Ultimately, pricing your new listing correctly comes down to whether the seller wants to sell as quickly as possible or achieve the highest price. If you price it just right, however, you may often achieve both. Here are a few strategies.
Top producers often can correctly price properties without even looking at the comparable sales. Nevertheless, knowing where the property will sell and where to price it to are two entirely different questions.
In a previous column, I discussed my confusion about how to best price my brother’s house. I found a recent comparable sale that was identical to our house and also did the price-per-square foot analysis. The “perfect comp” and my price per foot analysis came in $1,000 apart.
It turns out my price-per-foot analysis was the exact price we got for the property. Nevertheless, we still listed at $52,000 lower than that number. The lower price generated multiple offers and an extremely well-qualified set of buyers. If you want to start pricing your properties more accurately, follow the seven guidelines below.
1. Do your homework prior to the listing appointment
When you walk into your listing appointment, you should already have a good idea about the ultimate sales price, even if you haven’t seen the interior. To be completely prepared, make sure to complete each of the following steps:
- Review the values posted by the major AVMs (HomeSnap, Realtor.com, Trulia and Zillow) so you know the sales price the seller may have in mind from visiting these sites.
- When you construct your CMA, review the interior photos for each property. Place each comparable sale in one of three categories: The top 25 percent in terms of price and condition, the middle 50 percent and the bottom 25 percent.
- Calculate the average price per square foot for each category. Use this number to estimate the property’s value on a price-per-square-foot basis.
2. Pricing using the average price per foot
Once you view the interior of the property, you’ll know which of the three categories the property falls into — top 25 percent, middle 50 percent or bottom 25 percent. You can use the average price per square foot for that category to estimate the ultimate selling price.
3. Which matters most — time or money?
Before Greg McDaniel discusses pricing of the seller’s property, he always has a conversation about what matters most to the seller — price or time.
If the sellers want a higher price, they may be willing to wait longer and can be more aggressive on their price. If they want to sell quickly, they should list at a lower price that will pique buyers’ interest and generate more showings.
4. The ‘bag of cash’ strategy
The next question McDaniel asks his sellers is, “If someone were to bring you a bag of cash right now, what amount would motivate you to sell today?”
Sometimes, sellers will give you an outrageous number in the millions. In that case, ask again for a number based on the realities of their local market.
5. Explain their options
Before you review the comparable sales, McDaniel recommends using the following alternative choice close:
Mr. and Mrs. Seller, there are three ways we can price your property. First, you can price it about 5 percent under the comparable sales with the idea of generating multiple offers. This will help you sell your property in the least amount of time.
Second, you can price it based on the fair market comparable sales. At this price point, your property on average would take (insert number) days to sell. (Quote the “average days on market” for your local area.)
The third alternative is to list at the highest price ever in your neighborhood, which means you may have to wait awhile to find the right buyer. Which of these three alternatives works best for you?
6. Are agents in your market routinely underpricing, and if so, by how much?
If properties are selling well over asking, look at the original list prices to see how far the buyers bid up the property. If this is happening in your market, McDaniel recommends listing the property at about 5 percent below the expected sale value.
7. Be prepared to meet pricing objections
Here are two strategies for overcoming two tough objections:
‘But Zillow says my house is worth more!’
Many agents really struggle with this objection. The best way to overcome that objection is to show the seller the AVM prices from HomeSnap, NARRPR.com, Realtor.com, Trulia and Zillow.
Once the seller has reviewed the prices ask, “Which of these is correct?” At that point, take out your CMA and discuss your findings in detail.
Have the seller select their own comparable sales
A fantastic way to avoid most pricing objections is to have the sellers choose their own comparable sales. Locate at least one comparable sale in each category (top 25 percent, middle 50 percent or bottom 25 percent.)
Download the photos of the kitchen, living room, primary bedroom and any other salient features such as a pool or other amenity. Be sure to note the price per square foot where it sold.
Next, ask the sellers which home is most like theirs. Once they make the selection, show them the price per square foot for that property and multiply it by their square footage of their property. That should be very close to correct selling price for their property.
If the market is red-hot, it may allow you a bit of wiggle room on the high side. If the seller is totally out of line, be willing to walk away. Here’s what to say:
At that asking price, I’m not the right agent for you. I wish you the best in getting the price you want for your property.
Ultimately, pricing your new listing correctly comes down to whether the seller wants to sell as quickly as possible or achieve the highest possible price. If you price it just right, however, you may often achieve both!
Bernice Ross, President and CEO of BrokerageUP 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.