As a real estate professional, your clients rely on you for a number of things- but an area in which they may most likely look to you for guidance, based on your experience and training- is in pricing their home. Price is one of the basic cornerstones of a successful home sale marketing plan- and appropriate pricing is crucial to the success of a real estate deal.
Of course there are often challenges involved in advising a client on the right price for their home and there can be disagreement, intense emotional attachment- and even the possibility of hurt feelings. There are several ways to accurately and effectively present pricing to your client.
You are the trial lawyer, and your client is the jury. Pricing is systematic and based on fact and research, and must be presented to the client as a persuasive argument- logically strung together, based on evidentiary proof and data.
In introducing cold, hard facts about comparable listings and selling prices in the area, you create framework and context based on numbers. Clients are more objectively able to judge their own properties under this condition of emotional distance.
A Delicate Balance
Pricing a house is a delicate, intricate balance. Too high and the house may sit for ages on the market and lose the lure of a fresh listing. Too low and the client may end up not getting as much as they could have- and therefore feeling resentful- possibly towards you.
Always remind the client of the power of pricing- and of the impact if you hit your mark- and the ramifications if you hit out of the target completely.
Comparative Market Analysis (CMA)
Perhaps your greatest evidentiary based ally is a comparative market analysis. As Realtors, we have access to detailed data, and clients should be aware that this is part of the value you bring to the relationship.
When pricing the property in question, look at things like the comparable properties, time on market, ratio of list price to sale price and pending sales.
Also look at expired listings, and determine why you think those properties did not sell. Accumulate all of this data and present it to your clients as reasons to determine the price that you did.
To get the end result you want, start at the beginning. Why is your client selling their house? Is it a divorce, estate settlement or relocation? Do they have a firm offer elsewhere? Are they just “testing” the market?
All of these jumping off points will, among other things, dictate how aggressively you price your house.
Again, the strongest pricing strategy comes down to evidentiary based fact. Another way of presenting your strategy to your client is to use a method called triangulation.
Basically, you are framing their property within three points, and arriving at the price by plotting their property between them.
For example, plot out three points – Municipal Assessments for similar properties, recent sales for similar properties in the area- and average prices, and finally similar properties that have sold at a premium- or over asking (you could also reverse this point to reflect properties that have been sold at a ‘discount’, depending on market conditions). Determine why these properties sold above or below asking.
By laying out these values, in a triangle diagram, you are reasonably able to draw a price, as it places the property in question in context to the market.
Ratio between List Price and Sales Price
There is ample evidence, in many markets to suggest that, over time the ratio between list price and sales price diminishes. A Comparative Market Analysis’ will present evidence to the client to prove that theory.
The strategy of setting a price on the higher end, and waiting it out, does not usually prove to be most effective, especially if your property is positioned in an area with steady inventory, and many properties with similar features.
Heather Wright – Propertywire.ca