Why Pricing Real Estate Is an Art Form, Not a Science

I have noticed something about real estate professionals over the years: When we become licensed, we put too much pressure on ourselves, thinking that because we’re licensed, we need to have all the answers. We fear that if we don’t have the answer, then we look stupid or incompetent, like we’re somehow undeserving of our license.

I talk with a lot of attorneys, and one of the things I’ve noticed is that they don’t have the answer to everything. That’s why they have paralegals to research anything they need to know. Here’s the funny part. When you talk to them, they answer with confidence like they do know everything.

The Problem of Pricing
When it comes to pricing a home with a buyer, there are two things you need to keep in mind. First, you’ve got to have confidence in anything you’re saying as a professional. This doesn’t mean you have to be right, but you’ve got to have confidence. Second, being too scientific with a CMA (Comparative Market Analysis) or thinking that you have to give a perfect answer can land you in hot water. Pricing real estate is not a science; it’s an art form.

The Analogy
Pricing a home is like being a baker versus being a chef.

Pastry chefs and regular chefs have always had a “battle” within the industry. A regular chef is very creative when they’re making a dish because it’s based on flavor. They are highly inventive and creative, and every dish is a little different.

Conversely, as a pastry chef, you must be very scientific and precise. If you have flour, egg and butter, and you put the egg in before the butter, it will produce a totally different result than if you had reversed the order. If you use regular butter rather than melted butter, the cookie will come out crispier. If you want to make whipped cream, you’ve got to do it in a bowl that is room temperature, but if you’re making a meringue, the bowl needs to be chilled.

The Takeaway
Do not be a pastry chef when it comes to a CMA. It’s not scientific, but rather, instinctive. The more you do your business and the more you work your market, the better chef you’ll become. You’ll develop that instinct.

When talking to a homeowner, give your opinion, but never make assertions. “Here’s my professional opinion. Based on my experience, we put it on the market at this price. We can try it at this number and see what happens in order to get a feel for the market, and after a couple weeks, we’ll make an adjustment if we need to.” You can still talk with confidence without boxing yourself in.

Darryl Davis has spoken to, trained and coached more than 100,000 real estate professionals around the globe. He is a best-selling author for McGraw-Hill Publishing, and his book, “How to Become a Power Agent® in Real Estate” tops Amazon’s charts for most-sold book to real estate agents. He is the founder of the Next Level® real estate training system The Power Program®, which has proven to help agents double their production over their previous year. Davis is currently hosting free weekly webinars to help agents navigate the new real estate reality. To learn more, visit www.darrylspeaks.com/Online-Training.