As the prepared and focused real estate agent you are, you’ve come to your listing appointment with all the information you need. You know exactly how much the property will sell for, you have all the comparable sales and artificial intelligence evaluations to back it up — but still your potential seller hits you with one of the most common and pesky objections in real estate: asking price.
When the client says, “We have to net X from our sale,” do you know how to respond? Below are three scripts to help you overcome this common pricing objection and price the property right.
Script No. 1: The real estate market is like the stock market
When sellers purchase their property in a heated market, it may be years before they can recoup their previous purchase price plus their cost of sale. Nevertheless, many still believe that when they list their home for sale, their price should be based upon their acquisition costs. This belief leads to the following objection:
Seller: Well, we paid X. We are not going to sell unless we can get X plus closing costs and have enough to buy another house.
Here’s how to overcome this objection:
Agent: Seller, did you know that the real estate market is like the stock market? The sellers and the brokers do not determine the price, the buyers do. For example, if your stock was trading at $100 per share a year ago and today it’s trading at $90 per share, you wouldn’t have any buyers if you wanted to sell at $100 per share.
If you’re unwilling to sell for under $100 per share, your only other alternative is to wait for the market to improve. Consequently, you have an important decision to make — do you want to sell at today’s prices, or are you willing to wait until the market improves? It’s your choice, what would you like to do?
Script No. 2: Your house has to qualify
A different way to overcome the pricing objection is to educate the seller that their house, not just the buyer, must qualify for the loan.
Agent: Seller, did you know that when you sell your home you not only need a qualified buyer, but your house also has to qualify?
Seller: What do you mean my house has to qualify?
Agent: The large majority of buyers must obtain financing in order to purchase. This means that your property has to “qualify” with a lender in order for the transaction to close. In other words, even if you sold your property for $280,000, if the appraisal comes in at $250,000, most buyers will walk away from the transaction because they believe they would be paying too much.
So, before you make a decision about where to position your property in the marketplace, let’s take a look at what properties are “qualifying” for in your neighborhood.
This approach shifts the discussion from the price the seller wants to discuss, to the final sales prices from closed transactions, i.e., properties that have closed and “qualified” for a loan.
Warning: If prices are declining, comparable sales from 60 to 90 days earlier may be too high.
Script No. 3: Are you in the X percent that will sell this month?
The rate of absorption (how quickly properties are turning over) is one of the most powerful tools for persuading the seller to be realistic. There are a wide variety of ways to use this approach. The script below explains that if sellers want to sell in a given month, they must be in top tier of properties by both value and price in that location.
Example: Four months of inventory currently on the market.
The example below assumes there are four months of inventory on the market. The probability the seller will sell in a given month 25 percent (100 percent / 4 months = 25 percent). The probability the property won’t sell in a given month is 75 percent.
Agent: Seller, did you know that there are currently four months of inventory on the market? What this means is that each month, only 25 percent of the inventory sells while the other 75 percent remains on the market.
Because new listings are constantly coming on the market, in order to sell in any given month, you must be positioned in approximately the top 25 percent in terms of price and value. You now have an important decision to make — will you position your property on the market where it will be in the top 25 percent that will this month, or will you position it where you will be in the 75 percent that will still be listed next month? It’s your choice, what would you like to do?
Although there are numerous ways to handle listing price objections, the three scripts above have withstood the test of time in both appreciating and depreciating markets. Experiment with each of them to determine which approach will work best for you on your next listing appointment.
Bernice Ross, President and CEO of BrokerageUP (brokerageup.com) and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.