Dos and Don'ts of Effective Pricing
Pricing can be a sticky issue in a challenging market. These take-away tips from experts will make it easier for you to work with sellers on setting a realistic price tag.
November 1, 2008
Setting the right price is the key to turning a listing into a timely sale, especially in today's tough market. REALTOR® Magazine has published information over the years on how to work with sellers to reach a price that works. Here's a collection of the best tips from experts we've consulted.
Do your homework before the listing appointment.
Perform a competitive market analysis to present to sellers. This compilation of market data shows what homes similar to the prospective listing have sold for and how long those sales took. It's absolutely vital for educating sellers about pricing and days on market. Your CMA should feature a snapshot of several similar homes on the market, the average price per square foot of each, pending and recently closed transactions in the area, and days on market to close a sale.
Don't forget to check out home-valuation sites.
Your sellers have probably visited Web sites like Zillow.com to see what their home is worth. Is the information at those sites accurate? Maybe, maybe not. But one thing is for certain: You need to know what those Web sites say about your listing before you arrive at the appointment. If the value stated on the Web site is not correct, you need to be prepared to explain to sellers how the Web site works and where the numbers are coming from.
Do consider the sellers’ urgency.
If sellers must move in 30 days because of a job transfer, snagging the highest price may not be a top priority. A lower price may help move the house more quickly. When speaking with sellers, find out how important it is for the home to sell quickly.
Do weigh the home’s condition.
If floors are scuffed and the place is cluttered, explain that a stale, worn look will negatively affect pricing and the ability to sell. “Somehow you have to dig up the nerve to tell them that buyers will expect a coat of fresh paint and new carpeting. If they won’t update, I have to consider that in the pricing of the house,” comments Judy McCutchin, RE/MAX Preston Road North, Dallas.
Don't be derogatory.
Be sure to point out pluses and minuses of the home’s location and condition compared to other homes that sold—and didn’t sell—recently. But do it in a polite, professional manner. Sellers are often sensitive to comments made about their home. That's why it's always important to compliment the home in some way, too.
Do use MLS illustrations to show the risks.
Show examples from the MLS of overpriced listings. Illustrate the number of times the price was reduced and how long it ended up taking to sell the house. Look for listings—initially overpriced—that eventually sold for less than their worth. Expired listings also serve as an effective reality check, particularly in areas with long days-on-market stats. Provide information on expired listings to remind sellers that if they’re not realistic about pricing, they could end up on that list.
Don't be wishy washy.
When you get to the pricing discussion, it's imperative to be professional and firm. Carol Royse, a sales associate at Keller Williams Realty East Valley in Tempe, Ariz., uses the following dialogue: “I know you told me you think your house is worth $500,000. With your permission, I’m going to show you some data to help us determine an accurate price for your home.” She then goes through each comp, asking for the sellers’ agreement every third or fourth home: “This house is two blocks over with your same floor plan, and it recently closed for $405,000. Do you see that house?” What if sellers claim their house is nicer? “I’ll say, ‘I understand your house has some nice upgrades. However, that house had similar upgrades. I’m going to mark this as a star comp, very similar to your house within the last 30 days.' If I’ve done my job well, they’ll ask what I think their home should be priced at, and I’ll give them my number.”
Do agree with sellers on a price-reduction plan.
If you agree to an unrealistic price, you’ll know within a couple weeks. Get sellers to agree to a price reduction plan upfront. For example, tell them that after a set period—two weeks or so—if you aren’t getting traffic and offers, it's time to revisit the pricing issue.
Don't hesitate to walk away if sellers are unrealistic.
If sellers are adamant about going with a price you know is too high, walk away. Says author and trainer Ralph Roberts, Ralph Roberts Real Estate, Warren, Mich.; “I’d rather turn down the listing than disappoint you by not being able to sell the house for what I think is an unrealistic price.”