Smart Realtor Series: Pricing The Listings:
We are doing a disservice to clients if we are not firm with them on the reality of the situation. I tell my prospects that this is gut check time and you may want to throw me out the window, but my job is to tell you the reality of the market, not to gain a listing. My last three listings this month were $80,000, $60,000 and $40,000 under my competitors; yet I won the listings. Your sellers will appreciate the honesty. Either hurt them now, or let them be hurt by foreclosure should you not tell them. How can any agent not have the heart to tell people the reality and allow them to go to foreclosure?
This conversation seems to be easier and easier these days. We are finding that our sellers are truly getting it and starting to price right if they really want to sell. If they don't they are wasting everyone's time even considering being on the market. More professionals need to stand up and cut to the chase!
It is not easy to tell a seller that they have lost money on their house, but we are going to have to do it. None of us, who are dedicated to professionalism and to being the best of the best, should ever allow a seller to drastically overprice their home. The results are devastating for the seller and frustrating for the agent. The house will stay on the market longer and most probably end up selling for less or worst not selling and going into foreclosure.
The CRS listing class highly emphasizes absorption rate pricing and presenting it in your listing presentations. I've been using it now for about 6 months since taking that class. Very few other agents use this so sellers aren't familiar with it, but once you explain it to them in simple terms, it makes a lot of sense and makes you stand out from the crowd.
I do a Highest Price Analysis; it is a combination of a Comparative Market Analysis and a Trends Analysis Report, showing the months of inventory versus sold, etc. It works very well with clients since it encompasses MORE than most would show.
There isn't a listing presentation or an even a contract presentation to sellers that I don't have an absorption rate prepared and ready.
Most the time the listing agent has no skills to show their seller that there is nine years of inventory in their neighborhood and they'd be wise to consider any offer they get. You can bet I let them know when I hand them a contract.
What are some of your thoughts on the subject? Impart the right advice and run the risk of becoming part of this blog!
Comments
Participate
Post © 2009 Mirela Monte, Your Myrtle Beach Real Estate Connection. Design © 2009 ActiveRain Corp.
Logos and service marks owned by copyright holder.
Tim Moncrief, Co-Owner-Bartlett RE Group (Keller Williams Realty )
Sandy Childs
Christina Asad Edwards @ www.DaytonOhioHouse.com (Real Living Realty Services - #1 in Ohio!)
These smart agents are making a wonderful contribution. How are you dealing with this market in pricing your listings?
Mirela - Great quotes and great experiences that are being shared. Pricing is critical. We walk away if it does not make sense but wish the seller well. If the have (or want) to start higher, a good strategy is to plan for defnitive price reductions in the beginning (based on days on market or number of showings). This way it is talked about in the beginning rather than what many agents do which is take the listing and then recommend reductions.
Unbelievealbe!!!
Thank you so much for featuring this! I was dying for some more answers!
Some of our AR Members are so extraordinary, that I just decided to start a series called "The Smart Realtor Series" showcasing our brightest stars, of which we have many.
These are not the easiest of times for Realtors and all related fields. Networking on Active Rain has been instrumental in my success and my company's success. The knowledge gleaned here has been a career saver.
It is indeed a privilege to be part of this unique organization. Thank you for making Active Rain the success that it is!
I look forward to some great answers here!
Better to be upfront and to gain their trust in the beginning.
I'm happy to say that I have always used the absorbtion rate in all my presentations. It really puts it into FOCUS for the sellers. Particularly in segments locally where we have over a TEN year supply of inventory! I'm finding a larger % of sellers deciding not to list if they can't or won't price it correctly. Which is better than listing it at a price that won't bring a buyer. I agree, sellers are much more reasonable about the reality of the situation now, and very few put up a fight for an inflated listing price.
Thanks for posting the thoughts of many. I find it very interesting to know what others are doing as it helps me fine tune my skills. AR is a great source for usefull information.
Awe. Thank you for thinking of including me in your post. I appreciate it. Its been a while since I've been around much. People will wonder who the heck I am. :)
Thats a lot of great info. I usually come in a little lower than my competitors also. I am honest with the homeowner and tell it like it is. Thank You for sharing and I wish you the best.
Chris Elizabeth: Yeah, they won't recognize you without your glasses on... I loved your answer and it absolutely had to be part of this post. Maybe you'll be more active on Active Rain. I would love for you to join our Optimist Group and give us some of your savvy blogs.
Christopher and Stephanie: Now more than ever pricing is critical. When we are not persuasive enough our sellers lose. I don't know about your areas, but in my area the offer made three months ago is no longer valid. Prices have dropped since then. If that seller you tried to list at the correct price three months ago did not listen then, he may have to take considerably less today.
Todd: Why just take a listing and not sell it?
Janna: Right you are! Revealing the absorption rates to your clients is eye opening indeed and absolutely mandatory in order to get the correct perspective.
