As the market heats up and inventories shrink, sellers are once again becoming more aggressive about overpricing their property.
Seriously overpriced listings still don’t sell, even in the best of markets. What can you do to persuade your sellers to be realistic?
A major reason that sellers overprice their properties is that their agents have never mastered the scripts and strategies that will persuade sellers to be realistic.
Below you will find three of the most powerful approaches to meet the overpricing challenge.
1. What properties have qualified for
When you go on a listing appointment, sellers generally want to price their property based upon what other properties in the area are listed for, not based upon the closed sales price. The way to overcome the seller’s attachment to list prices is to explain, “Mr. and Mrs. Seller, in order for your transaction to close, you need a qualified buyer, right? Did you know, however, that your house also has to qualify?”
Most sellers will be puzzled by this remark and ask, “What do you mean my house has to qualify?”
The response to the sellers’ question is, “Because most buyers have to obtain a loan, your house will have to qualify with a lender. So let’s take a look at what properties are qualifying for in your area.”
This simple approach allows you to shift from discussing list prices to using the closed prices.
2. Price per square foot
Most multiple listing services today provide price per square foot sales numbers. Whether you are on a listing appointment or presenting an offer, the sellers have a certain price they have in mind. What they’re normally not prepared for, however, is a price-per-square-foot discussion.
For example, say that the sellers want to price their property at $20,000 over the highest comparable sale. You can show them the price-per-square-foot numbers and explain, “The highest price per square foot that any lender has been willing to make a loan for is ‘X’ dollars per square foot.”
In most cases, the sellers will believe their home will be at the top price-per-square-foot number. You then show them how much the house will qualify for with their lender, which is a realistic price.
A creative way to present this data to the sellers is to use what is known as a “pricing line.” Here’s how it works.
You will use three different lines that represent the price-per-square-foot numbers for each home in your analysis. The first line is for current listings. The second line is for sold listings. The third line is for the expired listings.
Post the price per square foot for each house in each category on the appropriate pricing line.
When the sellers tell you that they want a higher price per square foot than the comparable sales suggest, show them where the sold properties were priced per square foot, as opposed to the expired and still listed properties.
You then ask, “Do you want to be in the group of the ‘sold prices,’ or do you want to list your home at a price that would place you in the expired listing or still listed group? It’s your choice, what would you like to do?”
Letting the seller make the decision is a powerful way to avoid confrontations over the price as well as to help them to be more realistic.
3. Move from price to positioning
The old approach to setting the list price was to position the property at slightly less than the next highest even number. For example, you might take a listing at $299,000. In the days of the old paper MLS books, some agents would place their listings on at $299,899 to be the first one that appeared in that price range.
With the advent of Realtor.com, Trulia, and Zillow and the use of mobile devices to search for properties, you need to change your pricing strategy.
To illustrate this point, one of our private coaching clients was competing for a $1 million dollar listing. She was pretty certain the seller wanted to list it at about $1,010,000 or $1,015,000. She believed that the correct list price was $995,000 or $999,000. She wanted a way to persuade the seller to list his property for less than $1 million.
I suggested that she use her mobile device to search listings on Realtor.com, Trulia, or Zillow since these three sites currently dominate mobile real estate search. If her sellers want the maximum exposure to the marketplace, the smart “positioning” move is to price their property at exactly $1,000,000.
The reason is that Realtor.com as well as the other sites allow people to search in increments. In the million-dollar price range on Realtor.com, one increment was from $900,000 to $1 million and the other was from $1 million to $1.25 million.
By positioning the property at exactly $1 million, the seller would be found by people searching in both price ranges. If they had used the agent’s price or the seller’s price, they would have missed a substantial number of mobile searches that could have resulted in a closed sale.
If you are bumping into pricing issues with your sellers, try applying any of these strategies. All three are powerful ways to help sellers be more realistic about their prices.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice’s five-minute daily real estate show, just named “new and notable” by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.