Pricing is one of the most challenging and intimidating tasks in the life of a real estate agent.
But we all have to face it.
The biggest challenge is that part of the listing presentation is based on pricing the home. This sets up either a win-win situation or a lose-lose situation depending on how you handle this very important topic.
If you go in with a very thorough description of exactly where the market is (and where the seller's home is within it), you can easily lose the client. People often have a fixed amount set in their minds that just doesn't fit into the real world. When you bring real world numbers to them, they balk and bail on you.
It happens to all of us.
But on the flipside, the agent can go in with a very optimistic price (even unrealistic) that thrills the seller. The agent immediately gets a listing and all is sunshine and roses, right?
I guarantee it's only downhill from here. Wowing sellers with too optimistic prices is the recipe for long days-on-market and expired listings.
What's an agent to do? How do we walk the tightrope of presenting the correct market price without offending the seller?
It all comes down to four major mistakes that agents make when it comes to pricing:
#1 Buying the listing at any price hoping reality will set in with the seller
Also under this heading is thinking that you can convince them of the true value of their home later. Trust me, this won't happen. Take it from someone who's been in this business for decades - I've rarely seen a seller who suddenly "wakes up" to reality without a lot of hard-core persuasion from the agent. They refuse to believe the market doesn't support their delusions.
When you do finally convince them (after a mental beating over-the-head) that their home is worth much less than you told them in the beginning, you've totally destroyed the trust you created with these clients. And without trust, you've totally destroyed your agent-seller relationship.
#2 Buying the listing hoping that you'll find other potential sellers at an Open House.
I've seen this, and it's just plain unethical and negligent. Don't do this! You are soiling your reputation if you do so.
#3 You just don't have enough information
You've gone into the listing presentation with a few solds and a few expireds, but you really haven't done the due diligence required. (This is probably the most common pricing mistake.)
Do you know every single pending in the market? Do you know every sale for the last two years? (Two years? Yes, two years!) Do you have area information? Local information? Regional information? National information? If not, you need to fine-tune your research skills.
#4 You badger the seller for the lowest possible price, hoping to surprise them when their home sells for more.
This is the opposite of Mistake #1. Sometimes sellers are not emotionally able to handle the sticker-shock of where their house is today versus where it was two years ago.
Then, you knock them down even further with a price that makes them want to cry at how much money they lost in 24 short months. This is not the right way to go either. The average home seller is never going to fully appreciate the long-term impact of fluctuation in the real estate market. (A handful will, but the vast majority will not.)
Previously, your market may have been a turbo-charged market. That's unhealthy in the long-term, but sellers don't understand this. They think that because their home hit $500,000, then it's going to stay there forever. They don't take into consideration that two years ago we were in a frenzy of lending that was built on a house of cards. When it collapsed in on itself, all the inflated pricing ended.
That's a hard pill to swallow for most people.
Pricing is both an art and a science. It is the art of communicating and it is the science of research. You need to learn how to balance these two critical elements.
A lot of agents rely on either too much science and not enough art, or vice versa.