Simon and Nate: You are welcome! You can re-blog and direct your Sellers to your site or bring this article with you on your listing presentations. If they don't believe you, maybe they'll believe all these other experts. It certainly couldn't hurt...
Mirela:
What a great idea for a blog post and thank you for featuring my post. We, as professionals, need to stick to our guns on this issue, so we may be of better service to the public. First of all, our agent population needs to be educated about their market numbers and certainly absorption rates, then be upfront and candid with the sellers about pricing their house. We not only do ourselves a dis-service, but we do not service our clients well when we overprice their house. This is an issue that my team is so passionate about, thank you again.
I tell the sellers that this market is still adjusting. I show them the last six months of comps and then tell them that if they truly want to sell their home, they need to price it just under the comps to get the attention of the buyers. Then I tell them that I insist we agree on a price reduction schedule in advance. I am not interested in getting another listing, but I AM interested in getting their house sold!
There really is no point in taking an overpriced listing. When I put my sign in someones yard I expect it to sell.
I am so gratified to see so many smart experienced listing agents standing firm with prices.
In the county in which I live, DOM has come from 135 in 2007 to 120 in 2008 to 102 in 2009.
Prices have come from an average of $486,292 in 2007 to $426,442 in 2009 to an averge of $325,606 in 2009.
Agents who show not only recent comps but long term trends have a lot more credibility with sellers and much more likelihood of listing at a price that will sell.
If negative equity is a problem, that has to be dealt with honestly or the owner can be driven into foreclosure.
I greatly admire agents who price for market and not to get a listing.
Mirela, absorption rate is very important and we use it. We just lost a listing last week because of price. I'm just going to watch it sit there...
We too find great resources on this site. Learning from others in the field in a great way to fine tune skills.
We agree that pricing is critical. In our experience being honest is always the best way to go. Misleading your client to believe there house is worth more then it actually is takes away from your credibility, and it is not doing your job to the best of your ability. We are here to serve in the best interests of our clients. Not being forthcoming to them certainly isn't in there best interests.
I always tell the sellers to not chase the market down it will only lead to a bigger loss. My rule of thumb is 10% below the last sell within a six month period. I don't even list homes that were purchased from December of 04 to June of 06 unless it is a short sale or they put 20% down when they bought it.
Hi Mirela ! Great post, and one thing I would add is that there will be many sellers who say "well can we just 'test it' at the higher price, then adjust if we need to from there". Well, there are risks with that strategy too. In a declining market you could always end up 'chasing the right price' - with each price reduction you could always be 'just a hair too high'. The comps should tell you a pretty accurate list price - after all, thats what buyers will be looking at too with their agent ! Dont recommend the 'test the water' strategy - go with the RIGHT PRICE, and if they dont want to - then wish them luck and be on your way !
Cheers !
Sheldon
Mirela nice collection. I am pretty much a straight shooter and my "clients" appreciate it. Although the ones that don't sign with me don't always feel that way. I have one of those appointments this week. You have someone that has two homes in their neighborhood that are for sale and are overpriced and newer and larger. He feels his should be comparable. It is not! Now is the "gut check" time.
To many agentswill take a over priced listing just to get the listing
Well, Sheldon pretty much summed it up and Larry S. topped it off. Nothing good can come from overpricing and no amount of advertising will sell an overpriced property.
I agree, it makes sense to tell it the way it is. They may not like it but you are telling the truth.
They will figure it out eventually. Hey....."don't shoot the messemger...right!"
Portsmouth NH Real Estate
Mirele, Loved your post. And yes in today's market you not only have to be realistically priced, but since we're still in a declining market, you have to be able to beat the market and price it so that it's right 3 months down the pike from now. In my area prices have been dropping on an average of 1 1/4 to 1 1/2 % a month. Ideally I'd want to adjust the comps accordingly to arrive at the right price to attract a buyer and have the property appraise.
These are great points and it does hurt to tell the truth some times. When the reality is that a seller has not appreciated and in fact gone the other way, it's our job to be honest. I don't want to list a home to list, I want to gain clients for life by communicating the true market conditions and making sure that the seller knows what to expect and is ready to sell. Thanks for the viewpoints...professionalism wins!
I also use the absorption rate during a listing appointment. That helps solidify your role as the Real Estate professional.
Many sellers do want to "test" the market. I explain to them that homes that sell will quickly, will usually sell for a higher percentage of their listing price and not get stale on the market with people wondering what's wrong with the home or how desperate the seller is.
Sound advice. An old adage is very true today: The only thing worse than no listing is a bad listing.
Mirela,
I have found the following graph idea to work very well for illustrating to Sellers the dangers to over-pricing their home for the start. I take a blank sheet of paper draw on flat line, one linear line moving up the page and then a line that is linear moving down the page. Using the flat line as current market value and showing the Sellers what happens if they are too far from that line really visually drives the point home! Thanks for the post and happy blogging to you!
Mirela-Many good thoughts here in this post.
