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Effective Pricing Strategies When Taking a Listing or Price Reduction 1. Be First in the market with the Price a. Use the MLS one liner description of properties to show the seller where they are priced the market. b. If you were to look at this MLS sheet of active or sold listings in the seller’s price point where would the property fall: first, middle or last? c. Explain that buyer’s comparison shops. They look at the price of their home and compare it to other homes in the market. If the buyer sees that the price is too high they will use the seller’s home to justify buying another home. 2. Price Home at Fair Market Value or 5% below to create demand a. If the seller’s motivation is high they will do it! 3. Pricing is all about Supply and Demand a. When there is high demand and no supply prices go up b. When there is high supply and low demand prices need to be adjusted in order to create demand 4. Introduce a Price Reduction Form at the Listing Presentation a. Or at least have a conversation with the Seller about what they can expect in the next 2 weeks or 30 days if the home does not sell. b. Please see Pricing Conversation at the Listing Presentation 5. Use ALL of the Market Statistics a. To tell the story and help the Seller SEf-Discover that pricing it too high is a problem b. Please see Market Statistics you Need to Know
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6. Know the Seller’s Motivation and bing it up to them constantly a. Bring up the Seller’s motivation on why they want to move in a way that they can feel the pain…if they over price the home they will not get to their next destination in the time they want…or whatever their motivation is… 7. Be Straight Forward when discussing price and asking for a price reduction a. Do not be wishy-washy - They may not like it but if they are motivated they will respect you for telling the truth! 8. Call Weekly or Bi-Monthly and discuss the following: a. What I have done this week to get your home sold i. Advertising - the marketing department will email this to you ii. Marketing-Direct Mail, Social Media, phone calls to COI and Neighbors iii. Go back to the JB Plan of Action and review what you are doing off it, refer to it over & over b. Buyer and Agent Showing Feedback c. Review Current Market Statistics d. Discuss Buyer and Agents Reaction to Price Rule of Thumb - No showings, no offers, buyers are telling us that the home is 10% overpriced. Quite a few showings and no offers, buyers are telling us the home is 5% overpriced.
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Pricing the Home to Sell Market Statistics Even in a Seller’s Market when homes are flying off the market, you need to know the Market Stats. Also, in an area like the North Shore where in many spots it is a Seller’s Market there are certain locations and price points were homes are not flying off the market and it is NOT a Seller’s Market. Often times, the media does a blanket market report for all of the Boston area, stating it is a SELLER’S MARKET and never states that in different price points and market areas it is not. As you know, this can make getting the price right at the Listing Presentation or a Price Reduction somewhat difficult.
Market Statistics you need to know and be able to present: 1.
Total Number of Properties that are For Sale a. All Areas you service b. All Prices c. All Properties
2. The Number of new properties coming on the market per month 3. The Number of properties that went under agreement the last 30 days 4. The Number of properties that closed in the last 30 days
Sample language to use with the seller at the Listing Presentation to price it right, or when getting a price reduction. This language helps the seller self-discover why he/she should price it correctly: Mr. and Mrs. Seller, “Are you aware that today there are over _____(i.e. 27) homes for sale and last month only _____(i.e. 5) actually sold. That’s a ______(i.e. 7.5) month supply of homes if no other homes come on the market. Last month _______(i.e. 6) homes came on the market. Can you afford to sit here for months or through the winter with the hopes of the home selling by next August? You want to be in ___________(motivation of where moving to) by the fall correct? 5. Average Days on Market for those that have closed 4
6. Expired, Canceled, Withdrawn from the first of the year (YTD) a. Sample Language: “See this group, this number expired, you do not want to be in that category do you?” 7. Absorption Rate: The rate at which homes sell in a given area during a given time period. It is calculated by dividing the number of sales in a given month by the number of available homes for sale. It is the inverse of months of supply 8. Months Supply of Inventory: Is the measure of how many months it would take for the current inventory of homes on the market to sell given the current pace of home sales. For example, if there are 50 homes not eh market and 10 homes sell each month there is a 5 month supply of homes for sale.
