Help Sellers Price It Right
The days of looking up neighborhood comps and adding 10 percent are over. In addition, sellers are confused about pricing. Here’s how to help sellers price their homes to sell.You’ve been smart enough to read the market and change the way you do business, and it’s paying off. You’re getting listing appointments with motivated sellers. But you’re finding that many of them haven’t made the same adjustment to today’s market. They want last year’s prices—and they want them now!
Case in point: Sellers insisted that their vacant lot was worth $2.4 million, even though sales associate after sales associate told them it was worth about $800,000. “They wouldn’t believe anyone,” says Richard Arthur, a sales associate at Prudential Network Realty in Jacksonville. “People tend to hold onto a number at the peak of the market, and it’s hard for them to let go of a number that could have been.”
But let go they must. That is, if they want to compete with the high inventory in many Florida markets. Here’s a guide for showing and telling sellers how to make the right decision on price.
Send a pre-listing-appointment package. “You want to avoid confrontation during the listing presentation and educate sellers,” says Carla Cross, CRB, GRI, president of Carla Cross Seminars Inc. and Carla Cross Coaching in Issaquah, Wash. To do that, Cross recommends that you send sellers data on the state of the market, along with your professional portfolio, to review before the listing presentation.
“Sales associates can’t get the right price, not because they don’t know it but because the seller doesn’t trust them,” she says. “It’s not a logic issue; it’s an emotional issue, and you can’t fight with somebody’s emotions. So, start educating them until they start understanding how all these pricing pieces fit.”
Include graphics showing the number of homes on the market, time on the market, pending sales prices and trend lines illustrating where the market’s been and where it’s going. The trend analysis is critical, says Floyd Wickman, founder of the Floyd Wickman Team LLC in Easton, Mass. “It says, ‘Here’s where prices were a year ago and six months ago, here’s where they are today, and here’s what’s going to happen if the trend continues.’ It’s a way of communicating to sellers that if the trend continues, they’ll be glad they got the price [they can] right now. That’s a way to say, ‘Don’t cut off your nose to spite your face.’”
Finally, Cross recommends that you include photos of staged and unstaged homes and examples of properly priced homes, along with their time on the market, contrasted with overpriced homes and their time on the market.
Tell the story of your market. When you meet with sellers, explain the data in a way that hits home. “Sellers think that what neighboring properties are listed at is what theirs is worth,” says Sharon Worley, ABR, CRS, a sales associate at John R. Wood Realtors® in Naples. Given that, you have to explain the difference between prices of active listings and closed sales prices, which are often significantly lower. “Then show them what homes that are selling actually sold for, which is the true value,” she says.
In addition, telling sellers the number of homes on the market will probably go in one ear and out the other, but its importance will sink in if you do what Wickman calls converting price to time. Worley does just that. “If there are 30 homes for sale in their neighborhood and 10 have sold this year, I explain that we have a three-year supply,” says Worley.
Spelling out the total, areawide number of homes for sale in sellers’ price range can also be powerful. “Typically, you’re looking only at comps in their neighborhood,” says Worley. “But showing that there are 300 homes in the area like the sellers’ in the price range they’re competing in points out that buyers have lots of options.”
Piper Rothan, a sales associate at The Keyes Co./Realtors in Coral Gables, gives sellers a spreadsheet that she updates monthly. “It has the last six months of sales, pending sales and all the active listings, and I calculate the average price per square foot of each home,” she explains. “It’s a pretty powerful tool, because the numbers don’t lie.”
The spreadsheet also helps her identify for sellers when mortgage fraud—which she says has been prevalent in her area—has inflated prices. “If county records show that three houses closed at $650,000, sellers will think their home is worth that, even if the rest of the homes are selling for $500,000,” explains Rothan. “But I explain that those records can be misleading because they record the mortgage amount rather than what the home sold for.”
Take sellers on a tour. “If sellers are hesitating on price, and they think their home is laid out better than others and has nicer finishes, I’ll show them the competition,” says Arthur. “I’ll have them preview, as buyers, the top three homes in their area that are priced competitively and that will sell in the next 30 days so they can see what they’re competing with. A lot of times sellers haven’t looked at other homes for a long time, and the preview gets them involved in the process and gives them a better understanding of the buyers’ perspective.”
Address their concerns. Even if you use persuasive data and paint a true picture of your market, you’ll still run into sellers who are persistent in their too-high price. Smart dialogue can help sellers get real.
Worley reminds sellers of a basic fact: “I tell them, ‘Listing your house for a higher price doesn’t mean you’re going to get more money. It’ll just take longer to sell because buyers aren’t going to look at overpriced homes.’”
Also emphasize that neither you nor they set the price for the home—the market does, says Dan Gooder Richard, owner of Gooder Group, a marketing company in Fairfax, Va. “A good metaphor is the stock market. You can say, ‘No stock buyer will pay you today what the price of a stock was yesterday. It’s either higher or lower.’ That takes the emotion out of you stepping on the sellers’ toes or blaming them or the property. Go hard on the market, but go easy on the sellers.”
“If sellers aren’t receptive, I ask them to think like buyers think,” says Kathy Wilhelm, senior vice president and sales associate at ERA American Realty of Northwest Florida Inc. in Crestview. “When sellers say their upgrades make their home more valuable, I explain that there’s a theory of substitution. I say, ‘You might have upgrades and extras, and that will contribute to you getting a better price, but if there’s a similar home built the same year as yours, that’s a substitute buyers might want to buy. Will they pay more for your upgrades, and how much more?’”
When sellers are stubborn because they owe more than the property is worth, Wilhelm probes for more information. “I always ask, ‘When you borrowed that money, was it to make improvements to your house?’ Often, they say they were consolidating debt, so I say, ‘That second mortgage has nothing to do with the value of your house, so we need to not make it a factor in pricing.’ That’s hard for some people, but it’s important to discuss if they have to sell their house, and they’re willing to listen.”
If sellers used equity to add, say, a pool, Wilhelm stresses the pleasure they’ve received. “I’ll ask, ‘When you put the pool in, did you put it in for your enjoyment?’ When you ask those questions, that can help sellers come back to reality and say, ‘Yeah, I have enjoyed that pool. I’ve got my use out of it.’”
Finally, for sellers who bought before the peak, Worley reminds them that they’re still making money. “Sometimes sellers look at price as though they’ve lost money, but many are still making a healthy profit,” she says.
Whatever tool or dialogue you use, make sure it circles back to the most important point: “We’ve got to convince them that this isn’t the market of two years ago,” says Wilhelm. “But houses are selling if they’re priced right and in the right condition.”