A few very interesting conversations I’ve had in the last two weeks have me thinking about the importance of stepping up and having more truthful, data-based conversations about pricing with potential and current sellers.
We must be the agents who go beyond the recent solds and provide a more in-depth analysis of the ever changing market conditions in order to arrive at a proper list price that will attract early interest and offers - if, in fact, the seller is highly motivated and truly must sell.
I was surprised to learn that in one market in 2016, fewer than 10% of the homes available went under contract and sold each month. This means 90% did NOT. The agent shared this data with me by way of a chart created by his MLS. He also shared that this information was something he hadn’t been sharing at the listing appointment. His reasoning? It might scare some sellers off and prevent them from listing. I completely understand that. If I were considering a sale I might be worried, too. But if I must sell, I must be fully informed, and I must price my home properly right from the start. In many parts of the country, sellers must be willing to make their market an offer it cannot refuse.
If 60 or 80 or even 90% of the available inventory in your market fails to go under contract every month, you need to be the agent who positions your client to beat the odds. Where does your market stand today? Have you pulled the 2016 statistics from your MLS and thoroughly reviewed them? What you learn is certain to impact the conversations you have moving forward.
Many have predicted that 2017 will be a year of great volatility, and of course, this remains to be seen. But there are a few things we already know and can rely upon now:
- Rates are on the rise. This affects buyers and sellers. A buyer approved today at a maximum purchase price of $250,000, for example, will see her purchasing power reduced to $235,000 if rates increase by a half of a percent. Naturally, the buyer pool will shrink, and sellers who wish to hold out to get a higher sales price for their current home risk losing that potential gain if they ultimately wind up paying a higher rate themselves for their next purchase.
- It’s not just about the recent “Solds”. Sure, it’s great if you have 5 or 6 from the last 90 days to share at the listing appointment, but what if there are dozens of actives sitting out there, too? The more inventory there is the less urgency there will be on the part of the buyers and the greater their expectation that they can pick and choose and negotiate on THEIR terms.
- What the seller needs, owes, or wants DOESN’T MATTER. - Oh my gosh people, please, cut it out. Stop taking these listings where you now feel responsible for solving an impossible problem. If the homeowner says “I must sell this home for …...”, or “I need to walk with …” your response should only be one of these: “Okay, tell me more about that...” or “And if I were to tell you the market doesn’t support that..?” This invites them to reveal more to you and for you, in turn, to perhaps offer a solution. And please - don’t be the agent who tells someone in an impossible situation that you will “try”. When you do, you are giving them false hope. Do you want this unsold listing taking up space in your head, month in and month out? Consider the relationship and communication you’ll be expected to have with the client and ask yourself if it’s really worth the investment of your resources.
- Taking overpriced listings hurts you as an agent. Really. You may be excited to take a listing in an area with high visibility or desirability, but if your sign remains for months on end the only message you’re sending is this: I’m the agent who can’t move this house. Furthermore, top producers know that you get hired when you demonstrate your ability to consistently sell homes faster and for more money than the average agent in your market. That only happens when they are priced right.
Be prepared to hear and respond to the following:
- “Well fine. We’ll just wait until Spring.” - Respond first with “okay, tell me your thoughts around that.” They are likely thinking that by waiting 3 to 6 months they’ll get the “out of market price” they want. A good response? “Well, you could roll the dice and wait until Spring. My concern is that you’ll be competing with even more inventory and rates will continue to rise, reducing your pool of available buyers. In addition, rates of appreciation have not exceeded 2.5% per year in this neighborhood since 2012. I’m afraid you may have to wait until Spring of 2020 to get your price. Can you afford to? Do you want to?”
- “Agent B says they will list it at my price.” - Any agent can list any home at any price. Your job is to promote your local market expertise and share a truthful and accurate interpretation of the facts, not tell the prospect what they want they want to hear. Don’t be afraid to walk away and be the second or even third agent to pick up the pieces and make the sale happen when they’ve gotten serious. Many agents have built a profitable practice around the expireds they have successfully sold when previous agents have failed, and the key has always been proper pricing.
I want you to be prepared for one more thing, and it’s something you might hear after you’ve done everything RIGHT:
- “I think we must have underpriced it!” - The best response is this: “We positioned ourselves to attract early interest and offers, and we have succeeded. You are among the 22% (use the number that applies in your market, of course) that went other contract, while 78% will continue to sit. I think this is something to celebrate, don’t you?”
There’s little downside to committing to proper pricing in 2017, and I hope you’ll be the agent who does so. Study your MLS with frequency. Know your days on market, months of inventory, and where rates falls each week. Calculate the sales price to original list price so you can establish expectations for both buyers and sellers. Continue to visit new listings each week and publish your insights at Relola. By doing so, you’ll increase your competency and confidence, speak with authority, and grow in both knowledge and productivity.
Beth Incorvati is our Chief Blogger and Podcast Host at Radio Relola. She has been training, motivating, and inspiring real estate professionals for over fifteen years.