How To Nail Seller Pricing?
When a seller gets ready to list a house on the market, chances are they’ve got dollar signs dancing in their heads, and that might be a problem for an honest real estate agent who doesn’t want to inflate a home’s value just to get a listing. It’s a well-known tactic for agents to float huge sums by sellers in a listing presentation in the hopes of getting their business, with the hopes of talking sellers into a price reduction later so that the home actually does sell.
As a real estate agent hoping to capture seller business, how do you nail the pricing dilemma? Here’s how you should think about pricing homes for sale, from your listing presentations and beyond.
Know your market
The biggest defense you have as an agent is your own particular market knowledge — ideally, even down to the neighborhood, block, or street where your seller is located. Even if you’re a brand-new agent, walking through open houses and minutely examining MLS listings can give you a big leg up on the competition. If there’s a big natural feature and a home’s proximity to it (or distance from it) is probably going to have an impact on sales price, then you’ll need to know that before you start collecting your bearings around one particular home for sale, so gather all the information you possibly can about how different home features affect price in your particular areas of specialty.
As a real estate agent, it’s up to you to understand how nuances like school districts, proximity or distance from major thoroughfares or transportation routes, elevation, kitchen appliances, the presence or absence of things like fireplaces and patios and pools, and a number of other different home features might influence a specific home’s desirability. The more you can point to the amenities that a home does and does not have, and compare it to other homes in the area, the better chance you’ll have at showing your expertise to the seller and setting up a foundation for a trusting, collaborative sales experience for everybody.
Know your seller
The range of human experience is vast, and there is an almost infinite number of reasons why people might decide to sell a house. Before you get deep into your pricing strategy, ask plenty of questions about the house itself, of course — but also do what you can to dig into the seller’s situation. How important is timing, and how important is price, and how would the seller like you to prioritize one of those over the other, if necessary? Does the seller have funds to fix up any issues in the home, or is it important to sell the property as-is? Will the seller be relocating to a different metro area or state? What’s the timeline for that move? What does the seller’s financial situation look like, broadly speaking? Are there kids or pets involved in the household?
When you have an idea of your seller’s situation, you can determine some of the seller’s priorities and put together a few different pricing strategies that might play to those priorities. It might not be possible to get your seller absolutely everything on their wish list, but if you know what’s important and what’s negligible, then you can act accordingly when offering your seller options.
Give a strategy playbook
Based on what you’ve learned about your seller’s unique situation and the home itself, think about some different home sale strategies that might work in this scenario. Ideally, you’ll have more than one to present to your seller, and don’t hesitate to get creative when it comes to solving the home sale problem. For example, perhaps instead of selling to an investor, you know a general contractor who’s willing to do some work upfront and collect a slightly higher payment after closing. Depending on your market and the potential return, that could be a very good choice for your seller in their current situation. Or perhaps in a very hot seller’s market, you want to price the house slightly below market value in the hopes of generating multiple offers and a bidding war — a solid strategy with a good chance of succeeding if you time it right and play your cards well.
Try to think of three different home sales strategies that might work for this particular seller and this particular home. Three is a good ballpark number; it’s enough for your seller to keep track of nuances and differences between the different strategies without overwhelming them, and if you find you really have more than three options, you can always opt to present the three that you think are most appropriate and offer tweaks or additions to those strategies down the line.
Choose your comps wisely
As you’re choosing comparable listings to share with sellers, don’t hesitate to provide a range of prices as opposed to a single price that you think your seller should land on, and it may also make sense to choose different comps depending on the strategy you’re presenting. Fixer-uppers don’t sell for the same price as a fully renovated and updated home on the hottest street in the neighborhood, so showing sellers the range of options available to them is a good strategy.
When choosing comps, make sure that you are not only looking at list price but also at sales price. Anybody can list a home at any price they want if they’re willing to jump through the hoops — but that doesn’t mean the home is worth that price. You can of course include list prices in your comps, but be aware that they are list prices, not sales prices, and do your best to be transparent with sellers about what each metric means and why you’re prioritizing one over another (more on that later).
Factor for square footage
It’s not always the best way to price a house, but the fact is that appraisers consider the price per square foot with comps and in the neighborhood overall quite heavily when they’re getting ready to appraise a house. And even if a buyer is willing to pay more per square foot than the market dictates, if you can’t convince an appraiser based on the condition or amenities in the home that it’s actually worth more, you may wind up with a low appraisal and a big problem with mortgage financing on your hands.
