re thinking the price of your listing ought to be, but the ones that don’t give you fits. The more research you do on these outliers will not only make your CMA stronger, but will give you an air of confidence when going through your CMA with a seller.
Next Time – Putting it All Together
Ahhhh… back from vacation… and I must confess it’s awfully darn cool to GO to the beach and then come HOME to the beach!
Anyway, here’s a follow-up to my last pre-vacation blog about the show Loreena Yeo and I did together in the SWS Virtual Studio about getting listings sold FAST.
One of more memorable messages conveyed during that show was Loreena’s utter and complete commitment to walking away from a listing that doesn’t meet her requirements. If the seller refuses to price properly and/or to follow her advice on preparation and staging, she does not want the listing. Period.
Many listeners commented to me afterwards how refreshing it was to hear a real estate agent so secure in her value and confident in her abilities – that you couldn’t help but FEEL the control Loreena takes of her business and her clientele, and be a bit awed by it.
Perhaps that’s a bit melodramatic, but only a little bit. Seriously, it was impressive.
Well, so maybe everyone wasn’t so impressed. A few listeners contacted me afterwards chiding us for making it sound “so easy to walk away.” That we were being unreasonable and irresponsible to advise agents who are not yet “there” to turn down business. That it’s fine for us fat & happy established agents to be selective about which clients we accept and which we don’t, but for the average new-ish agent, being selective is simply not an option. After all, new agents NEED the practice; they NEED the experience, and perhaps most of all, they NEED those For Sale signs to generate calls from buyers.
Whoa, let’s back up here a minute.
QUESTION: Under what circumstances does Loreena respectfully walk away from a listing? Hmmmmm?
ANSWER: She walks away because the seller refuses to do what Loreena knows needs to be done to experience a successful home sale.
Loreena knows what it will take to sell a home in her Frisco market. And presumably, that’s what the seller wants and therefore, it’s what Loreena wants to deliver. If the seller is going to stand in the way of that goal, Loreena feels duty-bound – both to herself and to the seller – NOT to acquiesce and allow the seller to fail.
That’s her job. And she takes it seriously.
To allow a seller to call the shots – to “drive your bus” as Loreena calls it – is to neglect your fiduciary duty to your seller. Your personal needs for experience, practice and sign calls are not remotely relevant to your responsibility as a licensed real estate professional who is being considered for the honor of listing a home.
I have a friend with high blood pressure. When his doctor discovered it, he prescribed a blood-pressure-lowering drug. My friend balked, saying he didn’t want to be on a prescription medication the rest of his life. The physician calmly replied “Well, then, that’s your right, but I have to tell you that if you refuse treatment, I will no longer accept you as my patient. I feel that strongly that you take this drug for the sake of your health.”
And guess what? My friend takes his medicine and is grateful his doctor respectfully insisted. We owe our sellers (and ourselves) the same respect, don’t we?
Had an interesting email dialogue over the weekend with a SWS reader – I’ll let him identify himself here if he likes – about the use of charts and graphs and data and statistics in a listing interview. He asked the question during my “Helping Your Seller See the Light” teleseminar on Saturday whether or not I use, or recommend using statistics like “absorption rate” and “days on market” and “average list-to-sold,” and if so, what exactly IS the best use of these statistics?
Well, my superficial, off-the-top-‘o-my-head answer was that no, I don’t use charts and graphs and statistics because my brain doesn’t work that way. I’m not a numbers gal, so when I look at charts and graphs and statistics, they don’t mean much to me. And I don’t want to go into a listing interview armed with information I don’t fully understand.
And I highly recommend that if you’re like me, not a math-nerd (I say that with respect and affection for math-nerds), don’t try to become one when talking to sellers. Provide the information in a format that makes sense to you, and that you can easily and conversationally explain.
But if you ARE a numbers guy or gal, and you love your charts and graphs and stats, how can you best use this data when talking with a seller prospect about pricing?
Veddy, veddy carefully.
Here’s the thing. The problem with graphs and charts and numbers and statistics is that they give the impression that selling a house is a random event, governed by those numbers and statistics, and not influence-able (?) by the agent’s or seller’s efforts. To present a chart that shows an 8-month inventory, for example, implies that it takes 8 months to sell a home. To present a graph showing an average list-to-sell ratio of 92% implies that a seller should build a margin into his price to account for being negotiated 8% down.
But is that REALLY what the numbers are saying? In most cases, NO. Not even close! And again, do you really want to give a seller prospect the impression that neither you nor he is capable of affecting the outcome of your home-sale adventure?
To me, that’s what depending on the numbers says to a seller. That THESE are the cold hard facts and there ain’t nothing we can do to change them. We, Mr. Seller, you and I, are at the mercy of the market.
AND THAT’S NOT TRUE.
Because you know what? Whenever you come up with a statistic, that statistic is based on a range of outcomes. Some houses didn’t take 8 months to sell. Some houses sold higher than 92% of list price. And were these better-than-average outcomes simply the result of chance? Luck? Random events?
Of course not.
“Okay, Ms. Smarty Pants, but that’s not how I use my graphs and charts – I use them to demonstrate the reality of the market to my sellers to persuade them to price properly. If they see those cold, hard facts, they’ll realize that they need to listen to me and my pricing recommendations if they want to have a hope of selling.”
Fair enough, and I’m inclined in theory to agree with that strategy. But as I said earlier, it must be done veddy, veddy carefully.
You only have so much time in a listing interview to say everything you want to say. At some point, your seller’s eyes are going to glaze over and they’ll check out. I’d rather spend their valuable attention span talking about what WE (he and I together) can do to maximize the chance of sale, at an acceptable price.
Besides, you know what? If your seller prospect is interviewing other agents, they’ve probably gone overboard with all the doom & gloom and already handled that part of the conversation for you! If YOU come in, not with a bunch of dire warnings, but rather a plan and a smile, you’ll be a breath of fresh air, won’t you?
