Powerfact: With homes selling at unbelievable prices, using real estate comps to guide sellers to a pricing decision is more difficult than ever.
I feel like I’m repeating myself constantly when I say this market isn’t like anything we have seen before, but one benefit to these crazy real estate times is that it forces us to constantly reinvent the way we do business, which makes us one of the most adaptable industries in the world.
One new issue that we are seeing over and over right now is the use of comparables.
How do we use comps, as agents in our listing appointments when they aren’t accurate, or even reasonable!?
One of my Power Agents® explained her situation recently. Her market area in Florida was exploding, but on her listing conversation appointments, she couldn’t even show the comps on houses in the area because people were paying just about anything to get into a house, making these comps useless! There didn’t seem to be any rhyme or reason behind the amounts being paid, so she wanted to know how to recommend a listing price when other selling prices seem so random.
Learning from Our Mistakes
One of the biggest things I have come to realize is that we learn best from our mistakes. I know, it’s a common saying, but many of the questions that come up here at Power Headquarters are from the mistakes the Power Agents® make and want to learn from. The Huffington Post has “Nine Powerful Lessons We Can Learn From Our Mistakes”, so, this isn’t just a real estate agent issue, it’s a human one!
Going back to the issue of these crazy comps, the mistake (and the great question that comes from it) is this idea that we have to KNOW exactly what the house is worth. The truth is, it’s not our job — we aren’t licensed appraisers! As listing agents, our job is to market the property.
The Used Car Analogy
Let’s say I sell cars for a living. I know where the steering wheel is, and know where the engine is, and what the miles per gallon would be, and the current mileage, but I don’t know how to BUILD the car. That’s not my job, my job is to sell it.
It’s the same thing in real estate. Our job is to market the property. What it actually sells for versus what it appraises for, that isn’t up to us. This article by REALTOR.com deep dives into explaining the differences between assessed value and market value.
Many agents think that’s the main part of our job description, but I believe that’s inaccurate. You can only share the information with the homeowners and let them decide. You don’t tell them what their home is worth, you only recommend what price range they could likely sell it for.
Instead, you can say this:
“Here’s what’s happening in the market. Here’s what’s currently up for sale, and this is what I think the price range will be. I’m willing to put it up for whatever price you want, because it’s just that kind of crazy market and we will just have to see what happens.”
If you are less committal to the actual number you are giving, you will not be losing the listings to other agents who will list for more…and sell it quickly at that price.
Why Pricing Well is Important
Another common error that agents make is to use comps for what has already sold in the area, but neglect using the listings that are currently up for sale. Let’s go back to the car salesman analogy.
If you come to me at my car lot in search of a car, am I going to show you all the cars that have already sold? Not really, other than to show you how much these cars sold for to give you a ballpark idea of what a car with certain bells and whistles are worth.
But we aren’t going to spend much time there because what’s the point of spending a lot of time looking at cars that aren’t even for sale? You will move on to the cars that are currently available for you to buy.
I can hear your asking, “What do I say to the seller who sees those very large dollar signs and wants to price their home at a number somewhere up in the stratosphere?” In order to bring this seller back down to earth, check out “The Price Discussion: How To Talk Sense (and Cents!) With Your Clients.” Also, here is a suggestion on what you can say:
“Anyone that comes to your house isn’t looking at what they can’t buy, they are looking at your house, Mr. and Mrs. Hunna Hunna, and other homes just like yours in similar price ranges – that’s your competition. That being said, we need to price your home based on the competition, because that’s how the buyer will make their decision. If you were a buyer, and you have this house, and then three other houses at these three prices and this square footage, which house would you consider buying first?”
The best way to price the property is to look at the competition and price accordingly. Take a careful look at what’s currently for sale in the area and compare based on things like location, square footage, number of bedrooms, number of bathrooms — you can suggest a range of prices based on what the competition is listed at.
A Little Something EXTRA
To delve into some of the psychology behind pricing the home, check out this Homelight article.
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