As you’re making these calculations, pay attention to the price per square foot and articulate any arguments for boosting the price per square foot in the home you’re selling beyond “the seller thinks it’s worth more than everyone else’s.” Every seller thinks that, but it doesn’t make it objectively true; make sure your seller knows that if they can’t back up their price per square foot desires with evidence, they might end up derailing a sale and explaining to a new set of buyers why their home didn’t appraise at the full asking price in a torpedoed sale.
Embark on a history lesson
The seller will have likely given you some details about the home they want to sell, but as their agent, it’s your job to know everything you can about the home — so do some digging into public records, tax records, and other resources you can use to tell you about the home’s history, renovations since it was built, liens and easements and ownership history, and any other details that might be useful as you start to put together your listing presentation. It’s possible that you might uncover a tidbit of history or a detail that the sellers didn’t even know, but at the very least, knowing when the house was built, who built it, how it’s been updated (if it has), and how all of those factors align with neighborhood norms will help you back up whatever pricing strategies you wind up selecting from your list of options.
Learn from others’ failures
As you’re doing your comp research, it also pays to spend some time digging into the sales that didn’t happen recently in the neighborhood. Were there any homes that were listed and then pulled off the market? This can be especially illuminating if you can find homes that were listed, unlisted, and relisted all within the past few weeks or months; you might be able to show some real-life anecdotal evidence of what happens when sellers overprice a home, or when there’s some kind of appraisal or inspection issue that causes the sale to fall through in between the offer acceptance and the closing table.
This kind of background research can be especially useful if you’re able to conduct it on the comps you use in your listing presentation. Sellers will see the attention to detail you pay to the overall strategy and execution of a home sale, and they’ll likely appreciate having that level of attention on their side when it comes to selling their house.
Show, don’t tell
For some agents, it’s easier to overwhelm their listing clients with jargon and try to impress them with what you know (and what they don’t) than to guide them through the home sale process — but most clients appreciate it when you respect their intelligence and try to explain your thinking and strategic decisions to them. If they’ve already sat through a few listing presentations, it might be useful for you to explain the difference between list price and sales price, for example, and the significance of the list to sale price ratio. It’s quite possible that they’ve been fed a bunch of numbers and statistics by agents without learning what the relevance is, and if you can help explain exactly why you’re making the decisions you’re making, and give sellers the opportunity to ask questions and learn from you, then if they decide to work with you, the level of trust you’ll have already established will take you well on your way toward a successful conclusion.
Land on the right number
After this preparation, you should be ready to provide some cold, hard numbers to your sellers when they ask — and you should also be ready to explain exactly why and when they might want to price their house at one range over another. This conversation should be approached as a collaborative process between you and your sellers, but you’re also the authority here, so delineate the numbers you’re going to offer up with confidence.
Cross the i’s and dot the t’s
Sometimes, sellers can be swayed by the silliest, smallest things in a listing presentation, such as an agent’s reassurance that they’re going to write the listing description, take all the pictures, and make a multimedia tour of the home available on the major listing portals. Services and offerings that might seem very obvious to you might not be at all obvious to your sellers, and you shouldn’t assume that they’re going to know what’s included and standard in the real estate industry, and what’s considered above and beyond. As you’re going through your listing presentation, flesh out any details that you possibly can so that your sellers are getting the purest, most comprehensive image of everything you’ll do to help sell their house.
Spit, polish, and shine
There’s nothing like creating an amazing listing presentation that hits on every point and then populating it with a bunch of old-school clip art from a word processing program that makes it look terrible. Most agents wouldn’t do this, of course — but then again, it pays to point out that your attention to detail needs to also apply to your own marketing materials. The photographs should be crisp and well-lit, the brochures glossy and typo-free, and your overall presentation polished until it glows. It almost seems counterintuitive, but if sellers aren’t distracted by cheap-looking or thrown-together presentation materials, they’ll be better able to absorb the message as a whole.
If you want to work as a listing agent, you’ll have to get seller pricing down sooner or later. Don’t forget these eleven tips as you price homes and embark on listing presentations, and you’ll have your first (or hundredth) listing client in hand in no time.