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Pricing Presentation Script (Name) What price do you absolutely have to have? __________ Based on that . . . there are a couple of real important questions I need to ask you . . . Mr. Seller . . . It’s important to me . . . that we can justify the highest dollar amount for your property . . . because . . . the more we sell your home for. . . the greater the chance I have of receiving referrals from you and your family . . . and . . . the higher we can sell your home for the better chance I have of doing business with your neighbors . . . So . . . if it’s ok with you . . . what I’d like to do is come up with a list of reasons why your home holds more value in the eyes of a buyer, fair enough? (Write down reasons their home is “better”) Mr. Seller . . . in today’s market place . . . much of this means you’ve simply brought your home up to selling standard. All homes need _________________________(working roof, furnace, kitchen) . . . right? Let me ask you a question . . . If a buyer wants to buy your home . . . but . . . they plan to get rid of ________ . . . the moment they buy your home . . . how much is it worth then? Exactly! Did you add that to your home for the next buyer . . . or . . . for your own enjoyment? If you were purchasing a home . . . and two similar homes were for sale . . . one for ______ . . . and one for ______ . . . which would you buy? . . . Why? Wouldn’t you want to use the extra ______ to do what you wanted to the home? Don’t you think most buyers would feel just like you? Of course they would. That’s why. . . I’m going to recommend . . . a price of _____ . . . based on what we know . . . are you comfortable listing with me for that price tonight? IF they agree to the price; Mr. Seller . . . I feel very confident in the price of ______ that we set on your home tonight . . . It’s important that you understand that we won’t actually know the true market value until we put it out there (PUSH CMA FORWARD ON TABLE) & see how the buyers respond . . . What I mean is . . . if we have a lot of showings in the first two weeks & no offers we’re in the ball park . . . which means we may need a
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slight reduction in price . . . & after two weeks we have little to no showings we priced it too high . . . & the difference between me & most other agents is that I have the courage to tell you that I’m wrong & that we made a mistake . . . versus another agent who’ll leave it on the market without communicating the truth to you . . . now . . . would you rather have an agent that has the courage to tell you the truth . . . or an agent that just tells you what you want to hear? Great, then let’s go ahead and get started! IF they agree to signing; Mr. Seller . . . It’s important that you know prices are fluid & they can go up or down daily . . . Do you know why that happens? Prices go up & down because of the price our competition lists their homes at . . . Prices also fluctuate because of what homes actually sell for. There are homes being listed and sold every day and this can affect the market value of your home very quickly . . . A simple example of this is if a similar home in your neighborhood lists or sells for $15,000 less than your home, this could cause the current market value of your home to drop . . . Does that make sense? **Remember if you end up listing at a price that was NOT your price, be sure to show your confidence in their home and that price and prepare them for a review after 14 days on the market**
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Future Pacing the Seller Pricing Script at the Listing Presentation Now that we have signed the contract to get your home on the market, we both have to make the agreement that we will continue to communicate about the price we have set for your home. Pricing is not an exact science meaning prices are fluid; they go up and down daily based on homes that are coming on and off the market. This can affect your home value. . “Mr and Mrs. Seller . . . I feel very confident in the price of $________________ that we set on your home tonight and It’s important that you understand that we won’t know the true market value until we put it out there & see how the buyers respond and there are one of three ways they’ll respond: One, if we have a lot of showings and a handful of offers in the first few weeks, we marketed and priced it right. Or… Two, if we have a handful of showings in the first two weeks & no offers (or a low one), we’re in the ballpark, we will need a slight reduction in price (5%). what that means is that we are not so high that they will not look at the house but we are high enough that they are going off and buying something that they think is a better value. Or.. Three, if after two weeks we have little to no showings and certainly no offers, we’ve priced it too high by 7-10%.”If that happens then we went so high on the price that the buyers are not willing to look at your home. It is common we will know in the first two or three weeks. If we are not getting 1-2 showings I will be calling you to reduce the price so that more buyers actually come to look at the house So, as part of my customer service, I will be calling you every 7-10 days to discuss the previous week’s traffic and feedback and we will both keep our eyes out for signals that a price reduction is needed. Does that make sense to you?
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Weekly Customer Service Call As part of the customer service at __________ Company , I am committed to call you every week between and and discuss the following: 1. What we have done this week to find a buyer for your home 2. Give you feedback from the agents and buyers who have looked at your home. 3. Review the market stats to ensure your house is priced correctly to attract agents with buyers and if we don’t have a contract in two or three weeks then we know what we will have to do regarding the price. 4. How the market is reacting and what the agents and buyers are telling us about the price of your home. There are two ways in which buyers speak to sellers regarding the price of their home: 1. IF VERY FEW or NO SHOWINGS -- the buyers are telling us your home is 10% overpriced the market place 2. A LOT OF SHOWINGS AND NO OFFERS -- the buyers are telling us your home is 5% over priced.
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ADDITIONAL PRICING DIALOGUES Write out each in your workbooks.
