Powerfact: There is an art to navigating price effectively, especially in a competitive market — and communication is the key.
By Darryl Davis, CSP
The discussion to set the price of your client’s home doesn’t have to be an awkward talk, though in recent weeks, it seems to be the source of tension among many of our Power Agents® as they are having clients insisting on setting the price of their home way above market value. As any savvy agent knows, the market can only support so much.
When doing a comparative market analysis (CMA) with a homeowner during the listing conversation, it is in your best interests to validate the appraisal in the minds of the seller before you even begin. They need to see its value before they will listen to anything you have to say about price and where to set it. I have a dialogue for you all that will help accomplish this:
“Mr. Hunna Hunna, let’s talk price and how it works in real estate. When a buyer wants to buy your house, and you want to list it for more than it’s worth, a few things will happen. Let’s say we list your home for a million dollars. Now, let’s say you actually find a buyer that’s willing to spend a million dollars, but they don’t have that kind of cash. They are going to go to the bank for money. If they are an average buyer, they are going to ask that bank for a loan for 80-90% of that amount. Trust me on this, the bank will be far more invested than the buyer. The bank will come out to appraise your home because they want to make sure that this will be a good deal for THEM to sell on the secondary market. They are going to be very conservative when they come out to appraise it. They look at the other houses around that have sold, and for how much, and they will decide all the comparables and come back to the buyer and tell them that your home isn’t worth a million dollars, it’s worth $800,000. The deal will fall through with the bank, and then the deal will fall through with the buyers, so you end up wasting valuable time and your house is still unsold.”
I know that conversation probably isn’t going to make your seller’s very happy, but it’s going to prevent a lot of hassles and wasted time in the future. Once you have explained the downside, you can present the options in a more positive light.
“So, I want to show you something. I have several emails from bank appraisers asking me for comparables, or comps as we often call them. Now, why are they calling me? Because I’m a real estate professional and I’m the one actually making these comps because I’m out in the field every day listing and selling houses. Now here is my point, and I want to show you something. This document is exactly what the bank appraisers are going to see before they even see the house to appraise it. So, we are basically getting this useful inside information, how cool is that?”
By doing that and wording it that way, you make the homeowner feel like saying, “WOW! we are about to see some really special inside information and this is powerful information that the bank is going to use to decide the worth of our home.” Then, when you pull out that CMA and appraisal to talk about how to price their home, they are going to pay extra special attention and be far more agreeable when talking about how to price their home at a place that the market will support.
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Power Agents, you’ll find lots of tools to help you navigate price and other objections in the Objection Handling tab of your classroom. Tools like this Importance of Pricing Right flyer and more that will have you taking objections and stalls in stride!
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