Editor’s Note: The Playbook is a new RISMedia weekly segment centering on what brokers and agents are doing to ensure they not only survive but thrive in these challenging times. Industry professionals explain the strategies they’re employing and unique ideas they’ve formulated. Tune in every Thursday for another addition to the series.
Given the complicated state of today’s market, there’s been a lot of uncertainty on both the buyer and seller side. Home prices and mortgage rates continue to fluctuate, creating a lot of barriers on all fronts of the market. Not only have buyers felt pushed out, but sellers are also feeling like they won’t see a return on their investment.
The solution? REALTORS® have to encourage sellers to feel confident in selling their home. Sellers also need to be kept down to earth as far as market expectations are concerned, because there’s a big chance they might not get everything they want.
Keeping your sellers’ confidence up
For sellers who saw others have success during the pandemic boom versus what’s happening now, Ryan O’Neill, founder of the RE/MAX Advantage Minnesota Team in Bloomington, Minnesota, notes that “Naturally, you feel a little bit short-changed or a little bit slighted.”
However, sellers definitely shouldn’t let that keep them down, because there will always be an opportunity no matter how glum the outlook. O’Neill points out that people will always have to move due to some life event, like divorce, jobs, family or others.
“Even people that think ‘hey, it’s not a good time to sell’ have to remember that isn’t always the case, because in some situations, they might be the only home in that area and price range for a buyer to choose from. So, sellers shouldn’t assume that it’s not going to be a good time,” explains O’Neill. “Even in a state like Minnesota, people are always moving. As agents, what we’re encouraging people to do this year is to find the business that’s out there. There’s a lot of business to be had, and it’s just trying to focus on finding the business.”
Ashley Alred, a REALTOR® at The Regal Group in Pullman, Washington, goes on to explain that a seller shouldn’t necessarily look at the current market and decide to wait for less uncertainty, because it will always be there.
“There’s always uncertainty in the real estate market, in any market really. Uncertainty is something we deal with continually, whether it was 10 years ago or five years ago, no one can predict,” she says.
Alred adds that while you want to keep a seller realistic, a good way to instill confidence in their sale is by supporting them on their ideas. You can support their higher-priced dreams while having a plan in place in the event they don’t work out.
“One of the tips and tricks I tell agents is to have a signed price reduction form. Agree to the higher price, say I understand and we’ll use this price to start and set a timeline on how long you’re going to give it,” explains Alred. “It really is a win-win. A seller gets to try what they want to try, but if it doesn’t work, you immediately have a plan already. Obviously you want and hope for the higher price, but you’re still prepared in case it doesn’t work out, and it won’t affect a seller’s drive to sell. Plus, you could have interested parties who were willing to buy and were waiting for the price to come down, who will now buy the property right away.”
Bringing high expectations down
Looking back at the market from the past few years shows a much different picture than what we’re seeing now. A lot of sellers will set their expectations based on what they saw their neighbors or people in their town/city selling for in the boom of the pandemic market. But, according to Alred, it’s important to look at the present…not the past.
“The comparable sales for the last year are the inflated sales, so having the expectations and setting the realistic standards comes down to the current market—what is on the market now, what houses are for sale,” says Alred. “Your current competition is what I’m looking for with sellers. It doesn’t matter what happened one month ago or six months ago or a year ago. Your current active and pending listings are your realistic expectations.”
Expanding on this idea, O’Neill explains that an agent or broker isn’t a “magician,” and they have to work with what the current market is dictating.
“Of course, that’s not necessarily something we have any control over from a macro level, with interest rates and buyer demand and everything,” continues O’Neill. “Part of the job of the agent is to help the seller understand that piece of the puzzle: that though we can’t control things, one of our jobs, however, is to market the property in the best way possible.”
Most sellers, even if they have some knowledge of real estate, might not fully understand the current state of the market, so it’s important to get on their level and explain the ins and outs of today’s market in a way they understand. O’Neill adds that the market “is what it is,” and “if someone wants to sell, it’s just helping them understand that’s the case.”
“Most people just want to be treated honestly and fairly, and it’s easy as an agent to want to sugarcoat things, but the reality of it is, as an agent, you’re hurting yourself by doing that,” says O’Neill. “If you tell the seller it’s worth 450 and in your heart you really know it’s worth 400, it’s a long painful process of listing at 450 and hopefully getting some price reductions over time and then upsetting that seller because their expectations have not been met. Sometimes it’s a little easier to just rip the bandaid off upfront, and do it in a respectful and kind way.”
There are a lot of different ways to demonstrate to a seller on their level what the market looks like right now, but Alred says that one of the best ways is to show them their competition.
“It is absolutely okay to walk a seller through an active listing in the neighborhood or down the street or across town if they’re not understanding what you are saying about the current market, or they still think they have an inflated price,” says Alred. “You can walk them through a house and say, ‘This is what $500,000 buys you; let’s compare that to your house.’ If a seller actually starts being a shopper, they can be tuned into the competition, which will help keep them realistic.”
Key takeaways:
- People will always need to move, so even if the market looks glum, someone will need to buy a house. Also, the market will always be uncertain, so don’t let sellers use that to hold themselves back.
- Encourage a seller’s dream price, but have a backup price reduction plan in place to prevent loss of confidence if the property doesn’t sell.
- Don’t look at the past. Inflated sales won’t help a seller understand that you aren’t a magician, so show them current sales metrics.
- Get on a seller’s level to explain the state of the market. They don’t need to be sugarcoated; they want honesty.
Show a seller what the market looks like by showing them their competition. Walk them through current listings in their area to help them visually understand.