Days on Market Enemy Script - I can certainly appreciate that and were you aware that in today’s market DOM is actually the enemy to a home’s value? Did you know that?” - Well what do you mean by that.... - How long have you lived here? (7 years) Well, when you bought this house, did you work with an agent?” - Yeah we did... - And what were some of the questions you asked your agent before you put an offer in? - Well we asked them if it was a good deal, if there was anything wrong with it....etc - Did you ever ask how long it has been on the market? - Oh Yeah, we definitely want to know... - And why did you ask them how long it has been on the market?? (this is when it clicks) - Well we asked them because we were trying to get a better deal... - Don’t you feel most buyers would feel just like you? - - -OR- - So, you can see that if we start high and come down later only increases the DOM which is... the enemy of a home's value. That's why I'm going to recommend we list it at the right price from the start.
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- Well what price do you recommend? - I recommend we start at 199.900... - 199,900, are you nuts?!? How are we going to get 205 if we list at 199,900?
“Better Chance” Script - 199,900, are you nuts?!? How are we going to get 205 if we list at 199,900? - Mr + Mrs seller, here’s what’s amazing about that.. You actually have a better chance at getting 205 for this house by pricing it at 199,900 than pricing at 215,000. May I explain? - Okay.. sounds a little backwards, how are you able to do that? - You see, buyers do their searches in increments of 25k brackets.... - Well what does that mean... - What that means is it’s not very often you see a buyer that is searching between 187,000 and 209,000... No! They probably searched between 150-200. So, if most buyers are searching within 25k increments, then you’re missing out at all the buyers who are capping their search at 200k. - By the way, in your particular community, the buyer pool for a house between 150 - 200k is like THIS (large, wide hand gesture) and the buyer pool for houses that are 200-225 is a little smaller (hand gesture). Do you want to fish from a bigger pond or a smaller pond? - (Now you go into this...)
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Now, if you went back and tracked all your buyer sales and what they bought vs what they told you, you’ll find that 80% of them follow this stat. So, lets move on to the top of price range script...
Top of Price Range Script - Mr. Mrs seller, did you know that most buyers buy at the top of their price range? In fact did you know that over 80% of buyers bought at the top of their price range? - Well what does that mean... - That means when a buyer comes in and tells me that they want to buy a house between 175-200, they are probably buying a house somewhere between 180 and 205. - OR - If they come to me and say that they are looking at 200k-250, they are probably buying a house between 235-250... So, this whole idea of “what about the buyers shopping at 200-250” those buyers are really buying somewhere in the 235-250 range. So, now you’re at the bottom of their price range. - Yeah well don't we look like a deal? - Not when for 20k more they can get a house with updated kitchen, or finished basement (or whatever weak point you can identify in their home) - So that’s just another reason why we want to get a buyer to see your home that is at the top of their price range, rather than the bottom of another price range. - So, I know it sounds backwards... but you honestly have a better chance getting 205 if we list at 199,900 than 215,000. (Yeah jeff we understand... we just really want to try it at 215) 12
2-3 OFFERS SCRIPT Mr + Mrs seller... I have to ask you a question... If I had a buyer RIGHT NOW with CASH IN HAND who was ready to buy your house for 205k, would you take it? - If they say yes, but that they “just want to try it out” go on to the next part... I can appreciate trying... and at the end of the day, you hired me to be your agent, and I'm up for trying it at that. I just want to make sure you understand that you have a better chance of getting 2-3 offers at 199, even if you want to turn them all down, than getting an offer at 215k. And I’d rather see you get 3 offers and turn them all down than never get an offer at all. And at, 215, we will be on pace to not receive a strong offer. I can promise you that.
- So, I’d rather see you get 2-3 offers and turn them all down then get no offers or showings at all. So lets go ahead and price it at _________________ NEED VS MARKET SCRIPT “Jeff, you don't understand... we need 200k out of this sale, or we cannot move.” - Okay, I can appreciate that. And ultimately, you’re not selling the house because you love the home, you’re selling the house because you need to go somewhere... So refresh my memory, where is it you’re moving to? - (whatever it is, have another conversation about why they’re moving”
- Well let me ask you a question...when you go shop homes, and I take you through some of the best deals and properties, are you going to make an offer on a property based on what it’s worth? Or based on what the agent says the seller needs. 13
- Well no. Obviously what the market says its worth. - Right! So, telling me what you NEED out of the house if informative and I appreciate that, and obviously I’m going to fight for that but the reality is we ALL need to understand that we’re in this together and that it’s not about what you NEED out of a home, but what the market says it’s worth and what a buyer is willing to pay, just like when you go to buy your home, you’re not going to make an offer based on what the seller NEEDS, you’re going to make an offer on what it’s worth.... Does that make sense?
