No, Your House Is Not Worth That Much…
Is it me or does every seller think their house is worth more than it really is? I don’t blame them. I too, thought my house was worth more than it was. It’s totally natural because there’s an emotional attachment to it. I think my Mom and Dad are the best Mom and Dad in the world, but that doesn’t make it a fact. That opinion is based on an emotional decision.
So how do you approach a listing when your seller thinks their house is worth more than it is?
Here is an approach you can take pricing your listings so you can accomplish two things.
- Allow the seller to determine they are overpriced themselves so they agree to your initial pricing.
- Avoid accumulating too much market time and tainting the listing.
This post is about how to address your sellers unrealistic expectation of pricing while at the same time avoid accumulating too much market time and shooting the listing in the foot. Lots of market time on a listing is no bueno!
It’s our job to advise our seller clients on the who what, where, when,why, and how of listing a property for sale. This includes telling them to low down dirty truth about their market value. You are only doing your clients a disservice taking an overpriced listing you know won’t sell.
On this post we are going to talk specifically on pricing positioning.
Your initial list price is the most important part of positioning because the first couple weeks on the market is when you will get the most amount of eyeballs on your listing. Knowing how consumers search online is crucial. It’s even more crucial to explain this in detail to your client.
- How do buyers search?
- What are the most important parameters they set up?
The #1 search criteria on any property search online is price. Most people and search sites search in $25,000-$50,000 increments. Your initial list price should take this into consideration. For example, listing at 254,900 would miss all buyers searching up to $250,000. Your initial pricing should be focused on what would trigger the most amount of traction in the least amount of market time simply on price alone. “Testing” the market at a very high price can backfire on you if price is not adjusted early on in the listing.
More showings and competition means higher offer to list price typically. I would rather list at $199,900 vs. $209,900 for example. I know I have a higher chance of getting as close to $200,000 within the first two weeks of listing. In a tight inventory market there’s a good chance I can get higher than $199,900 by creating a multiple offer scenario. If I start at $209,900 I am missing everyone capping their search at $200,000.
My risk of starting higher is in accumulating too much market time. As a buyers agent I advise my clients to come in much lower on properties that have over 30 days of market time than ones newly listed. If you have over 60 days of market time, I’m coming in very low.
Having a preplanned pricing strategy creates urgency and scarcity if done correctly.
How To Plan A 2 Step Pricing Strategy With A Seller Who Doesn’t Agree With Your Initial List Price
Let’s say you had a seller who wanted to start really high. I would suggest a pre-planned price change before you took on the listing. Tell the seller than you agree to their price for a certain amount of time (1-2 weeks) if they agree to a price change early on should they not get enough activity up once they go live. This gives you a back up plan so you have the time to “reposition” the listing without accumulating too much market time early on in the listing. A newly listed property ALWAYS gets showings unless its OVERPRICED even with a bad marketing plan!
Most sellers don’t realize how market time can hurt them down the road and when you point this out in detail, you look like a ROCKSTAR.
Pricing positioning, many times, is the key to getting an offer. It’s amazing what a repositioning in price can do for your listing even if the price change is only $5,000 and you enter into a $25,000 or $50,000 increment. You should have a pre-planned pricing strategy laid out for your seller upfront should your initial offering not get enough traction to create an offer. This allows the price change conversation to go over more smoothly if you have to resort to it. Also, having a “back up plan” is great service and sellers appreciate it. They are hiring you for a solution to their house problem so be a good problem solver!
We took over a listing from an agent who had the property listed for over 250 days without one price change. Nobody wants to buy the house that sat on the market FOREVER. When we took the property over we decided to list it at $214,900. This was only a $5,000 price change from when it was previously listed at $219,900. The seller was taking a big loss on the property so every dollar counted! We sat on the market for roughly 2 weeks with a decent amount of showings and even received a second showing, but no offers.
I had to have a heart to heart with the seller and tell him that we needed to go below the $200,000 to get an offer before we shot ourselves in the foot by accumulating too much market time. I knew we would be “repositioning” and reaching everyone capping their search at $200,000. Within 4 days, we received an offer within $1,000 of list price because the buyer didn’t want to lose out on that deal! It was because we had a minimum amount of market time that made the buyer “not want to lose out” and come in with an offer that was within 1% of list price!That’s pricing positioning!
TIP: Always try to tell stories of past experiences. It helps people understand much better and you will get your point across more effectively.
Nobody wants to buy the house that nobody else wanted, but at the same time everybody wants the house that everyone else wants. When a property gets listed for sale, everyone takes notice of it. A good listing agent knows how to create urgency.
“You are more likely to generate a higher offer when you can create urgency because someone will pay more for something they feel will be gone tomorrow”.
When speaking about price with your seller it’s very important that you explain this to them in detail. It’s best to always price correctly from the beginning, but let’s face it, you are going to have clients who think their house is worth more than it is. Sellers LOVE when you have options and multiple exit strategies. When you get a client that wants to try to test the market and shoot for an unrealistic price, make sure they know the consequences up front of accumulating market time.
Here is a video from one of my training inside Attracktor that will explain this in more detail.
Grasp the concept of pricing positioning so you can now have an educated conversation with the seller that pricing too high from the start can potentially hurt them in the long run.
We suggest pricing right from the beginning, but this is for those sellers that are emotionally connected to the property and do not want to listen to your expert advice.
This is more of an “I Told You So” approach without actually having to say that. With this approach you can give the seller what they want (pricing too high) and at the same time not accumulate too much market time where they end up retrieving less in the long run.
One of my favorite lines is, “we cannot create the market, we can only react to it”.
Let this serve as a potential compromise when your seller disagrees with your pricing.I have found that this approach does two things.
First, it lets a seller who thinks their house is worth more than it really is (every seller) test the market and see for themselves.
Secondly, it gives you a pricing repositioning strategy for when a listing just sits. I hope you don’t have to change price at all, but it’s going to happen on some of your listings and as the market changes. Now, you have a backup plan when all else fails and you need to kick the listing in the ass.
A marketer will have backup plans. A Realtor has just one. How many other agents do you think are giving their clients a “back up plan”?