Mirela, great collection of quotes for those wanting to know how realtors price their listings. You are great at finding gems in the rain. Thank you for always looking out for the members while the staff is on vacation (joke). Seriously though, you rock. You deserve this feature and i think i'm going to give you the 1st quarter, 2009 "pay it forward" golden castellum award. I'ts a higly coveted award so i hope you cherish it :)
Mirela, you rock! What a great start of the Smart Realtors(R) series. Just one thought. Overpricing is a common sin. However, what's a responsibility on us the Realtors(R) on right pricing of new listings while close to the bottom when the trend is near to change. We see it in some segments of the market. Unfortunately, banks dumping on foreclosed listings are leading the pack.
great post Mirela and thanks for getting this string started
Mirela, thanks for compiling a great list of quotes from frontline agents.
Congrats on the FEATURE,
well deserved.
There is no place for an overpriced listing and especially not in our market today. Always good to show the sellers, TRENDS, where it looks like the market is actually headed. Right now that is still downward, unfortunately.
If you price "at market" these days, you are likely chasing the market. Only the homes priced ahead of the market sell with any reliability- we are competing with REOs and short sales, remember-so 309 won't cut it with 299 in sight. The public does respond.
I'm really stressing it more everyday and there are very few I will take above market value..you end up reducing them anyway...it's just a technique Realtors use by taking it at whatever the sellers want it priced at hoping they'll get massive price reductions in time to sell it or get fired. You can't catch up the the true values if your always behind.
It's a tough go right now...but the conversation is "do you want to list it, or do you want to sell it?"
The inventory levels are a great help as this figure is not something easily accessed by clients. So they need to see the realistic expectation if they want to price there home with everyone else.
Thanks for the post.
Casey: You nailed it! I am very direct and that is always a question I ask Sellers when they have grandiose dreams of 2005 prices...
Neal: I hate to admit I've been guilty of that myself. Not anymore. This market has a way of calling us to the mat.
Philip: "Chasing the market"... I love that! Competing with the foreclosures is certainly lowering the pricing bar...
Fantastic comments here! Please keep them coming! I'll be back to comment some more a bit later.
One more thing: re-blogging this may help you make the point. If they don't listen to you, maybe they'll listen to all of us...
Mirela: This is great to showcase ideas and tips from smart Realtors. All the comments were very informative too. As for me, I learned very early on, not to take overpriced listings. If serves no great purpose and can do so much more damage than good. Just not worth it. Keep your eye on the objective and that is to sell the property so the natural progression is what will it take to sell the property and stay focused on that.
Being married to an real estate Appraiser I have a somewhat different look at the market in my area. Although I do not let his approach tell me how to price a property I do see how hard it has become to even try and find comparables in our area. We do not have the extreme inventory of other markets but we see a trend in bargain shopping. Thanks for the insight!
Great blog. An agent with many years of experience gave me a great tip. One question he asks his potential clients at the listing table is: Do you want me to be your friend or do you want me to sell your house? After explaining that he may have to tell them things about their house they do not want to hear, they usually list with him. By the time it's sold, many have become friends and lifelong clients
I am insane about making sure my CMAs are to the nth degree. My best tool, though, to take to the listing presentation is David Knox's DVD on pricing your home to sell. It will be the best $25 you spend in your real estate career!
I'll rather not take a over priced listing and not waste my time nor the sellers time then to take a listing that is overpriced only to disappint your clients. And when your listing has been on the market for over 200 days (since it is overpriced but you dont care because all you want is a listing) and it hasnt sold,what do you think the sellers are thinking about you? Great post Mirela.
I have mastered the reblog! I am so re-blogging this to the Keller Williams Group!!!
I loved this post! Great comments and ideas from each of the six agents listed, and I agree that in this market listing price is more important than ever.
There is no point in taking an over-priced listing. The most difficult thing to do is to tell someone their home isn't worth what they think it is. My way has always been to find out the true motivation on what that seller wants to sell. If I can explain the area comparable pricing and feed into their motivation, I am more apt to get the listing and be able to price it right.
There is another newbie out here that would like to know what absorbtion rate is. Is it the trend towards inventory reduction in the market? Can anyoneone help me and Carin?
Great Post!
Bill and Carin: Here are two blogs that should help decipher absorption rates:
http://activerain.com/blogsview/958648/How-Absorption-Rate-is-Figured-The-Definitive-Answer-using-the-KISS-Method
http://activerain.com/blogsview/958762/Absorption-Rate
Mirela,
Thanks so much for the links!
Mirela,
You are so knowledgeable and I thank you so for your honest advice.
Mirela - These are all great comments. We, as professional Realtors need to be honest with our clients and inform them of what is currently happening in the market. It doesn't do anyone any good to agree with the sellers idea of what they want to list their home at, take the overpriced listing just to have a listing, and then watch as it never sells. I think we all have better things to do with our time (sellers and agents). Let's be honest and help people who need to, sell their homes.