“But Jeffffff, we still need/want 215! Gotta have it!”
Appraisal Scenario Script - “Mr + Mrs seller, at the end of the day it almost doesn’t matter what price you pick or what price I pick... and can I share with you why that is? (yes) Because even if we price your home at 199,900 and it sells for 210.... HONESTLY... what happens if it doesn't appraise?”
- Well, I guess then we start all over. - Exactly.. See, it doesn't matter what I say, or what you say or what the buyers even say....All that matters is what an appraiser says your home is worth. So, we can go around and around 215 or 199 or 210... and it all boils down to what appraiser we get and what they determine its worth. Now, we are going to do everything we can to get the buyer to pay the sales price, but I want you to think about this... If you were a buyer and you got into a multiple offer situation and paid 199 for a house and it ended up appraising at 185, how good are you going to feel about paying the 199? Probably not that great, right? You’re not going to want to pay over appraisal, are you? And now, as your agent, I would never expect you to. So we have to think about how many agents out there would encourage their 14
buyer to pay over appraised value. So really, all that matters is the appraised value. And based on the comps, its very possible that it will appraise between X and Y... - Mr. + Mrs. seller, you could have 3 appraisals on this home and all 3 appraisals will come in at different numbers. Can I tell you how that happens? (yes) - Well, you could have an appraiser who doesn't know the area, you could have another appraiser who values your finished basement at 20k and another one who values it at 30k, you could have one appraiser that thinks the market is hot and another one that thinks it's not... I promise you, if you had 3 different appraisals on the home, you’d get 3 different values... Now, if I were appraising your home, taking a look at these actives and solds, where do you think YOU would appraise it... (well probably X) - See you can see the challenge that even if we get you 205, we still need to get over the appraisal...
Disservice Script - If I wasn't upfront and honest with you, I would be doing you a disservice... I would not be doing my job as your salesperson if I wasn’t upfront and honest with you about the sales price...And by the way, ANY agent that comes here and lists it at 215-220 would also be doing you a disservice. And what they would be doing is called “buying a listing”. Are you familiar with what's called “buying a listing?” - (nope) - Buying a listing is me telling you what you want to hear just so I can get a listing,
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knowing that I'm going to call you a few weeks from now asking you to reduce the price. And I’d rather get it straight right out of the gate. And it's my job to be honest + upfront with you.
Disservice Script This is honestly only if you’ve had enough discussion... and nothing else is working.. And you’re at risk for losing the listing. Alright here’s what we will do, I’ll make you a deal... I don’t want your listing to become stale so we can put a timeline of two weeks on it. We are going to put it out there at the price of 215,000 with the understanding that in two weeks, if we don’t get great offers or we don’t get great feedback, we will have a conversation about the price at that time, fair enough? And honestly, we might not even need to go down to 199,900... we honestly won’t know until we put it out there and see how the buyers respond.
Disclosure & Fine Print Script The reality is... we don't actually know the true value until we put it out there and see how buyers respond. And I will tell you, it takes a good 10 days to really know the value. Which is why - mr + mrs seller - if a buyer comes and knocks on your door tomorrow and says they want to buy your home, I probably will advise against taking the offer up front, because we haven't given it enough time to get full market exposure. And I’d be doing you a disservice if we accepted the first offer that comes in. Now, from time to time, we DO accept the first offer because it can sometimes be too good to be true. But we won't know the true value of the home until we put it out there and see how buyers respond, fair enough?
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FINAL THOUGHTS ON PRESENTING PRICE ● Only do them on the computer… ● Get in the habit of every 14 days. 30 is too long in a declining market. ● Turn down a price reduction if necessary ● Think in increments of price brackets (215 to 209 versus 215 to 200k (5-7% min) ● Prepare them for PR’s at the listing table - pre-price reduction form ● Go see them face to face if need be ● Consider getting an extension… along with the price reduction. ● How often are we talking to the sellers during a listing? ● What information should we be putting together? ● Weekly sellers reports showing… ● How many people came through ● What they all loved ● What they didn't like ● Buyer price opinion based on other similar homes they have seen in the area ● Any agent recommendations to adjust to either the condition or price (very important to not recommend a price reduction every single week) ● Then, phone call to follow up + discuss all that info…
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