Check out the latest guest post from my good friend and stellar Real Estate coach Suze Cumming. If you haven’t already, please check her out and subscribe to her blog because it is awesome. Suze has trained many top agents in Canada and is responsible for my of the successful agents at Bosley Real Estate. You can check out her website http://www.thenatureofrealestate.com/
How do you get good at pricing homes? Twice now I’ve lost a listing because my price was wrong. Once it was too high and the other time it was too low and the house ended up selling for $40k more than I thought. I am not only losing the listings, I’m starting to second guess myself all the time. Is there a course or something that I can take?
Pricing matters in real estate and unfortunately, it’s not an exact science. By definition, market value is uncertain as it estimates the value based on what we think buyers and sellers will agree on. To make this estimate, we look at what different buyers were willing to pay for different properties in the recent past. There are a lot of variables in this process and this creates a large margin for error.
Let’s look at the formal definition of market value:
“The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue influence”
I recommend that you keep a copy of this definition with your listing presentation material. It will help you focus on what you are trying to estimate when you are pricing homes and it will help your potential clients understand that your price is an estimate based on factors that we cannot always determine accurately.
The most difficult thing about market value is that it can change very quickly. It can jump up if there are several buyers desperate to get a home in a certain neighbourhood and there is nothing for sale. It can drop significantly due to changes in the economy, world news, threats, rumours, and such. Many of these things are beyond our ability to predict.
I had several listings when the World Trade Center Disaster occurred and their value changed significantly in an instant.
To get good at pricing, understand the definition and then practice. Inspect as many homes as you can in your market place. Estimate what you feel they will sell for. Think deeply about how buyers will perceive this product in this market at this time. Make notes about what you think the home will sell for and why you think that. Then go back when these homes sell and see how accurate you were. If you are way off, speak with your broker or other agents in your marketplace to uncover what information you are missing when estimating values.
I use to underestimate home prices on busy streets. It was my own personal bias because I really value quiet and couldn’t imagine living with the traffic noise. As a result, I only ever sold one home on a busy street in 28 years in the business and I felt guilty about it. (They are still living happily on Mt. Pleasant Avenue in Toronto after 16 years). It’s challenging to keep our biases out of the process but awareness and practice will get you there.
A course on pricing? Good idea. I’ll work on it.
Columnist, The Nature of Real Estate
We had an interesting debate last week at Mastermind about taking an overpriced listing and who and how the price was determined. Have you ever asked an agent ‘Is that the Seller’s price?” because essentially what you are saying is ‘hey, that price is so far out in left field you either don’t know what you are doing or the Seller has chosen the price himself’. Anyway you slice it, no agent wants to hear this question. Sure, ask it as often as you want, but be prepared for the day when the shoe is on the other foot.
So, for a moment, let’s assume that you have taken a listing and the owner has insisted that you list it $100K over fair market value. You took the listing because it is in the neighbourhood that you want to farm and the Seller has agreed to revisiting the list price after a few weeks of “testing” his price. Perhaps you feel confident that you can keep hammering away at the home owner for price reductions. Eventually you get “that” call. An agent calls asks you if it is the Seller’s price. What would you say? To say yes would make you seem unprofessional and perhaps reveal that the Seller is in the driver’s seat but to say no might suggest to that agent that you ‘bought’ the listing. dilemma? Not really. Your best answer is “I would encourage you to bring an offer that you and your Buyer find fair”.
At the core, this whole conversation starts with the listing agent’s initial discussion with the Seller about why his value is so much higher than the agent’s own competitive market analysis. Perhaps you are missing something. Probably not, but lets keep an open mind. The Seller believes his home is more valuable for a number of reasons. Sure, you can see some of his points, even though they are dull ones, but as a duly appointed representative of the Seller, and since you agreed to take the listing, it is your job to go out and stand behind that price. Have you ever heard the term the walls have ears? Saying something negative about the Seller or the list price will come back to bite you. Recently I heard a story of how an agent lost a listing because during a showing she made negative comments about what a dump the kitchen was. The owner and proud kitchen designer was hiding in the pantry listening. We live in a time when nanny cams in homes are as common as dishwashers.
Treat your client fairly and don’t reveal your true feelings about their price. Hopefully you have put into motion a plan and timeframe to revisit your pricing strategy. I suppose the flip side to this argument is that you let someone else take the overpriced listing and let them spend money trying to market it. That is a personal decision only you can make.
The following post is provided by The Nature of Real Estate, and Suze Cumming, a former Bosley Real Estate Agent and now a terrific real estate coach and trainer living in British Columbia. I am grateful to have Suze as a friend of over 30 years and a close confidante to me and many of my agents.
I’ve been sending real estate flyers out to my neighbourhood for six months now and I haven’t received a single call. It’s a lot of work, time and money. I am thinking about quitting and trying something else. Is this a wise decision? Any other ideas?
If attracting clients was as simple as sending out a few real estate flyers, everyone would be in real estate and we really wouldn’t be worth the fees we charge.
The way home sellers choose their realtor is a complicated and a somewhat unpredictable process. It is unique to each individual and while some are methodical and logical, others make the choice from instinct or intuition. Regardless of their process, it is far more complicated than receiving a flyer (likely one among hundreds) and picking up the phone.
Sending flyers out to a neighbourhood on a consistent basis is a good first step in a farming strategy. It is not farming by itself. You will need to find 3 to 4 ways to touch the people in your farm on a regular basis and you will need to be consistent with this touch for a very long time before you can expect a return on your investment (ROI). To speed the process up, you will need one of those “touches” to be face-to-face or voice-to-voice.
Farming, a metaphor for a community based marketing plan, is not for the faint of heart. It takes creativity, tenacity, persistence, and belief that it will pay off in the long run. Most realtors will quit farming before they have any significant return. On the other hand, farming done well can build you a dream business. Imagine being the real estate resource of choice in your neighbourhood. People who know and like you will suddenly be calling on a regular basis to list their homes!
If you want to know more, then email us (firstname.lastname@example.org) for a copy of our resource paper titled Geographic Farming.
Columnist, The Nature of Real Estate
Dear Zuess is a column dedicated to offering tips for real estate agents that want to create lasting connections with their clients. Do you have any real estate binds you’ve been in lately? Drop Zuess a line at email@example.com