By Craig Proctor
RISMEDIA, August 27, 2008-One reality of the current, slow market is that you need to be more aggressive than ever at helping your clients to price their homes at a realistic market value and to help them face the current market reality in terms of required price reductions.
Price reductions are always a difficult subject to broach with a client for obvious reasons, both financial and emotional. Financially, they don’t want to lose on the sale of their home, and emotionally they will always feel their home is worth more.
It’s very important that you approach your client with solid statistical back up which will transfer the “blame” from your shoulders back onto the market . . . where it belongs.
You see, your client (as you all know) will have a tendency to hold you responsible for their home not selling. Rather than looking at what is happening around them, they will try to find you at fault for not adequately marketing their property to the right buyers.
Assuming you have done a good job of doing so, you must deal with this accusation head on by giving your client irrefutable proof that it is the market that is at fault, and not you.
Here’s an example of the kind of “proof” that will help you make your case. Below you’ll find four sample charts. You should have charts like these developed from the actual data in your own marketplace and bring them with you to your listing presentation:
*Note: All numbers in these four charts are fictitious and for illustration purposes only.
These charts simply report on publicly available market data from MLS.
Together these four charts paint a clear picture:
The number of homes sold is down – Less homes are selling and thus it will be more difficult for your client’s home to compete with others on the market at the same time.
List to sales ratio is down – The homes that are selling are getting a lower percentage of their asking price than homes used to command.
The average selling price is down – The sample chart shown above is for luxury homes.
You should have a similar chart for move-up and first homes to reflect the relevant price range for the seller you are meeting.
Days on market is up – It is taking longer for the homes that actually do sell to move through the process.
All of these factors point to the fact that the market is down. By helping the seller to understand the pricing of their home in more objective terms, you should be able to: 1) help the home-seller to price their home right in the first place and, 2) achieve the required price reductions without it reflecting negatively (and unfairly) on your abilities.
In addition to these general market charts, follow these three steps:
Define expectations up front-Prepare a CMA that is simple but effective. The best way to get a home priced correctly is to prepare a simple CMA within a radius of the subject property that compares homes that are as close to the subject as possible. Your CMA should be simple so that even the least experienced prospects will get it. This should include:
A summary page that lists 10-20 actives within the immediate area; whatever pendings that show up (it’s very important to point out that this is what the market is saying yes to at that very moment); 10 solds within the last several months or up to a max of six months if possible; and several expireds and withdrawns in the area (it’s important to make them aware that the wrong price caused these).
The second part of the CMA should include pictures of the subject properties with broker descriptions (the advertising copy should reveal the best features such as granite counters, updated baths and kitchens etc.) as this is a highly effective way to compare the subject property without having seen the interiors of the competitors and most importantly the solds.
This is best demonstrated in a magazine format with six homes per page, with nothing more than the front picture, the address and the description. The easiest language to use to keep them from over-pricing is: “If you were a buyer, would you buy that house with more features and updates at a lower price, or yours?” (This implies less features and a higher price expectation). This back and forth dialogue will begin to narrow the “range of reality.”
Set up for future “price discussions”-When you discuss the price range, you should always let them know that you are making the decision today based on the “market evidence” that is available to you, but that it is very important to meet every 3-4 weeks to discuss the activity level, and a new CMA, because this is a process where the factors affecting price are always in flux (no different than the stock market).
Language you might use at this point might follow this: “Mr. and Mrs. Seller, I appreciate that you have given me the opportunity to market your home, but no matter what great programs I offer, I’m not good enough to overcome the market. I still need to price it right so at least I can attract buyers to come through the home and then offer them these programs. Ninety percent of marketing, especially in the early weeks, is about pricing it in the right range. Now clearly I know I can negotiate the best deal for you and get you the highest net, but not if the price is scaring the buyers away from even viewing your house.”
Be consistent in following up for price reductions-You must follow up and book a face to face conversation with your client every 30 days to review activity on their home and to bring a new CMA. Remember that your clients will always show some resistance, and that’s why it’s important to remind them that you told them upfront that you would be meeting to discuss this issue every 3-4 weeks.
In summary, you must not be afraid to discuss pricing honestly with your prospects and clients. Your fear will not only cause you to waste your time and hurt your business, but it will also begin to water down your reputation as not being a strong agent. Bottom line, make sure you price your listings right or be prepared to walk away.
“The key to selling more houses in today’s tough real estate market is a sound system for compelling sellers to lower their price when appropriate. There are three ways to expect consistent results and sell more listings. One is to add an exhibit to your listing agreement that requires an upfront agreed upon pricing schedule. Another would be weekly updates to your seller outlining activity and explaining to them the reasons why they are not getting offers. For example, if you are getting lots of showings but no offers, you are mostly likely 2-3% off on the target price. If you have no showings and only drive by’s, the price is most likely 6% or more off. A third system for securing price reductions is a 30 day review. Your job as an effective agent is to positively change the outcome for your clients. Every 30 days you should update the CMA, track which homes the buyers that previewed your listing bought and also track all recent sales and new competition. You have an obligation to share this valuable information with the seller so they can make a good decision on selling.” – Todd Walters, Marietta, GA
“One of the biggest success roadblocks agents face is self imposed fear. That fear can be as simple as being rejected by prospects who might not agree with what we have to say, which clearly could affect whether or not we obtain new listings and whether we have the courage price them right. You have to remember and believe that you are the expert in all aspects of residential real estate sales, especially pricing homes. Forget all the sales gurus who tell you that you have to manipulate people or even hypnotize them! How about giving them what they really want and need which is the truth! People want to know that you are genuine and honest so you can bridge the gap of trust. This gives them the comfort level to take a chance on you. So tell them the truth — even when it’s ugly — and they will appreciate you much more than you think. In order to obtain the correct price on a listing, or secure a necessary price reduction, you must develop this mindset and avoid creating the reputation of being a mediocre agent because you thought you were just being nice and doing the right thing for the client when, in reality, you were lying to yourself and your prospect because you know better as an expert.” – Danny Griffin, Hyannis, MA
To find out more about effective presentation systems, you can visit http://www.hypertracker.com/go/cp/a27a080827/ where you can learn about my 3-day SuperConference where I train agents on proven listing and pricing strategies that help them get their clients’ homes sold fast and for top dollar.
Billion Dollar AgentTM Craig Proctor has been in the top 10 for RE/MAX Worldwide for 15 years. To receive free training from Craig with no obligation, visit: http://www.hypertracker.com/go/cp/a27b080827/.