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Pricing — take your sellers for a ride!

By: Ian Grace
 

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No, it probably doesn't mean what you are thinking. We're not going to take them on a one-way trip to a deserted place and we are not going to con them. What we are going to conquer once and for all are two things I get really tired of hearing from Realtors.

Firstly, a Realtor who can't sell a property complaining bitterly "Aaah, the property was always overpriced….". That's their excuse for not being able to sell the property as, according to them, it was always the seller's fault who wanted too much money.


Secondly, Realtors complaining they have lost a listing to another Realtor who indulged in the practice of "buying the listing" or telling the seller they would achieve a higher price, often unrealistic, to win the listing, then afterwards gradually "conditioning" or "educating" the seller to keep lowering their price.

Research

Let's have a look first at what research tells us and the three most important pieces of information that potential buyers look for in any real estate advertising.

Price, Location, Number of Bedrooms
If all the research done shows conclusively that these are the top three pieces of information potential buyers require, then common sense says...give it to them! I make mention of that fact because, depending on which country I am working in, I see some or even all of those pieces of information left out of the advertising. How illogical is that?

Price, therefore (number one on the list), is obviously vitally important. However, in countries such as Australia and New Zealand where auction is a very popular and often very effective way of selling homes, many agents using this practice leave price out completely -- not even an indication of price to be seen.

This leads to many disgruntled potential buyers, who probably should never have attended a particular auction in the first place, because they have dramatically misjudged the price of the home. I also have research from one of the Australian Real Estate Institutes showing as high as 58% of potential buyers would not ask the Realtor for any further information, if the price or at least a price indication, wasn't included in the ads.

Consultative selling means teamwork

Consultative selling is the most powerful form of "selling", when, instead of selling at the sellers, the Realtor works as a team with them. So, pricing is obviously vital because if the Realtor and the seller can't agree on pricing before the relationship starts, then they are never working properly as a team. This is when the Realtor needs to have the courage and integrity to walk away from a listing, while offering any assistance the seller should need in the future.

Time after time, I have seen this happen, then the Realtor has still ended up with the listing, as the seller, given time to think about it, was impressed with the honesty and integrity of the Realtor and decided to go with them.

So, how do we get closer to real agreement on a realistic price? By taking the sellers for a ride! Realtors should automatically be showing sellers a CMA or Competitive Market Analysis (different terminology in different countries), showing them exactly what has sold in their area and surrounds, right up until yesterday.

That is the kind of information a seller should be able to expect from their real estate "expert". Obviously, comparisons should be shown with properties that are as close to identical to the property for sale as possible. However, it is still just words on paper, plus maybe a photo or two, but never the same as the real thing.

Firstly, impress upon the seller how important it is to be working together on the same goal/price in mind. Tell them you need to spend a little time with them and take them for a drive. Armed with the CMA and your digital camera, you then visit several homes that are similar to theirs, that have sold in recent times.

Photograph the homes and compare what they have to offer, not just the home itself, but what the surrounding area offers. For example, two homes that would appear to be identical can be priced quite differently, if one is adjacent to a park, where children could play, pets could roam or be taken for a walk and adults could just relax, stroll or perhaps picnic.

That home could quite possibly attract a substantially higher price. With homes near the beach, the difference is quite dramatic -- beachfront homes, then one street back from the beach, then two, then four, then six -- prices will differ quite dramatically even when the physical characteristics of the homes might appear to be the same.

Again, properties that are within walking distance of just about every facility required will attract higher prices every time than properties where the buyers would have to drive everywhere to get to what they need.

Once you return to the seller's home armed with the photographs, your CMA and the actual comparisons of real homes and actual prices achieved, it is normally a much easier exercise to reach agreement on what a realistic price goal should be.

In my experience, sellers are also highly impressed by the integrity of the Realtor and the fact that they took the time and trouble to drive the sellers around to make those comparisons. It sets that Realtor apart, because you can guarantee that 90+ percent of Realtors would never consider doing it.

Also, if another Realtor tries to "buy the listing" by inflating the expected selling price, the seller has now been armed with the correct information in the most honest possible way and as much as they would like to believe an inflated price they are presented with, they realize it's not right and now question the integrity and advice of that Realtor.

So, taking your sellers for a ride has some great advantages and will win you many more listings, as countless Realtors have told me over the years.

Location
Research item number two is also very important. The suburb definitely, then it is up to yourself whether you give them the exact street address. This can now depend on how you have advertised the property. If it's the same old front of the house main photo, then often if they visit the property and are not really impressed with the front of the house when they see it in real life, they can drive away and you have lost them.

As an example, a Realtor in one of my classes was buying a house himself. He had been to see this particular home and thought it was okay, then arranged for his wife to view the property with him and the Realtor who was selling it.

They were in two cars and when they arrived at the property, the wife had one look at the front of the house and said she hated the property and there was no chance she would agree to buy it. She was absolutely adamant initially that she was not even going to get out of the car.


Eventually, the husband managed to get her (very reluctantly) to walk into the house, convincing her to be polite out of respect to the Realtor who had met them there, have a look and then they could tell him it wasn't for them.

However, once the wife walked into the house and particularly, walked onto the expansive back deck/veranda, with a beautiful view over natureland, the wife fell in love with the property and they bought it.

This is a perfect example of when an ad showing the front of the house would never have worked with this lady and how giving them the address in advance, also would never have worked with her. She would have hated it and the Realtor would never have seen her.

Number of bedrooms
This is pretty obvious, but in some areas I see Realtors who leave out the number of bedrooms. Most particularly when it only happens to be one or two bedrooms, as they somehow feel that might put them off, but they will "sell" them on the property when they phone to see how many bedrooms it has.

Sadly, it's not when they phone, it's if they phone and one thing is for certain, if there are two properties advertised side-by-side that appear to satisfy the buyers needs, one property telling the number of bedrooms and the other not, guess which one they will phone first -- obviously, the one telling them how many bedrooms, rather than playing guessing games with the other one.

In my next article, I will give you an insight into the unique process in practice in Australia and New Zealand, where the Realtors obtain advertising dollars from the sellers. That's right, they get the sellers to pay for the advertising campaigns, often many thousands of dollars. But, many of these sellers come back for more and repeat the process with their next home for sale, time and time again. I'll show you why, and also how this practice is appearing in other markets and countries.

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