Pricing Strategy – Words from the Wise
For several weeks we have talked about pricing during our Mastermind sessions. It is usually the same stories; agent lists home, home doesn’t sell on offer date, agent stresses. The house eventually sells and everyone is happy. The reality is that there is no exact science to nailing the list price. Yes, experienced agents will tell you that they can get pretty close most of the time, but sometimes, no matter what the research and gut feeling tells you, you just get it wrong. It happens to the best of them. Because pricing has been a moving target lately, I decided to assemble a few of Bosley Real Estate’s best and create a panel on the topic of pricing. Our meeting was packed. Thanks to Lisa Munro, Anita Merlo and Kim Kehoe for an outstanding job.
Here are some of the questions that were asked of our panel;
Agents; I recently went on a listing presentation and gave the owner a price on his home. Two other agents, I later found out, had given the same price. I lost the listing to another agent who listed it at the price we all suggested. It has been six weeks but the house has still not sold. How is it possible that we all got it wrong?
Panel; Most likely two reasons. The first is simply market conditions. The seller took a little bit too long to make up their mind and in that time, the market shifted. The shift is not about pressure on prices, it is about demand. Second of all, the property in question was an executive townhouse. Probably not suited to families. It is a smaller segment of the buying population and generally the smaller the segment, the longer it takes to sell.
Agents; My seller thinks his house is worth $599K but my research tells me low $500’s. What are some of the talking points you use when listing homes for (potentially) more than they are worth?
Panel; The first 10 days are crucial so it is absolutely important to get the house onto the market at the right price. Sometimes though, the seller has his own ideas so part of your strategy is to say ‘fine, I will list at your price for two weeks but if it has not sold we immediately reduce to my price’. With the average home on the market for 3 to 4 weeks, some sellers are reluctant to reduce earlier so you have to be proactive and act fast. The market responds quickly to the wrong price and the last thing you want to do is wait too long then you may be forced to cancel the listing and bring it out at a new price. That involves starting up a whole new marketing strategy.
Agents; What do you do about those homes which are anomalies to your research?
Panel; first of all, there are always houses which make you ask ‘what’s up with that sale’. Those are the houses whose sale price just defy logic. They can be a real problem to your pricing strategy because they skew the results. Your best defense is a good offense so know your product. Unless you have personal involvement with a sale your best solution is to call the listing agent and ask them why the house sold for so much over asking. Multiple offers are one thing but sometimes homes sell for a value beyond reason because the buyer had some additional motivation.
Agents; Do you recommend us bringing in a skilled agent if you are not sure about a property?
Panel; Sometimes bringing in an agent may do you more harm than good. Ideally, your first viewing of the house should last about an hour. Get the seller to give you a tour and use the time to build rapport. With any luck they will divulge their motivation so let them chat away. I don’t ever reveal my complete marketing plan, just a few bits and pieces along the way. Explain to them that you will provide a more detailed plan once the listing is signed. You do not want to give away your intellectual capital so take your marketing plan with you when you leave. If you are not familiar with a neighbourhood, your best bet is to go away and do your own CMA and then rely on agents within your company to verify the work that you have done. Agents in your company should be a resource for you, not competition. You never want to go into a listing presentation and look inexperienced. If you don’t get the listing, it is important to find out why. Conduct an exit interview and keep track of your success rate.
Agents; What is your opinion on pricing for a bidding war? (e;list low and holdback offers).
Panel; Ultimately the listing price is the decision of the seller. Our job is to outline different marketing strategies, one of which is to list low. However, it is important to explain that sometimes strategies backfire. Agents should act responsibly when it comes to listings. A low list price may generate lots of offers but the strategy affects the lives of all the agents and families who waste a whole evening by being in a multiple offer situation that they may never win. We have been in situations where an agent told us that he lists low so that he can advertise that he sold a house for 118% of list price. It seems irresponsible. A little low is okay but don’t go overboard.
Agents; What specific tools do you use for pricing a home?
Panel; We only ever look at past sales that are within the last six months. Another tool is Market Watch from TREB. The statistics they report lag by a month and sometimes that’s all the time the market needs to change. Obviously being out in the field is your best education and if you are new to the business you simply have to be in the office a lot. It is the best way to learn. Listen to the stories of all the agents around you.
Agents; When you are on the other side of the table and you are presenting an offer to a seller who is expecting more money then your clients are offering, what do you say?
Panel; First of all, never drag out your list of competative properties. (Use the word competative rather than comparable) . It is better to commit them to memory and casually bring them up. It should always be a gentle discussion. Gage the reaction. If it looks like they are responding negatively then your tact should be ‘okay, I think I’m missing something. Perhaps you could show me your stats and competative properties so that I can go back to my buyer and see if I can get you more money. By doing that, you immediately get them on your side.
After the meeting I had a brief discussion with Brian Torry from our Merton office. He had also conducted a pricing panel at his office and after comparing notes we discovered that top agents pretty much conduct their business the same way. Not surprising really. If you want to be the best in class, one of the simplest things you can do is emulate the work habits of the successful people around you. Have an awesome week.