Sellers can be very unrealistic about the price they want you to list their home for, especially when the market is moving quickly and in their favor. Many agents get caught up with their seller’s optimism because, to some degree, they feel the seller has a point. After all, homes are selling like hotcakes and maybe this home could get swept up in the sales frenzy too! It’s very tempting to think, “Why not at least try it?”
Wait! Not so fast! This will come back to bite you. If the property that you list at that optimistic price doesn’t sell as quickly as the seller thought it would, then you have no place to go with price but down. Your overly optimistic sellers DO NOT like to do price reductions. The challenge is this: If you don’t do a price reduction in a hot market then the property will not sell, the listing will become stale, and the seller will be disappointed with the market and you.
When meeting with sellers in a hot market you have to present more than just the standard CMA. Sellers are visual! In order to have a seller really understand where the market is you have to show the market to them visually. I recommend using more than just comparables to show price.
In a hot market you have to keep a very close eye on what is selling and how long it is taking for those homes to sell. You have to look for clues when trying to show a seller where they should be priced. Just because a home is in a particular price range doesn’t mean it is going to automatically sell. That is where the “what is selling” part becomes important.
What type of home is it? What is the location like? And what special features does the home have? These are the questions to be asking when you are looking for clues for how to price the home. Look at homes that have some of the same features your home has. Even if that home isn’t in the same price range you can still see if that feature helped to sell the home faster. Pay particular attention to how long it took for that home to sell. Don’t just use comps in the immediate area if your home has a special feature, look for more clues.
For example: Imagine you have a view property that you are trying to price but you have absolutely no comps available for your listing. You know the home has a lovely view, but you are having a hard time trying to assess how much that view is worth in the fast market. What I would do is research all view properties that have pended or sold in nearby areas. I would want to know what the days on market trend is for pending homes and what the sales prices were for the closed homes. Now you have two very big clues! You have the average days on market number for view properties and you have the list to sale price ratio for view properties.
If you see that view properties are selling 5% above list price on average and view properties have pended within the first week, then you now have a basis for pricing the view property listing that you have. Even though other properties are in a different area, the market can give you clues that apply to your home and your area. Also, do not forget that in some super-hot markets a listing can even be considered stale or overpriced at 14 days. You have to know your market!
To get your sellers on board with pricing their home for today’s market, you’re going to need some visual aids. One thing you can do to demonstrate where the price should be is map what is selling and what is not. You simply show the sellers a 3 column box colored green, yellow and red. Insert all your solds and pendings in the green box. Put your 90 days or longer listings in the red box and any listings that are 30-90 days in the yellow box. This will quickly show the sellers what is moving in the market and what is not.
It is one thing to tell a seller where pricing should be. It’s quite another to show them. So start putting a more visual pricing presentation together to make a strong pricing case to your sellers. One of the greatest gifts you can give your sellers is the gift of correct pricing.